28 January, 2016
SSEK Indonesian Legal Consultants partner Fahrul S. Yusuf and Michael S. Carl, a senior foreign legal advisor at the firm, have contributed the Indonesia chapter of the new Practical Law global guide to Public Mergers and Acquisitions.
The following is an extract from Public Mergers and Acquisitions in Indonesia.
What form of consideration is commonly offered on a public takeover?
If the acquisition is by subscription for newly-issued shares, the consideration must be cash. Similarly, in a direct buyout of an existing shareholder triggering a Mandatory Tender Offer (MTO), the consideration must also be in the form of cash.
In the case of a Voluntary Tender Offer (VTO), the consideration can be in the form of cash or securities.
Are there any regulations that provide for a minimum level of consideration?
There are minimum pricing requirements for both an MTO and a VTO.
Mandatory Tender Offer
For an MTO triggered by the takeover of a public company, the pricing is based on one of the following, depending on how the change of control arises:
- Where the change of control arises from the direct acquisition of shares of a public company (for example, the acquisition of shares in the public company itself) and the shares are listed and traded on a stock exchange, the pricing follows one of two formulas (whichever results in the higher price):
- under the first formula, the price is based on the average price of the daily highest price traded on the stock exchange for either the:
- 90 calendar days prior to the announcement of the closing of the acquisition leading to control; or
- 90 calendar days prior to the announcement of negotiations leading to the acquisition (if negotiations are announced).
- under the second formula, the price is based on the actual price of the acquisition leading to control.
- Where the change of control arises from the direct acquisition of shares of a public company and the shares are listed and traded on a stock exchange, but during 90 calendar days prior to the acquisition announcement or prior to the negotiation announcement the shares have not traded on the exchange, the pricing follows one of two formulas (whichever results in the higher price):
- the average of the highest daily prices traded on the stock exchange during the 12 months preceding the last trading day of the shares; or
- the actual price of the acquisition leading to control.
- Where the change of control arises from the direct acquisition of shares of a public company that are not listed or traded on a stock exchange, the pricing is determined by either (whichever results in the higher price):
- the price at which the acquisition leading to control occurred; or
- the fair price determined by a licensed appraiser.
- Where the change of control arises from the indirect acquisition of shares of a public company (for example, the acquisition of shares in a controlling shareholder of the public company) and the shares in the public company are listed or traded on a stock exchange, the pricing is determined by the average of the highest daily prices traded on the exchange during the 90 calendar days:
- prior to the acquisition announcement; or
- prior to the announcement of negotiations.
- Where the change of control arises from the indirect acquisition of shares of a public company and the shares in the public company are listed and traded on a stock exchange, but during 90 calendar days prior to the acquisition announcement or prior to the negotiation announcement, the shares of the company have not traded on the exchange, the minimum pricing is determined by the average of the highest daily prices traded on the exchange during the 12 months preceding the last trading day of the shares.
- Where the change of control arises from the indirect acquisition of shares of a public company that are not listed or traded, the “fair price” will be determined by an appraiser.
Voluntary Tender Offer
In the case of a VTO, the price must be higher than:
- The previous highest price offered in a VTO by the same party within the 180 calendar days prior to the announcement of the VTO plan.
- If the shares are listed and traded on the stock exchange, the average of the highest daily prices traded on the stock exchange during the 90 calendar days prior to the announcement of the VTO plan.
- The average of the highest daily prices traded on the stock exchange during the 12 months preceding the last trading day of the shares, if the shares have not traded during the 90 calendar days prior to the announcement of the VTO plan.
- If the VTO is offered for shares that are not listed on the stock exchange, the “fair price” determined by an appraiser.
Are there additional restrictions or requirements on the consideration that a foreign bidder can offer to shareholders?
There are no specific additional restrictions or requirements for foreign bidders, apart from foreign shareholding limitations for certain industries.
To read the full guide to Public Mergers and Acquisitions in Indonesia, click here.
For further information, please contact:
Fahrul S. Yusuf, Partner, Soewito Suhardiman Eddymurthy Kardono
fahrulyusuf@ssek.com
