The Singapore Code on Take-overs and Mergers (“Code”) was revised by the Monetary Authority of Singapore pursuant to Section 139(6) of the Securities and Futures Act with effect from 25 March 2016. This article aims to highlight the key changes that were made to the Code, and will touch on various amendments including those relating to:

  • Competing offers
  • Board conduct during an offer
  • Prompt disclosure of material changes
  • Settlement of acceptances
  • No increase / no extension statements

Competing offers

Amendments to the Code were made to provide greater certainty on the applicable procedures and timelines in cases of competitive offers and to increase the prospects of a competing offer that will benefit offeree company shareholders.

Alignment of offer timetables

The new Note on Rule 22.9 of the Code provides that all offerors will be bound by the timetable established by the despatch of the offer document of the latest competing offeror.

The Code prior to the revision did not clearly state the timelines to be observed by offerors in competitive offers scenarios. This had left open the possibility of typical timelines in the offer process not being observed. The new Note on Rule 22.9 of the Code brings clarity to timelines to be observed by offerors in competitive situations, reducing uncertainty arising from the offer which may otherwise have a destabilising effect on the offeree company.

Default auction procedure

The new Rule 20.5 in the Code provides that in competitive situations at the later stages of the offer period, the Securities Industry Council (“SIC”) will normally require revised offers to be announced in accordance with an auction procedure, the terms of which will be determined and announced by the SIC.

Such auction procedure will normally be as set out in the new Appendix 4 of the Code, the key steps of which are as follows:

  • the default auction procedure shall commence only if either or both of the offerors revise their offers on the 46th day following the despatch by the second competing offeror of its offer document (“Day 46”);
  • the default auction procedure shall consist of five rounds of bidding with each round to take place each day over the five business days immediately following Day 46;
  • either or both of the competing offerors will be permitted to announce a revised offer in the first round of the auction;
  • for subsequent rounds of the auction, a competing offeror will be permitted to announce a revised offer only if the other competing offeror has announced a revised offer in the previous round;
  • if the auction process enters into the fifth round (meaning that there was a revised offer announced in the fourth round of the auction), both competing offerors will be entitled to announce a revised offer in the fifth and final round; and
  • if on any day of the auction there are no revised offers announced, the auction will end.

Other features of the auction process include:

  • the flexibility to include new forms of consideration during the auction;
  • no minimum increment over the latest competing offer; and
  • no dealing in shares or procuring irrevocable commitments in relation to shares in the offeree company during the auction process.

The codification of the default auction procedure in the new Rule 20.5 of the Code is intended to provide greater finality, transparency and an orderly conclusion to the competitive bidding process within a reasonable timeframe.

Notwithstanding the greater finality introduced by the new Rule 20.5 of the Code, it is still unclear what factors the SIC would take into account when deciding whether:

  1. to impose the default auction procedure (as the new Rule 20.5 of the Code states that the SIC would “normally” apply the same): and
  2. to adopt any alternative procedure agreed upon between the competing offerors and the board of the offeree company.

Deadline for announcing competing offer

The new Note 6 on Rules 3.1, 3.2 and 3.3 of the Code provides the revised deadline for clarification of intention by potential competing offerors.

In the case of a contractual offer, the deadline for a potential competing offeror must make an announcement of its intentions to either make an offer or no bid has been revised from the 50th day to the 53rd day from the date the first offeror despatches its initial offer document.

In the case of a scheme of arrangement, trust scheme or an amalgamation, the deadline for such announcement will be no later than the 7th day prior to the date of the shareholders’ meeting to approve such scheme or amalgamation.

The extended deadline will provide more time for a potential competing offeror to consider and finalise the terms of an offer which may increase the prospects of the offeree company shareholders receiving a competing offer.

Board conduct during offer

Amendments to the Code were made to encourage the offeree company boards to take a more active role in procuring a better offer in the interests of the offeree company shareholders.

Offers not amounting to frustration

The new Note 8 on Rule 5 of the Code is the codification of SIC’s position that an offeree company seeking better and/or alternative offers does not frustrate an existing offer. The new Note may encourage directors of the offeree company to seek better and/or alternative offers if the initial offer is not sufficiently attractive.

Availability of management projections and forecasts

The new Note 5 on Rule 7.1 of the Code has been introduced to highlight that an offeree board may consider sharing management projections and forecasts with the independent financial advisor (“IFA”) for the purpose of the latter’s advice on the offer. The incorporation of such information into the IFA’s valuation process may potentially provide a better gauge of the true value of the offeree company, as compared to relying solely on values of comparable companies in similar sectors especially where such values may have been artificially depressed by market conditions.

Other changes

Prompt disclosure of material changes

Note 1 on Rule 8.1 of the Code has been amended to require prompt disclosure of any material:

  1. changes to information previously published in connection with the offer; and
  2. new information which has been required to be disclosed in any previous document or announcement published during an offer period, had it been known at that time.

Settlement of acceptances

Rules 16.6 and 30 of the Code has been amended to adopt a 7-business-day settlement period instead of the previous 10-calendar-day settlement period to avoid practical difficulties for an offeror when part of the 10-calendar-day settlement period coincides with public holidays.

No increase and no extension statements

The new Notes 4 on Rules 20.2 and 22.7 of the Code clarify that the offeror may reserve the right to set aside a no increase statement/no extension statement in the event the offeree company makes an announcement of material new information after the 39th day following the publication of the initial offer document and such statement is made after that day.

The setting aside of the no increase statement/no extension statement must be announced within four business days after the date of the announcement by the offeree company of such material new information.

Codifying and streamlining existing practices

The Code has also been amended to:

  1. clarify standards that are required of pre-conditions in a pre-conditional voluntary offer (new Note 5 on Rule 15.1 of the Code);
  2. allow the offeree company to seek approval for the posting of the offer document at an earlier date in a pre-conditional offer (new Note on Rule 22.1 of the Code); and
  3. clarify how the offer value for a different class of shares should be calculated (new Note 1 on Rule 18 of the Code).


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