Depending on the form of takeover offer used, minority shareholders may do the following when presented with a takeover offer with an offer price of the target company (the “Company”) that is less than its NAVPS:
- Reject the Offer or Vote against the Proposal. Your Vote Counts.
Every shareholder has a choice, viz. his own shares. To a certain extent, he can help decide on the outcome of an offer or a corporate action of the Company by either rejecting the offer or, in the case of a corporate action that requires his voting support, vote against the proposal. Hence, if the offer price or other terms of the proposal are not sufficiently appealing to the shareholder, he or she may do the following:- If the proposal comes in the form of a general offer in accordance with the provisions of the Singapore Code on Take-overs and Mergers (a “General Offer”), REJECT the General Offer by not submitting the form of acceptance and authorisation / transfer in relation to the General Offer; OR
- If the proposal comes in the form of a general offer in accordance with the provisions of the Singapore Code on Take-overs and Mergers (a “General Offer”), REJECT the General Offer by not submitting the form of acceptance and authorisation / transfer in relation to the General Offer; OR
- If the takeover is proposed in the form of a scheme of arrangement (a “Scheme”), vote AGAINST the Scheme resolution by attending in person or submitting a proxy; OR
- If the takeover is proposed in the form of an exit offer in conjunction with a voluntary delisting, vote AGAINST the voluntary delisting resolution and not submitting the form of acceptance and authorisation / transfer in relation to the exit offer.
In the case of a privatisation by way of Scheme or a voluntary delisting, a general meeting of the Company will be convened to consider the Scheme or voluntary delisting resolution (as the case may be). A shareholder may attend a general meeting in person to discuss the proposal and make his or her views known at that time. In the case of the Scheme, the attendance of the shareholder (in person or by proxy) is important as a majority of shareholders present and voting (in terms of number as opposed to a mere percentage of voting rights carried) is required.
Minority shareholders do have the ability to influence the outcome of an offer and this has been evident in recent times. For example, in the scheme of arrangement proposed by ST Electronics to privatise Nera Telecommunications Ltd in 2012, minority shareholders were able to vote down the scheme resolution to privatise the company.
- If the takeover is proposed as a Scheme, you may also object to the Scheme in Court
Where a Scheme is approved at the general meeting, it has to be confirmed at a Court hearing. A minority shareholder may attend the Court hearing and present arguments as to why the Scheme should not be confirmed. He has to show that either:- The scheme document did not contain sufficient information to allow shareholders to make an informed decision. Carefully prepared Circulars (including Scheme Documents) reduces a shareholder’s chances of success on this ground; OR
- Process and procedure was not properly followed in conducting the vote, convening the scheme meeting, or in obtaining the votes for the scheme meeting, and the irregularity was prejudicial to minority shareholders or not representative of shareholders’ wishes. Take for example, the proposed Scheme to privatise PCCW Limited in Hong Kong, where the Court of Appeal of Hong Kong SAR refused to sanction the scheme in the face of “clear manipulation” of the votes at the scheme meeting.
- Object to Compulsory Acquisition
Where an offeror obtains 90% or more of the shares in the company, the remaining minority shareholders have the right to object to an offeror’s exercise of compulsory acquisition rights by filing an application in Court if the offeror, following the close of a general offer, exercises such rights. The procedures will vary depending on the Company’s jurisdiction of incorporation.However, in order to succeed in the objection, a minority shareholder must prove to the Court that the offeror achieved the threshold for compulsory acquisition rights by unfair means (for example, by using a third party to acquire shares from other shareholders at a price higher than the offer price and then accept the offer), or that procedure was not duly followed.
