A conditional offer refers to a takeover offer which is expressed to be subject to certain conditions being fulfilled. This means that the offeror will only become obligated to purchase the shares in the target company which have been validly tendered in acceptance of the offer after the conditions have been fulfilled. If the conditions to the offer are not fulfilled on or before the closing date of the offer, the offer will lapse and shareholders who have tendered their shares in acceptance of the offer will have their shares returned to them. A conditional offer is said to “unconditional” once all the conditions to the offer have been met.
The conditions that may be attached to an offer would depend on whether the offer is a mandatory or voluntary offer.
Under the Singapore Code on Take-Overs and Mergers (the “Code”), a person is required to make a takeover offer (a “Mandatory Offer”) for a company if:
- he acquires shares which (taken together with shares held or acquired by persons acting in concert with him (“concert parties”)), carry 30% or more of the voting rights of the company; or
- he, together with his concert parties, holds between 30% and 50% of the voting rights of the company and he, or any of his concert parties, acquires in any 6-month period additional shares carrying more than 1% of the voting rights of the company.
All other takeover offers made under circumstances other than one triggered for a Mandatory Offer, are considered as voluntary offers (each a “Voluntary Offer”).
A Mandatory Offer can only be subject to the following conditions:
- the condition that the offeror receives sufficient acceptances to the offer which, when taken together with any shares which the offeror may hold or acquire after the announcement of the offer until its closing date, would allow the offeror and his concert parties to control more than 50% of the voting rights issued shares of the target company (the “Minimum Acceptance Condition”); and
- the condition that the offer shall lapse in the event the Competition Commission of Singapore makes a decision to undertake a Phase 2 review of the transaction, or issues a direction that prohibits the offeror from acquiring shares in the target company.
In the case of a Voluntary Offer, if an offeror (and his concert parties) hold less than 50% of the issued share capital of the target company at the time of making the offer, then the Voluntary Offer must contain the Minimum Acceptance Condition. However, the offeror may apply to the Securities Industry Council (“SIC”) for its consent to increase the acceptance threshold under the Minimum Acceptance Condition from 50% to 90%.
If the offeror (and his concert parties) hold more than 50% of the voting rights of the target company as at the date of the offer, the Voluntary Offer is not required to contain the Minimum Acceptance Condition, although the offeror may nonetheless attach it if it intends to acquire not less than 90% of the target company’s voting rights.
Other conditions (such as the requirement for approval by the offeror’s shareholders, or conditions relating to the target company’s financial performance) may be attached to a Voluntary Offer, with the consent of the SIC. These conditions must be approved by the SIC, which does not allow conditions that require subjective judgments by the offeror or lie in the bidder's hands, as this can create uncertainty. Moreover, the Code further prescribes that offerors should not invoke any condition (other than the Minimum Acceptance Condition) so as to cause the offer to lapse unless the circumstances which give rise to the right to invoke the condition are of material significance to the offeror in the context of the offer, and information about the condition is neither publicly available nor known to the offeror before the offer announcement.