Definitions
Procedures
Fiduciary Duties
Competing Offers
Higher Bids
Withdrawal of an Offer
Acceptance and Revocation
Proration
Notice of Offer Results
Settlement
Comment
The main aspects of the Venezuelan tender offer regulations as amended by the National Securities Commission (CNV) on September 19 2000 concern the following:
- fostering transparency in tender, public exchange and takeover offers, and preventing erratic fluctuations in the prices of publicly traded shares;
- preserving shareholders' equal access to information necessary to decide whether to accept or refuse an offer;
- permitting potential competing offers by interested parties, including majority or minority shareholders who have blocking powers; and
- giving all holders of securities the opportunity to evaluate proposals by making available all the information related to the proposed transactions.
The law provides a number of definitions, including the following.
Tender offer
A tender offer is a procedure whereby the initiator offers cash for the target company's securities, shares or rights in order to give the initiator a significant participation in the target company of over 10% (provided it does not have the effect of a takeover).
Public exchange offers
A public exchange offer is similar to a tender offer, except that cash is not the consideration. Rather, the initiator offers securities or any other right as consideration.
Takeover offer
A takeover offer is made by an initiator who seeks the acquisition of shares, securities or rights of the target company so as to acquire the company, or at least obtain control of the political majority rights in it.
All regulatory procedures regarding these three types of offer are mandatory. They also apply when a shareholder that holds more than 10% of the capital stock of a listed company wishes to (i) increase his or her participation or (ii) dispose of his or her participation to the highest bidder. The procedures for tender offers and public exchange offers may be started simultaneously by the initiator. The consideration in a takeover offer may be either cash or securities, provided that the shareholder or holder of a right may choose between the offered considerations until the closing of the offer.
Any initiator wishing to acquire or significantly increase its participation in a public company must inform the CNV of its intentions. A detailed report on the proposed transaction must be submitted to the CNV at least five working days prior to the date on which the market will be informed of the transaction. The CNV will authorize publication of the report within five days of receiving it. In addition, the CNV may order the publication of any complementary information relating to the offer. The CNV will treat information filed by the initiator as confidential until it is published.
The regulations set out the fiduciary duties of the initiator, as well as of the administrators and shareholders of the target company. The following are the most important fiduciary duties.
The initiator
The administrators of the offer and any other related persons (as defined by the regulations) should keep confidential all information related to an offer until the report is published. None of the initiator's administrators or related persons may obtain or provide information regarding the acquisition of shares of a target company when the information is not public knowledge. The initiator must ensure that none of its actions compromise or affect the equal treatment of holders of shares, securities and/or any other rights.
Administrators and majority shareholders
From the date on which the report of the offer is disclosed to the public, the referred persons should:
- not make any declaration to the media that differs from those contained in the reports on the offer;
- not perform any act which may imply any disposition of the properties of the company; and
- not increase the number of shares and/or any other securities of the target company over the amounts already in the possession of the company, except as permitted under capital markets legislation.
Any related person, or any person acting in concert, including the shareholders of the target company, may make a competing offer, thus becoming an initiator. To this end, such person(s) must file a report on the competing offer with the CNV which complies with the requirements of the regulations. This report must be filed at least seven working days before the initial offer expires.
Any initiator of an offer may increase its bid, up to 10 working days preceding the expiry date, in order to improve the conditions of the corresponding offer. The CNV's authorization is required for such an increase.
The initiator may withdraw an offer within the following timeframes:
- up to the commencement date of the offer;
- from the commencement date until three working days before the offer closes; and
- up to the date of the settlement agreement, if the antitrust authorities or any other competent regulatory body imposes supplemental conditions or the offer.
The initiator must be notified of the acceptance of an offer at the place and in the manner stipulated in the report before the closing date of the offer.
Acceptance of the offer may be revoked only if (i) there is a competing offer or a higher bid, and (ii) such acceptance was made prior to the commencement of the competing offer or the higher bid.
Proration applies according to the terms of the offering documentation unless the initiator reserves and exercises the right to acquire additional securities. Proration does not apply to sellers holding a single share and/or security of the target company.
The following parties must be notified of the offer results within two working days of the closing of the offer:
- the CNV;
- the stock exchange; and
- the public, through publication in two national newspapers.
Any settlement and/or payment arising from acceptance of the offer must take place according to CNV requirements, and within five working days of the closing of the offer.
The regulations contain specific rules applicable to public tender offers concerning guarantees, valuation of securities, supply of additional information and special reports.
The regulations contemplate a simplified procedure that applies in cases where:
- the initiator already holds less than two-thirds of the voting securities of the target company and is offering to take total control of the target;
- the offer is limited to 10% of the voting securities of the target company; or
- the target company is conducting a plan to purchase treasury shares.
Other sections of the regulations provide specific rules concerning the protection of investors, such as the commencement of investigations of offers, special information to be provided by the target company and procedures for the determination of obstructive activities.
For further information on this topic please contact Carlos Omaña at D'Empaire Reyna Bermudez Abogados by telephone (+58 212 264 6244) or by fax (+58 212 264 7543) or by email ([email protected])