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Bapepam-LK Issues a New Rule on Takeover of Public Companies 31 May 2011[1]

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Capital Markets Client Alert June 2011 Bapepam-LK Issues a New Rule on Takeover of Public Companies On 31 May 2011, the Indonesian Capital Market and Financial Institutions Supervisory Agency (“Bapepam-LK”) amended Bapepam-LK Rule No. IX.H.1 on the Takeover of Public Companies, as attached to Decision of the Chairman of Bapepam-LK No. Kep-259/BL/2008, dated 30 June 2008 (“Previous Rule”) by issuing new rule No. IX.H.1 on Takeover of Public Company, as attached to Decision of the Chairman of Ba
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  Capital Markets Client Alert June 2011   Bapepam-LK Issues a New Rule on Takeover ofPublic Companies On 31 May 2011, the Indonesian Capital Market and Financial InstitutionsSupervisory Agency (“ Bapepam-LK ”) amended Bapepam-LK Rule No. IX.H.1on the Takeover of Public Companies, as attached to Decision of theChairman of Bapepam-LK No. Kep-259/BL/2008, dated 30 June 2008(“ Previous Rule ”) by issuing new rule No. IX.H.1 on Takeover of PublicCompany, as attached to Decision of the Chairman of Bapepam-LK No. Kep-264/BL/2011, dated 31 May 2011 (“ New Rule ”). The New Rule amended keyprovisions in the Previous Rule. What’s New? ã The New Rule is more comprehensive. The New Rule clearlyprovides that the tender offer meant in this New Rule is a MandatoryTender Offer (“ MTO ”) which is to be differentiated from a voluntarytender offer as provided in Bapepam Rule IX.F.1. Consequently, theNew Rule elaborates on the process of a tender offer applied in theMTO framework. Therefore, it is easier for the reader to understandthe MTO process because the reader does not have to conduct crossreference with other regulations regarding the MTO process like withthe Previous Rule. ã The new controlling party who shall undertake an MTO does notrequire an effective letter from Bapepam-LK anymore but it requires aBapepam-LK statement letter stating that the new controlling partycan announce the disclosure of information on the MTO in thenewspaper. ã The New Rule clarifies that the acquired company and the acquirerthat is a Public Company are not obliged to obtain shareholders’approval for the takeover in a General Meeting of Shareholders,unless the approval is required under the laws/regulations whichspecifically govern their business activities. ã The New Rule regulates all processes of the MTO. Consequently,Rule No. IX.F.1 is no longer applicable for the MTO. ã Under the New Rule, the MTO period is fixed at 30 days. A shorterperiod of MTO as in the Previous Rule is not allowed anymore. ã Bapepam-LK may extend the period of the implementation of themandatory sell-down to the public shareholders subject to certainconditions.   2 Capital Markets  June 2011 Key Provisions The key provisions of the amendments are stated below. But it should benoted that generally the takeover process requires a tender offer to be madeto all shareholders of the public company (unless exempted) and therequirements on divestment have not changed.1. As in the Previous Rule, the MTO is mandatory if there is a change ofcontrol as a result of a Party (i) holding more than 50% of all issued andpaid up shares of the Company, or (ii) having ability to determine, directlyor indirectly in whatever manner, the management and/or policy of thePublic Company.2. New Definition of MTO  . Pursuant to the New Rule, MTO is defined as anoffer to purchase the remaining shares of the Public Company (unlessexempted) which shall be conducted by the new controller.3. Announcement of Negotiation Process  . Both the Previous Rule and theNew Rule state that the potential new controller may announce thenegotiation process of takeover.In relation to the announcement, the potential new controller has twooptions:(a) the potential new controller may announce the proposed takeoverduring the negotiation process. If the potential new controller choosesthis option, all information of the negotiation including thedevelopment, the postponement and/or the cancellation of theTakeover plan, shall be published in at least 1 Indonesian dailynewspaper with nationwide circulation, and shall be disseminated tothe company that will be acquired, Bapepam-LK, as well as the StockExchange where the shares of the company to be acquired are listed.The publication and the delivery of the information shall be conductedno later than 2 business days after the negotiation developmentoccurs; or(b) the potential new controller must announce the proposed takeover nolater than 1 business day after the takeover is conducted.4. Detailed provisions of MTO Process  . Similar with the Previous Rule, thenew controlling party must undertake an MTO. In the New Rule, the MTOprocess starts no later than 2 business days after the publication of thetakeover (no later than 3 business days after the transfer of the shares(crossing) of the acquired company from the previous controlling party tothe new controller).We set out below the MTO process under the New Rule(a) Submission of Disclosure of Information on MTOIn the implementation of the MTO, the new controller shall submit thetext of the publication of disclosure of information on MTO includingthe supporting documents (e.g. letter of sufficiency of funds) toBapepam-LK and the company to be acquired, no later than 2business days after the announcement in at least one dailynewspaper in respect of the Takeover.   