Question

What are the three broad models of takeovers regulation and what are the features of them?

Which model of takeovers regulation has been adopted by New Zealand?

Answer 1

Answer) There are three models of takeover regulations -

1) Mandatory Tender offers

2) Voluntarily offers

3) Competing offers

Mandatory Tender Offer(MTO)

This is an offer where the purchase party is obligated to make an offer to the target company's shareholder. This is done so that atleast 26% of the shares can be acquired.

Initial Trigger - If The acquirer acquiring shares, in addition to the shares already with him along with th person acting in consert is more than 25% than MTO is mandatory.

Consolidated Trigger - If voting right Is more than 25% but less than maximum permissible limit of non public shareholding then also MTO is mandatory of atleast 5% of total shares in a single year.

Control Trigger- If an unlisted company is acquired, which controls a listed company, then this is an indirect control on Listed company.

And Hence MTO is needed.

2) Voluntary Offers-

If the acquired holds no shares in the target company, then it have an option to make an Voluntary Offer.

Various conditions needs to be met -

1) No MTO made in last 52 weeks.

2) if order is made then acquirer can't acquire share through any other means during the offer period.

3) Can't acquire share for next 6 months after completion of Offer. However, another Voluntary offer can be made.

3) Competing Offers -

This is an offer which is made by anyone in 15 days of original tender offer. Here time plays an important factor.

In this offer suppose there are two parties competing to acquire shares in the target company. So the party who will lose will not be able to sell its share acquired during the offer period and will continue to remain Shareholder of the target company.

Target company cannot help any competitive parties.

In new zealand following model is followed-

Voting right Owned. Method to increase

1) Upto 20%. No restrictions

2) 20-50%. A full.or partial offer on reaching more than 50%. Shareholders approval is needed to acquire new shares.

3) more than 50, less than 90 - A full.or partial offer without conditions

4) 90% or more - Can compulsory acquire remaining shares by any means.

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