The terms of an offer may provide for target company shareholders to be paid the offer consideration in a currency other than New Zealand Dollars. A number of recent offers have included this facility.
The key issue for offerors to be aware of when including options for payment of any type of consideration is that
any such offer must comply with rule 20 of the Code.
Rule 20 provides that:
An offer must be made on the same terms and provide the same consideration for all securities belonging to the same class of equity securities under the offer.
This means that all offerees must be given the option to be paid under any of the consideration options. For example, it would likely result in a breach of rule 20 of the Code if, say, only Australian resident target company shareholders were offered the option of being paid in Australian Dollars.
Where consideration in a foreign currency is offered, the Panel's expectation is that the terms of the offer will clearly indicate how the exchange rate will be calculated at which the offer consideration is to be converted from New Zealand Dollars into foreign currency. This may include a reference to an objectively determined formula for calculating the exchange rate. For example, the formula might be the spot rate for buying the relevant foreign currency with New Zealand dollars quoted by a reputable financial institution at a specified time before the date of payment.
Prospective offerors and legal advisers are encouraged to discuss with the Panel executive any questions they may have about offering payment of foreign currency as consideration.
A partial offer under the Code must be made for a "specified percentage" of target company voting securities not already held or controlled by the offeror (rule 9).
There have been quite a number of instances where the specified percentage was misstated by the offeror in its takeover documentation.
To assist market participants, the Panel has prepared the following example calculation of a specified percentage for a hypothetical partial offer, for reference:
| Number of total voting rights sought by offeror | x 100 = The specified percentage |
| Number of total voting rights not already held or controlled by offeror |
Example: The target company has 100,000,000 voting rights on issue. The offeror already holds or controls 19,900,000 (or 19.90%) of the total voting rights. The offeror wishes to increase its total holding to 50,100,000 voting rights (or 50.10%).
To obtain its desired total holding, the offeror must acquire 30,200,000 (or 30.2%) voting rights that it does not already hold or control. The specified percentage of the partial offer will be:
| 30,200,000 (number of total voting rights sought) | x 100 = 37.70287% (the specified percentage) |
| 80,100,000 (number of total voting rights not already held or controlled by offeror) |
A partial offer is an offer made by a bidder to all shareholders in a target company for less than 100% of those persons' voting securities. A partial offer made under the Code is subject to the same rules as those which apply to a full offer, apart from the special provisions in relation to partial offers set out in Subpart 2 of Part 3 of the Code.
A partial offer must specify the period for which it will remain open and it must remain open for that period.
The offer period must commence with the date of the offer and be not shorter than 30 days and not longer than 90 days (rule 24 of the Code). The offer period may be extended by way of a variation of the offer but must not be extended beyond the maximum 90-day period (rule 24A).
A shareholder in the target company may accept a partial offer in respect of any number of their voting securities. The Code (rules 11 to 13) prescribes how the offeror is to scale acceptances to ensure that voting securities are taken up under the partial offer appropriately as between acceptors when excess acceptances have been received. Any scaling of acceptances can only occur after the close of the offer period, once all acceptances have been received.
Rule 33 of the Code provides that the offer must state a date by which the consideration for the offer must be sent to those persons whose securities are taken up under the offer. The date must be not later than seven days after the later of -
In the case of a partial offer, it is wise to use the full rule 33 formulation so that, even if the offer becomes unconditional during the initial offer period, consideration is not payable until seven days after the end of the offer period as first specified in the offer document.
An offeror who extends a partial offer beyond the initial closing date first specified in the offer document risks the offer becoming unconditional before the new closing date. If this occurs, the offeror may be unable to comply with the Code's requirements to pay the offer consideration because the amount of any scaling is determined by the number of acceptances received through the entire offer period, not just in the period up to when the offer became unconditional. Until scaling is completed, the offeror will not know how many securities it may take up from each offeree and, accordingly, how much consideration to pay each offeree.
The Panel advises offerors to set a realistic initial offer period, and if it is necessary to extend that period, to do so in reasonably small segments, to minimise the risk of the offer going unconditional earlier than seven days before the end of the offer period. An offeror may also consider making its intentions clear about the date by which the offer will definitely close, by way of a last and final statement. The Panel expects that last and final statements will be adhered to as to a promise (refer to Code Word No.22 for further information). Such a last and final statement can help shareholders (who may want to delay accepting the offer until just before the offer closes) to understand that the offeror will not keep extending the offer period.