MAS revises takeover and merger code to enhance competition and disclosures

[SINGAPORE] The Monetary Authority of Singapore, on the advice of the Securities Industry Council (SIC), has issued a revised Singapore Code on Take-overs and Mergers.

The amendments, announced on Tuesday (Jun 16), “aim to protect the competitive process of takeover and merger transactions, improve certainty and timeliness of schemes of arrangement, and enhance disclosures to investors and shareholders”, the release by SIC read.

The revisions follow a public consultation launched by SIC on May 5 last year.

The new rules will take effect on Jul 16.

Key changes

The SIC will strengthen Rule 13 of the code to reduce the anti-competitive effects of deal protection measures commonly used in Singapore. Under the updated framework:

• Total break fees payable by an offeree company to an offeror will be capped at a maximum of 1 per cent of the offeree’s value.
• The offeree board and its financial adviser are required to submit an explanation to SIC demonstrating why the break fee is in the best interests of shareholders.
• SIC will provide guidance on anti-competitive exclusivity arrangements and may mandate remedial action if such agreements deter competing offers.

The revised code introduces changes to schemes of arrangement:

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• A shareholder meeting to approve a scheme of arrangement must be convened within six months of its initial announcement.
• Following shareholder approval, both the offeror and offeree company must immediately execute all necessary steps to make the scheme effective without delay.

The amendments also focus on offeror statements:

• An offeror who issues a “no increase” or “no extension” statement cannot make a subsequent offer that effectively increases or extends the bid. This restriction lasts until the later of three months after the original offer lapses, or the conclusion of a competing offer’s period.
• If an indicative offer price is disclosed prior to a firm offer announcement, the announced offer price cannot fall below the indicated price.
• Where a potential offeror has not clarified its intentions to make an offer for the company for a prolonged period, SIC may impose a 28-day deadline on a potential offeror to either announce a firm offer or confirm it will not proceed.

The updated code introduces measures to inform shareholder decision-making during contested bids:

• Offeree boards seeking shareholder approval for a proposed frustrating action must obtain and disclose independent advice. A frustrating action is an action taken by an offeree board which could result in shareholders being denied an opportunity to consider an offer.
• Where an asset sale competes with an offer for shares, the offeree company must disclose and quantify the expected cash proceeds to be returned to shareholders from the asset sale. These figures will be treated as a profit forecast.