ELIMINATING THE MINORITY AFTER A TAKEOVER
The takeover regime incorporates a policy that a small minority of shareholders should not be able to thwart an otherwise successful bid.
Following a takeover bid, a bidder will be permitted to compulsorily acquire securities in the bid class if:
the bidder and its associates have a relevant interest in at least 90% (by number) of those securities; and
the bidder and its associates have acquired at least 75% (by number) of those securities bid for under the bid.
A bidder is only entitled to compulsorily acquire shares under this method if it commences the compulsory acquisition process within one month after the close of the takeover bid.
In addition to the post-bid acquisition power:
a person who, either alone or with a related body corporate, has a full beneficial interest in at least 90% of the securities (by number) in a class, may compulsorily acquire the remaining securities in that class; and
a person who, either alone or with a related body corporate, has 90% voting power, and full beneficial interest in at least 90% (by value) of all the securities in the company that are either shares or convertible into shares, may compulsorily acquire all remaining classes of shares and securities convertible in shares. This allows acquisition of options and convertible notes.
This power is available at any time, not only after a takeover, provided the holder commences the compulsory acquisition process within six months of becoming a 90% holder. In this circumstance an expert’s report must accompany the compulsory acquisition notice. The expert’s report must contain an opinion on whether the terms proposed for the acquisition of the securities, as set out in the compulsory acquisition notice, are fair and, if so, the reasons for forming that opinion.
Where these are dissenting minority shareholders who, in aggregate, hold 10% of the securities covered in the compulsory acquisition notice, the majority holder may apply to
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the court for approval of the acquisition of the securities covered by the notice. The majority holder must, in most cases, pay the legal costs of a dissenter associated with any such application.
The flip side to the bidder’s right to “mop up the minority”, is that the bidder must offer, and the minority has the right to require the bidder to, purchase their securities. This right of the minority to force such a buy-out extends to securities that are convertible into bid class securities.
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