New Rules for Tender Offers

General Resolution No. 742/2018 (the “Resolution”) substantially modified the regulations of the Argentine Securities and Exchange Commission (“CNV,” after its Spanish acronym)  for tender offers in Argentina (“OPAs” after their Spanish acronym “Ofertas Públicas de Adquisición”). [1]

 

The Resolution eliminates the mandatory partial tender offer in the event of an acquisition of a “significant participation” in the capital stock of a listed company that does not imply an acquisition of a controlling interest in the target listed company. The CNV regulations previously required the acquirer of a “significant participation” of 35% or more of the voting capital of a listed company to launch a partial tender offer for an amount of votes that allowed it to reach at least 50% of the voting capital of the target company.

 

The Resolution also introduces the definitions of the Public Offer of Acquisition (OPA), both Mandatory and Voluntary, and of the Public Offer of Sale, establishing its scope.

Public Offer of Acquisition (OPA)

A tender offer or "OPA" is defined as "the market transaction by which a human or legal person, acting individually or in concert with other person/s, irrevocably offers to acquire all the shares with the right to vote of a listed company at an equitable price, for a pre-fixed term, and subject to a special procedure of control of the terms and conditions of such offer. The offer must be extended to holders of such shares and holders of subscription rights or options on those shares, of convertible debt securities or other similar securities that may directly or indirectly give the right to subscribe, acquire negotiable securities, or convert into shares with voting rights".[2]

Mandatory OPA

The Resolution provides that a mandatory tender offer is required to be made by a person who has effectively reached the control of a listed company (i) through the acquisition of shares or securities that grant, directly or indirectly, voting rights in said company; (ii) through agreements with other holders of securities that, in a concerted manner, grant the necessary votes to form the corporate will in ordinary meetings or to elect or revoke the majority of the Board members or members of the supervisory committee, or to establish a common policy with regard to management or whose purpose is to significantly influence the same, as well as any other agreement that, with the same purpose, regulates the exercise of the right to vote in the administrative body or in whom it delegates management; or (iii) indirectly or as a result of a corporate reorganization process.

Pursuant to the LMC, a person will have, individually or together with other persons, a controlling interest when: (i) they directly or indirectly reach a percentage of voting rights equal to or greater than 50% of the company, excluding from the calculation those shares that belong, directly or indirectly, to the affected company; or (ii) have obtained less than 50% of the voting rights of a company but act as a controlling shareholder (understood as controlling shareholder, any person which directly or indirectly owns, individually or jointly, a participation that grants the necessary votes to form the social will in ordinary shareholders’ meetings or to appoint or remove the majority of the members of the board of directors or supervisory committee).

Among the assumptions of concerted action, to those already provided for in the CNV rules, the Resolution incorporates the assumption of concerted action in the case of shareholder agreements that allow appointing directors or resolve main matters of the operation of the target company.

The LMC provides that the OPA procedure will be conducted after the acquisition of control. The deadline for submitting the offer is one (1) month as from the date when the controlling interest is obtained.

Voluntary OPA

Voluntary OPAs may be addressed to an amount of securities equal to or lower than the total amount of these, provided that the offeror does not reach, directly or indirectly, individually or in concert, a controlling interest, or when the offeror intends to increase its participation without falling within the scope of a mandatory OPA requirement. The voluntary OPA may be conditioned to: (i) the approval of amendments to the by-laws or other agreements subject to the shareholders’ approval; (ii) acceptance of the offer by a minimum number of securities of the target company; (iii) approval by the shareholders of the bidding company; and/or (iv) authorization of the operation by other state agencies.

Public Offer for Sale (OPV)

OPV (after its Spanish acronym, “Oferta Pública de Venta”) is defined as the market transaction by which a human or legal person, acting individually or in concert with other persons, irrevocably offers the sale of shares with voting rights of a listed company, for a pre-fixed term, and subject to a special procedure to control the terms and conditions of the offer.

Competing offers

The Resolution establishes new conditions, terms and procedures for the authorization of competing tender offer bids. Such tender offer bids must comply with the general provisions applicable to OPAs and with the following conditions: (i) they must be submitted up to 5 calendar days prior to the end date of the initial offer acceptance period; (ii) they must be directed to an equal or greater number of securities; (iii) they must improve the previous offer by raising by 15% the value of the consideration offered or by extending the offer to a higher number of securities, as the case may be. In the event that the acceptance period of the preceding offer ends before the competing offer, the term of the preceding one must be extended until the expiration of the competitor's term.

The initial offeror will have a term of 7 calendar days from the announcement of the competing offer to ratify or improve its offer. The authorization of the competing offer allows the initial offeror to desist from its offer.

