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Malta has no particular takeover bid legislation, but this state of affairs is expected to change after the Malta Financial Services Authority this week issued a draft list of rules to a select group of people, with the aim of transposing the EU’s Takeover Bids Directive of 2004.
The rules will not be applicable to companies not listed on the stock exchange and the listing authority shall be the supervisory body for takeover bids. But given the tight deadlines for submissions and eventual implementation, the rules are set to come into force by 20 May, the financial authorities seem to have woken up with a sudden jolt.
The regulations state that the bidder acquiring control of a company is required to launch a bid for all the company’s shares. The price offered must be an equitable price and the rules regulate what actions may be taken by the board of directors of a company for whom a bid has been made as well as the rights of minority shareholders.
The rules determine that the takeover bid regulations apply for anyone acquiring 40 per cent of a listed company.
The deadline for eventual implementation and the minimum shareholding to be acquired mean that the regulations will kick in when government eventually sells its 60 per cent stake in Maltacom and its 40 per cent joint shareholding with the Sicilians in BOV.
The deadline for implementation closes one day after Maltacom’s AGM.
It still has to be seen whether the privatisation deal with Tecom will fall under the new regulations.
Once an interested party takes on more than 40 per cent shareholding of a listed company, the buyer must also submit an offer for the other shareholding and make public an offer document.
The Board of Directors must inform their employees or representatives of this bid and must make public the opinion of the employees’ representatives. Unions will play an important role in a takeover process.
The listing authority will retain the right to grant the buyer an exemption from the obligation to make a mandatory bid.
An interesting issue is the determination of the equitable price, which is generally the highest price paid by a buyer during a span of a maximum one year period before the bid. More over if the take-over firm acquires 90 per cent of the voting rights and capital it must offer a fair and equitable price to acquire the outstanding minority shares.
The Directive which is being implemented through the listing rules will be onerous on the Board of Directors who cannot do whatever they like in defence of a bid, and after a bid is made certain actions need the approval of their shareholders through a general meeting.
The MFSA is taking a liberal approach when it comes to reciprocity rights with other member states and will not involve itself in the adjustment of an equitable price for minority shareholding. It is also not taking the option to be informed before a decision to launch a bid is made public, except for 7 days after the buyer acquires a controlling interest.
Observers told MaltaToday that the Authority should take a more active role in the interest of the thousands of small investors and control the process. There is still ample time for the MFSA to reconsider its stance on this issue and amend the draft rules.
The Authority is also making it obligatory to be informed of the Offer Document before it is made public. Again, it is in the interest of minority shareholders for the Authority to take an active role.
But the short timing for implementation has raised a few eyebrows. Whereas for corporate governance issues the MFSA published a consultative document for Comments by all and sundry way back last year, observers suggest government should have done the same for Takeover Rules.
“There rules affect those investors in public listed companies who bought shares through retail means and hold direct shareholding as well as those that bought units in funds.
The situation may arise where a company has been taken over by a buyer and the other shareholders will find a different offer for their shares. This may be something positive for shareholders but then if taken may restrict the number of shares listed on the local stock exchange.
“Observers comment that if any of the current companies de-list, investment opportunities in Maltese companies will be restricted. It is an anomaly that this important piece of regulation should not have been a legislative act passed by parliament. Are we turning into a state wherein, our Parliament desists from legislating and grants authorities the right to define their own regulations without an impact assessment?” an observer told MaltaToday.
An important regulation found in the draft rules is that any locally listed company, which is also listed on another regulated market in an EU or EEA member state, will have one authority regulating the process. This Authority will be decided between the Malta and other EU-regulated market authority.
Maltacom will have to pass through this process since some of its shares are listed on the London stock exchange.
The regulations also make it mandatory on the buyer to announce his intentions on the future business of the listed company, and on the jobs of the employees and management. The new majority holder must also announce any material changes and the strategic plans.
But with a strict deadline until 20 May there is little time to have a thorough discussion on the implication of these rules.
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