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Takeover Code to incorporate lessons from F&N saga



SINGAPORE's Takeover Code will finally address some of the precedents and issues raised in the takeover of Fraser and Neave (F&N), three years after the last shots were fired in that long-drawn battle.

The changes, which will take effect on March 25, seek to clarify the resolution of competing offers, the role of offeree boards and the timeliness of disclosures, the Monetary Authority of Singapore (MAS) announced on Thursday.

Because the Code is administered by the Securities Industry Council (SIC), which has the ability to make rulings on a case-by-case basis, many of the coming changes are merely codification of existing practice. But industry players welcomed the greater certainty created by putting practice onto paper.

"The changes that were proposed codifies what happened in the F&N case, and it creates more certainty in terms of what will happen," said Lean Min-tze, a lawyer with Baker & McKenzie Wong & Leow.

The bulk of the changes have their root in the fight for control over F&N between Thai tycoon Charoen Sirivadhanabhakdi and OUE that dragged on for more than six months from 2012 to 2013.

One of the biggest changes will be an outline for an auction if a stalemate arises near the end of a competitive bidding period.

Elizabeth Kong, a lawyer with Morgan Lewis Stamford, said: "Singapore first saw such a procedure being used during the F&N takeover battle, which was prescribed ad hoc after discussions with the competing offerors and the target company failed to produce an alternative procedure to break the impasse - its codification would similarly help ensure finality and orderly conclusion of competitive situations within a reasonable timeframe in future."

Respondents to a July 2015 public consultation had raised the question of whether the prescribed auction process will eliminate deadlocks.

SIC replied that it aimed to have a simple yet flexible process in place, and that a stalemate would be unlikely after the auction.

"Even where the auction results in the same offer price for cash-only offers, it is likely that the competing offerors will have differing levels of shareholding in the offeree company," SIC wrote. "Offeree company shareholders will naturally gravitate towards the offer which is more likely to turn unconditional, even if both offer prices are identical. For the above reasons, SIC is of the view that measures to prevent a deadlock under the modified auction procedure are not necessary."

The new rules also clarify that offer-period timetables will be aligned to that of the latest competing offer, after typical timelines fell by the wayside during the F&N saga, which went on for much longer than the typical 60-day window. The deadline for competing offers to be announced has also been extended to increase the prospects of competitive bids.

The Code has also been changed to clarify that boards of target companies may, but are not obliged to, seek a competing offer. Doing so will not be deemed to be frustrating an existing offer. This change was a response to F&N's board agreeing to pay OUE's consortium a break-up fee in order to create a competitive situation.

Not all of the changes are strictly with respect to F&N, however. Under the new Code, parties which have made known their intention to make a potential bid will now have 53 days from the despatch of the initial offer document to announce either a firm offer or declare their intention not to bid.

Known also as a "put up or shut up" requirement, the rule will address situations in the past when potential offerors have left the market wondering about their true intentions. Dealmaker Oei Hong Leong's silence in the 2002 battle for NatSteel and the coyness of Fortis Healthcare in the 2010 Parkway Holdings saga were raised by industry professionals as examples.

"It would be good for purposes of certainty to know whether you're serious," Mr Lean said.

Beyond the technical details, professionals also paid homage to the fact that the F&N saga continues to have an impact on the market today.

"This is the result of a lot of learning experience on the F&N action," one merger and acquisition lawyer said. "It codifies and improves upon the process after having the chance to think through issues clearly."