The Capital Markets Board (“CMB”) Communiqué on Principles Regarding Proxy Voting at the General Assembly of Shareholders Meetings of Publicly Held Joint Stock Corporations, Proxy Solicitation, and Tender Offers (“Communiqué”) is the main piece of legislation regulating the obligation to launch a tender offer when one party or parties acting together, directly or indirectly, acquires 25% or more of the share capital and voting rights or control of a publicly held joint stock corporation.
Since its issuance in 1994, the Communiqué served many investors to structure their acquisitions in the capital markets or to launch tender offers in order to collect the shares of minority shareholders in their target companies. With the entry of relatively more sophisticated local and international investors to the market in the last five years, the Communiqué started to become somewhat insufficient for the needs of sophisticated investors. Taking into account the issues encountered, the CMB has published an amended draft of the Communiqué (“Draft”) on its web site. The Draft includes certain rules imposed by the CMB in practice, although not previously addressed in the Communiqué. When the Communiqué will enter into force is not determined. However, the CMB may be awaiting the finalization of the amendments to the Capital Market Law to issue the Draft.
Main amendments foreseen in the Draft can be listed as follows:
- Within minimum three and maximum five days following the publication of the “information form” in one nationwide and two local newspapers, the tender offer process should start. Previously, the CMB used to determine the date when the tender offer would start.
- The tender offer period can be between ten to 30 days. Previously, there was no minimum limit.
- The Draft imposes the requirement of having at least 25% of the total tender offer amount in the account of the relevant broker institution or bank.
- Although how “acting together” in the acquisition of shares would trigger the tender offer requirement was defined in the Communiqué, the Draft provides a more detailed explanation of the term “acting together”. Accordingly, commercial relations, subsidiaries, relatives or any other third party agreed upon by contractual arrangements may be considered as acting together in the acquisition of a publicly held corporation.
- As the major novelty, the CMB addressed the issue of determining the tender offer share price in case of indirect change of control. This is not addressed in the Communiqué. The Draft provides that where the tender offer price cannot be determined under the provisions of the Communiqué, the CMB may seek a third party appraisal report from authorized appraisal companies. The Draft further states that the tender offer share price to be determined for indirect change of control events could not be less than three months average price prior to the acquisition triggering the tender offer.
- In the event the tender offer is delayed due to the responsible party, then the CMB may impose a “default interest” on the tender offer price.
- The Draft also includes a rule regarding the currency exchange rate calculation for acquisitions made in currencies other than the New Turkish Lira.
- Since introduction of “squeeze out” rule is problematic under the general principles of the Turkish Commercial Code, the Draft introduces a creative mechanism by allowing the minority shareholders to sell their shares to the purchaser who acquires more than 95% of the publicly held corporation within 30 days following the tender offer process at the tender offer share price.
- The Draft includes new exemptions from the tender offer requirement.
- The number of documents to be submitted to the CMB for the tender offer is expanded compared to the Communiqué.
The amendments explained above are expected to address the needs of market players to a certain extent. Together with the implementation of the new CMB Law and the Draft, tender offers will remain as one of the major issues to handle for investors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
