Jirapong Sriwat
SCL Nishimura & Asahi, Bangkok 
j.sriwat@nishimura.com 

The acquisition of securities listed on the Stock Exchange of Thailand (SET) for the purpose of business takeovers (ie, a tender offer) is mainly regulated by the Securities and Exchange Act BE 2535 (1992), as amended, and the Notification of the Capital Market Supervisory Board No ThorJor 12/2554 Re: Rules, Conditions and Procedures for the Acquisition of Securities for Business Takeovers, as amended (the ‘Takeover Rules’). This article provides an overview of the Takeover Rules.

Introduction

Tender offers can be categorised into: mandatory tender offers; voluntary tender offers; partial tender offers; and tender offers for delisting purposes.

Mandatory tender offers

The requirements on mandatory tender offers, which must be reported or submitted to the Securities and Exchange Commission (SEC) using Form 247-4, are triggered when any person, together with any related persons and/or concert parties, acquires voting rights at or in excess of 25 per cent, 50 per cent or 75 per cent (the ‘trigger point’) of all voting rights in a listed company, provided that the acquisition is: direct, through the acquirer’s ownership of the target company’s securities; indirect (through the application of the so-called ‘chain principle’); or a combination of direct and indirect acquisition.

Under Thai securities regulations, ‘related persons’ include a spouse, minor or person who holds more than 30 per cent of the voting rights in the acquirer or disposer. On the other hand, ‘concert parties’ refers to persons acting in concert who mutually intend to exercise their voting rights in the same direction, which may be evidenced by their agreement to exercise their voting rights and their agreement to restrict the right to sell securities in the case of a tender offer, among others.

There are a number of exemptions from the mandatory tender offer requirement, including:

• the trigger point was reached as a result of a target company’s share repurchase;
• the trigger point was reached through the inheritance of securities, stock dividends, rights offerings, tender offers or certain types of business restructuring;  
• the acquirer reduces its shareholding or controlling interest to below the relevant trigger point within seven business days; and
• a waiver is granted by the SEC or a specially convened takeover panel. In this regard, the SEC may grant a waiver on a number of grounds, including where the acquisition does not result in a change of control, the acquisition is made for the purposes of providing support to or rehabilitating a business, or the acquisition is made pursuant to a shareholder resolution (ie, a whitewash).

Voluntary tender offers

A voluntary tender offer is an elective offer to purchase the target company’s outstanding shares. As with a mandatory tender offer, a voluntary tender offer must be made for all the outstanding securities of the target company. However, as it is voluntary, the offer may be made on a conditional basis, including by specifying that the offer will only be consummated if a certain number of securities are tendered.

Partial tender offers

A partial tender offer is a tender offer for some, but not all, of the target company’s securities. A partial tender offer must be an offer for at least ten per cent of the target company’s shares and requires a waiver from the SEC, which may be granted if:

• the offer will not result in the offeror, including related persons, owning 50 per cent or more of the voting rights of the target company;
• the shareholders’ meeting of the target company resolves to approve the offer by at least 50 per cent of the total votes of the shareholders present at the meeting and having the right to vote;
• the offeror, including related persons, does not vote in the shareholders’ resolution to approve the offer; and
• over the six-month period prior to the offer, the offeror, including related persons, has acquired the total shares of no more than five per cent of the number of shares intended for the offer from any particular person and the voting rights of no more than 20 per cent of the total voting rights in respect of the shares that are intended for the offer. 

Tender offers for delisting purposes

Tender offers carried out for the specific purpose of delisting a public company from the SET are subject to a slightly different set of rules, most of which relate to pricing. Delisting tender offers also need to comply with a separate set of SET rules relating to delisting.

It is worth noting that the Takeover Rules do not provide for any tender offer ‘squeeze-out’ provisions. Therefore, after delisting, a certain number of minority shareholders may remain and the acquirer may not be able to freely control and manage the de-listed company after the delisting.

Pricing

The following three general pricing principles apply to all tender offers covered by the Takeover Rules:

1. the consideration offered to all holders of securities of the same class must be in the same form;
2. the tender offer consideration may be expressed in more than one form, but must include a cash-only alternative (except in one specific business restructuring scenario); and
3. if the offer is made in non-cash form, its cash equivalent must be appraised by a financial adviser.

Mandatory, voluntary and partial tender offers

The pricing of mandatory, voluntary and partial tender offers is generally set in reference to recent target company-related share or business acquisitions by the acquirer, related persons, concert parties and related persons of the concert parties. The tender offer price for securities of each class of the target company shall be no less than the highest price paid for any such securities by the aforementioned persons (if any) within the past 90 days, prior to the date on which the offer document is submitted to the SEC.

In the case where a tender offer is made pursuant to the application of the ‘chain principle’, the tender offer price shall be no less than the higher of: the cost of acquiring a ‘controlling’ interest in the relevant intermediate company; or the highest price paid for any shares acquired during the past 90 days. If securities of only one class have been acquired within the past 90 days, the tender offer price for securities of all the other classes is determined by the higher of: the weighted average market price of such securities for the five business days preceding such an acquisition, or the fair value of such securities appraised by a financial adviser. However, in the case of a mandatory tender offer where the offeror fails to submit the tender offer documents within the required period, the tender offer price shall comply with the pricing specified in Article 40/1 or 40/2 of the Takeover Rules.

The tender offer price may be adjusted to account for dividend payments, changes in par value and similar events, and the takeover panel is permitted to approve exceptions to the general pricing principles.

Delisting tender offers

Delisting tender offers are subject to a different set of pricing rules, which take into account the fact that if the delisting goes ahead, the tender offer may be the last opportunity for shareholders to sell their shares. For delisting tender offers, the offer price may not be less than the highest of:

• the highest price paid for securities of the target company purchased by the acquirer, related persons, concert parties and related persons of concert parties (if any) within the past 90 days, prior to the date on which the offer document is submitted to the SEC;
• the weighted average market price of the securities during the five business days prior to the earlier of: the date that the board of directors resolves to propose the delisting to shareholders for consideration, or the date on which the shareholders resolve to de-list;
• the net asset value per share of the target company; and
• fair value as determined by an independent financial adviser.

Acquirers are also permitted to apply to the takeover panel to reduce the tender offer price if any event occurs which has a materially adverse effect on the business.

Post-tender offer requirements, obligations and restrictions

The offeror is required to make preliminary and final reports on the results of the tender offer. The preliminary report is required to be made one business day after the last day on which securities holders are permitted to withdraw their tenders or, if earlier, three business days prior to the close of the offer period. The final report is required to be made within five business days from the close of the offer period.

In addition, an offeror that has passed through any of the trigger points will be subject to the following lock-ups:

• for a period of six months from the close of the offer period, the offeror shall be prohibited from acquiring securities of the target company at a price higher than the tender offer price, except in the case of newly issued securities or securities from an approved tender offer; and
• for a period of one year from the close of the offer period, the offeror shall be prohibited from taking any action materially different from that specified in the tender offering document, unless approved by the shareholders of the target company.

In addition, the offeror will be prohibited from making any subsequent tender offers for a period of one year following the close of the previous tender offer period, other than a tender offer to complete the delisting of the target company. In the case of a partial tender offer, the offeror may not acquire securities in the target company for a period of six months following the close of the offer period, unless such an acquisition falls under one of the automatic exemptions from making a mandatory tender offer, is for newly issued shares or is approved by the SEC.

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This article is intended merely to provide a regulatory overview and not to be comprehensive, nor to provide legal advice. Should you have any questions on this or on other areas of law, please contact the author.