Acquisitions of public companies
Financing arrangements for acquiring public companies are mostly identical with the arrangements for acquiring private companies, except for the following.i Time frame
In general, acquisition of a public company is subject to additional laws and regulations that safeguard the integrity of the acquisition process and the rights of minority shareholders. Specifically, if the target public company is listed on the Taiwan Stock Exchange (TWSE) or Taipei Exchange (TPEx), the acquisition of that company would then be subject to rules governing the de-listing process, and all these additional laws, regulations, rules and requirements could lead to variations in terms of the financing time frame, the structure of fund utilisation or the conditions precedent, all of which should be taken into account when structuring the financing deal.ii The requirement of shareholders' approval
Although the Company Act does not include specific provisions on minority squeeze-outs, the acquisition of a public company and the acquisition terms are still required to be approved by the shareholders of the target company with (1) a majority vote at the shareholders' meeting, which requires the attendance of shareholders representing two-thirds or more of the total number of the company's issued shares; or (2) where applicable, a super-majority vote at the shareholders' meeting, which is attended by shareholders representing a majority of the total number of the company's issued shares. Once the attending shareholders approve the acquisition and the terms, all shareholders of the target company are bound by the approval to the proposed acquisition. As such, a public company may conduct a cash merger or a cash-share exchange to squeeze out its minority shareholders by obtaining the approval from the shareholders with the said quorum and voting threshold, or, in the event that the target company is a subsidiary of the acquiring company by which 90 per cent of the target company's shares have been acquired, the acquisition can be carried out with the approval from both companies' boards of directors.
As to the correlation between the shareholder's approval and the financing arrangement for acquiring a public company, the shareholders' approval is often structured as the condition precedent for the utilisation of funds in the acquisition financing context. Transacting parties in Taiwan would typically agree that the substantial parts of the acquisition funds cannot be utilised unless the necessary shareholder approval is duly obtained. When the conditions are met, the funds would usually be handled by share transfer agent or the broker-dealer who assists in the acquisition and appropriated to shareholders of the target company.iii Certainty of funds
If the acquisition involves tender offer, the competent authority would require the acquirer to provide documents evidencing the certainty of funds when the application of tender offer is submitted for approval. Information required by the competent authority typically includes, without limitation, the financing amount prepared or obtained by the acquirer for the proposed tender offer and the identity of the party that provides or structures the financing arrangement. As to acquisitions that involve no tender offer (e.g., done through merger or share swap), because no regulatory approval is required, no review of certainty of funds would be required given that such acquisition is purely private between the parties.iv Information disclosed to competent authority
In general, public companies (including companies listed on TWSE or TPEx) are required to disclose certain material information, such as material resolution of the board of directors or shareholders' meeting, or other circumstances having a material effect on the shareholders' equity or the price of the shares. If the entry into a loan agreement, guarantee agreement or the provision of security for an acquisition financing is considered as material information, an instant disclosure of the major terms (such as the amount of the facility or limit of the guarantee) would be required pursuant to the relevant rules (note that the details, terms on fees or otherwise are not required). In addition, as a tender offer would require an approval from the competent authority, the offeror is usually required to disclose their financing arrangements to the competent authority so as to allow the authority to ensure the certainty of the funds in relation to the proposed tender offer. Such disclosure, however, is not required to be made to the general public or to include specific details.