Corporate & Securities Singapore Client Alert August 2015 Consultation Paper on Revision of the Singapore Code on Take-overs and Mergers In light of recent market developments and evolving international practices, the Securities Industry Council of Singapore (SIC) has issued a Consultation Paper proposing amendments to the Singapore Code on Take-overs and Mergers (Code) to: (i) provide greater certainty on the applicable procedures and timelines for competitive takeover offer situations, (ii) provide additional guidance on board conduct during an offer and rules for timely disclosure, and (iii) codify and streamline existing practices. We outline some of the key proposals of the Consultation Paper: (I) Competing offers The SIC proposes to introduce the following provisions relating to competitive offer situations under the Code: Introduction of an auction procedure to resolve competitive situations existing on Day 46. In the event that there are competing bids that are not resolved by the last day for revision of the bids (Day 46), the SIC is proposing to adopt an auction procedure that borrows many features from the procedure announced by the SIC in the competitive takeover offers for Fraser & Neave, Limited (F&N), but with certain key modifications (Modified Auction Procedure). However, unlike the procedure used in the F&N situation (F&N Auction Procedure) where there was no limit to the number of bidding rounds, the Modified Auction Procedure imposes a maximum of five bidding rounds over five consecutive business days. Both competing offerors may announce a revised offer in the first round of the auction. Thereafter, a competing offeror is permitted to announce a revised offer only if the other competing offeror has announced a revised offer in the previous round. In the 5th and final round of the auction, both offerors are entitled to announce a revised offer. In this final round, a competing offeror may submit a revised offer subject to the condition that the offer will only be announced in the event that the other competing offeror also submits a revised offer. This modifies the F&N Auction Procedure and prevents a competing offeror from bidding against itself. However, as was the case in the F&N Auction Procedure, it opens the Modified Auction Procedure to the possibility of both offerors arriving at the same auction price at the end of the auction process. The SIC is proposing to not impose a minimum increment over the value of the other offeror's last revised offer. Instead, the proposals provide more flexibility than the F&N Auction Procedure, by allowing the introduction of new forms of consideration during the auction. Formula bids remain prohibited. Contact: Wong Ai Ai +65 6434 2553 email@example.com Lean Min-tze +65 6434 2288 firstname.lastname@example.org Selwyn Lim +65 6434 2653 email@example.com Baker & McKenzie.Wong & Leow 8 Marina Boulevard #05-01 Marina Bay Financial Centre Tower 1, Singapore 018981 www.bakermckenzie.com To ensure an orderly process, the competing offerors and their concert parties will be prohibited from dealing in the securities of the offeree company and from procuring (or amending) irrevocable commitments in relation to either competing offeror's offer for the duration of the Modified Auction Procedure. Consistent with the F&N Auction Procedure, the competing offerors and their concert parties will be prohibited from acquiring interests in the offeree company's shares after the close of the Modified Auction Procedure. Align offer timetables to that of the latest offer. Where there are multiple offers announced, the SIC intends to codify its current practice of aligning the timetable for the earlier offer(s) with that of the latest announced offer. Deadline for potential competing offerors to clarify their intentions. The SIC is proposing to codify the practice of imposing a requirement that a potential competing offeror definitively state whether it is intending to make an offer for the offeree company on or before the 50th day following despatch of the incumbent offeror's offer document (a "Put Up or Shut Up" Deadline) in potential competing offer situations. However, instead of a deadline of 50 days in a general offer situation, the deadline will be 53 days following posting of the incumbent offeror's offer document. In the case of a scheme of arrangement, a trust scheme or an amalgamation, the deadline is no later than the 7th day prior to the date of the shareholders' meeting to approve the relevant scheme or amalgamation. (II) Guidance on board conduct during an offer The SIC will clarify in the Code that soliciting for or running a sale process for a competing offer does not amount to frustration of the existing offer. In addition, an offeree board may consider sharing available management projections and forecasts with the independent financial adviser (IFA) for purposes of obtaining the IFA's advice on the offer. (III) Timely disclosure of material developments The SIC also proposes to amend the Code to require prompt disclosure of: (i) any material change to information previously published in connection with an offer; and (ii) any material new information which would have been required to be disclosed in any previous document or announcement published during an offer period, had it been known at the time. (IV) Codifying and streamlining existing practices The Code will clarify, in the context of pre-conditional voluntary offers, the standards that the pre-conditions must meet. In addition, the SIC proposes to allow an offeree company to seek approval for the posting of the offer document at an earlier date in a pre-conditional offer. The Code will also clarify the valuations that the SIC will normally accept in respect of a comparable offer made by an offeror for the non-voting equity shares in the offeree company (such as preference shares). (V) Commentary Many of the proposed amendments to the Code incorporate the lessons learnt and practices adopted in the F&N and earlier competing bid situations. Baker & McKenzie.Wong & Leow The default auction procedure provides certainty on how the SIC will deal with competing bid situations that remain unresolved in the late stages of the situation, and will allow competing bidders to revise their offers in an expedited, yet controlled manner late in an offer process. The amendments to the Code to provide for the alignment of the offer timetables in cases of multiple competing offers, and the imposition of a "Put Up or Shut Up" deadline are codifications of the SIC's practices that had evolved with the increase in the competitive (or potentially competitive) takeover situations in Singapore over recent years. The inclusion of the clarification that an offeree board is free to seek competing bidders is a move to definitively dispel any confusion on whether the board of the offeree company is able to seek out competing offers for the offeree company. The inclusion of a statement that offeree boards are to consider providing forecast information to IFAs, is an attempt to change the current practice in the securities industry, where IFAs usually base their opinions solely on publicly disclosed information. It also appears to be an attempt to encourage offeree boards and IFAs to take into account the future prospects of the offeree company when evaluating an offer. All of the latest proposed amendments also bring the Code in line with similar provisions and practices in the UK City Code on Takeovers and Mergers, and the Hong Kong Code on Takeovers and Share Buy-backs. ©2015. All rights reserved. Baker & McKenzie.Wong & Leow is a member of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.