3 Capital Markets  June 2011 The New Rule describes the contents which shall be stated in thedisclosure including: the background of the takeover; informationregarding the shares, the new controller, and the acquired company;the conditions and requirements of the MTO; list of names and theaddresses of institutions and/or capital market supportingprofessionals that are involved in the MTO; and other importantinformation (e.g. a description of any lawsuit in relation to the takeoverand additional information that is needed so that the disclosure of theinformation in order to conduct the MTO is not misleading).(b) Period to Respond to Bapepam-LK Request on Disclosure ofInformation of MTOThe new controller shall submit the amendment and/or additionalinformation of the disclosure of information on MTO with the othersupporting documents no later than 5 business days after the receiptof Bapepam-LK request/comments. However, the New Rule does notregulate the period within when Bapepam-LK will make a request orcomment on the disclosure of information on MTO.(c) Announcement of Disclosure of Information on MTOThe new controller shall publish the disclosure of information on MTOin 1 Indonesian daily newspaper with nationwide circulation no laterthan 2 business days after the receipt of the statement letter fromBapepam-LK which stating that the new controller can publish thedisclosure of information on MTO.(d) MTO PeriodThe MTO period shall be 30 days starting 1 day after theannouncement of the Disclosure of Information on MTO as mentionedin point c above.(e) Settlement PeriodThe new controller must accomplish the MTO settlement process bythe transfer of money, at the latest 12 days after the end of MTOPeriod. The period to settle the MTO settlement process under thisNew Rule is similar with the Previous Rule.(e) MTO ReportThe new controller shall report the result of the MTO to Bapepam-LKno later than 5 business days after the settlement is completed.5. Extension Period for Mandatory Sell Down Requirement  .Both the Previous Rule and the New Rule provide provisions onmandatory sell-down that state:(i) If the MTO results in the ownership of the acquired company by thenew controller being more than 80% of the paid up capital of theacquired company, the new controller has an obligation to conduct amandatory sell down of the shares to the public so that the sharesthat are owned by the public are at least 20% of the paid up capital ofthe acquired company and are owned by at least 300 Parties, within 2years of the completion of the MTO;   4 Capital Markets  June 2011 (ii) If the takeover results in the new controller owning more than 80% ofthe paid up capital of the acquired company, then the new controllermust sell-down to the public at least the percentage of shares thatwere obtained at the time of the implementation of MTO and theseshares shall be owned by at least 300 Parties within 2 years.Now, under the New Rule, Bapepam-LK may extend the implementationperiod of mandatory sell-down as mentioned above, if the following conditionsoccur:(i) the Indonesia Stock Exchange Composite (IDX Composite/IHSG)decreases by more than 10% on 3 consecutive trading days;(ii) the Stock Exchange where the shares of the acquired company arelisted and traded is closed;(iii) the trade of the acquired company’s shares on the Stock Exchange issuspended;(iv) there is a natural disaster, war, riot, fire, and/or strike, whichsignificantly affects the continuity of business activities of the acquiredcompany;(v) the price of the share that are subject to the mandatory sell-down isnever equal or higher than the MTO price; and/or(vi) the new controller has made an effort to sell-down the shares, but theobligations to sell-down (article 5 point a and b of the New Rule) havenot been fulfilled. However, the New Rule does not provide furtherexplanation on how to prove that the new controller “has made aneffort to sell-down the shares”.Bapepam-LK can grant the postponement of mandatory sell-down as aboveunder the following procedure:(i) The new controller submits the request letter of suspension for themandatory sell-down to Bapepam-LK accompanied by data andinformation on share prices which prove that the stock price at thetime of the mandatory sell-down was never equal to or higher than theprice of the MTO.(ii) The request letter of suspension also shall be accompanied by the anexplanation on efforts that have been made in relation to theimplementation of the mandatory sell-down as well as difficultiesexperienced in implementing the obligations of the mandatory sell-down.Postponement of the mandatory sell-down is granted for a period of 6 monthsafter the issuance date of the letter of approval of postponement of themandatory sell-down by Bapepam-LK. If by the end of the extension period,the mandatory sell-down could not be implemented or could not becompleted, the new controller can submit another application letter forsuspension to Bapepam-LK, and Bapepam-LK may grant another extensionor may decide on another action (within its authority).The new controller shall report the progress of fulfillment of obligations for themandatory sell-down every 3 months (March, June, September andDecember) at the latest on the 10th business day of the following month.

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Dec 30, 2017
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