OPA for Squeeze-Out

A listed company is under almost total control when a human or legal person, either directly or through another or other companies controlled by a third party, holds ninety-five percent (95%) or more of the subscribed capital stock of the listed company.[3]

The LMC provides that when a listed company is subject to almost total control: (i) any minority shareholder may, at any time, request the controlling party to make an offer to all the minority shareholders at an equitable price under the terms of section II) of article 88 of the LMC; or (ii) within a period of six (6) months from the date in which the almost total control has been reached, the company subject to such control may issue a unilateral declaration to acquire the remaining share capital held by third parties.[4]

Voluntary Delisting Offer

Listed companies that resolve to delist their shares from the public offering regime must launch a mandatory tender offer to acquire their shares, subscription rights, and bonds convertible into shares or share options.

Offered price in OPAs[5]

Mandatory tender offers: For mandatory tender offer bids due to an acquisition of a controlling interest, the LMC, regulated by the Resolution, establishes that the “equitable price” offered must be the highest of: (i) the highest price that the offeror would have paid or agreed for the securities subject to the bid during the 12 months prior to the date of the agreement or payment that allowed the control participation to be reached; and (ii) the average price of the securities subject to the offer during the semester immediately prior to the date of the announcement of the transaction by which the change in the controlling interest is agreed upon. This last guideline does not apply when the percentage of shares listed on a market authorized by the CNV represents at least 25% of the capital stock of the issuer and the liquidity conditions provided by the Resolution are met.

Other mandatory tender offer cases: In the case of mandatory OPAs due to squeeze-out or delisting, the LMC establishes that the following price criteria must be considered: (i) the highest price that the offeror would have paid or agreed for the securities subject to the offer during the 12 months prior to the request of the minority shareholder or unilateral declaration of acquisition in squeeze-out cases (Article 91 LMC) or from delisting resolution (Article 98 LMC); (ii) the average price of the securities subject to the offer during the semester immediately prior to the request of the minority shareholder or unilateral declaration of acquisition in squeeze-out cases (Article 91 CLM) or as of the delisting resolution (Article 98 LMC); (iii) the equity value of the shares, considering a delisting special balance, if applicable; (iv) the value of the company calculated according to criteria of discounted cash flows and/or indicators applicable to comparable companies or businesses; and (v) the liquidation value of the company. In these cases, the “equitable price” must never be lower than the higher of those indicated in points (i) and (ii) of this paragraph.

The consideration offered in mandatory OPA cases must be in cash, expressed per share, in pesos or another currency. The offeror may offer shares or other securities admitted to the public offering and listed in an authorized market of the CNV in exchange, at the option of the investor, provided that the possibility of payment in cash is ensured.

The CNV has a period of 15 business days to object to the offered price, counted as of the time all the documentation is collected and no new observations and requests are made. After this period, the offeror may request an expedite procedure (pronto despacho) and the CNV will have 10 business days to resolve. Minority shareholders may also object to the price from the date of announcement of the offer or presentation of the delisting request and up to the objection period of the CNV previously described.

The price objection by the CNV is appealable, at the option of the offeror: (i) by appeal filed with the CNV within 5 business days of notification, which will be submitted by the CNV to the Ministry of Finance within the same term; or (ii) in proceedings before the Federal Court of Appeals with jurisdiction in commercial matters within 10 business days of notification, without suspending the effects of the CNV resolution..

In the case of a voluntary OPA, the offeror may set the price at its own discretion but must provide the investor with a comparison with the criterions described in the precedent paragraph.

General Provisions

The Resolution provides general provisions applicable to all OPAs.

Launch Notice and Prospectus: In order to promote uniform criteria, the CNV incorporates a launch notice template and changes are made to the Prospectus template.[6]

Appraisers: The Resolution specifies the specific independence requirements that appraisers must meet and the minimum contents of the reports they issue to determine the offered price.

Guarantees: The Resolution allows tender offers to be guaranteed: (i) by a foreign financial entity, with a branch or permanent representation in Argentina; or (ii) by local insurance companies under the jurisdiction of the Superintendence of Insurance, in the latter case with the prior agreement of the CNV.

Obligations of the corporate bodies of the target company: The members of the board of the target company must issue a report with an opinion on the fairness of the offered price within 15 calendar days of receiving the offeror's notice and may not resign until the issuance of said report. The supervisory committee and the audit committee must issue an opinion on the fairness of the offered price by publishing the corresponding minutes within 15 calendar days of receiving the offeror's notification.

Sanctions: In the event of a breach of the obligation to make a mandatory OPA, with prior notice to the obligors, the CNV will resolve for the auctioning of the acquired shares, and may suspend the political rights of the person obliged to launch the tender offer,  who will also be subject to the penalties provided by the LMC.

Effective Date

As of its publication in the Official Gazette on June 6, 2018, the Resolution was submitted to the Participatory Rules Elaboration Process. The deadline for comments expired on June 28, 2018. Therefore, the Resolution should come into effect soon.