New regulations for Tender Offers (OPAs)

Tender Offers in Argentina are governed by the Securities Law No. 26,831 (the “LMC” after its Spanish acronym) as amended by the Productive Financing Law No. 27,440 (the “LFP” after its Spanish acronym), and the resolutions of the Argentine Securities and Exchange Commission (the “CNV” after its Spanish acronym). 

 

General Resolution No. 779/2018 of the CNV published in the Official Gazette on December 28, 2018, (the “Resolution”) confirmed the new regulations for tender offers in Argentina (“OPAs” after their Spanish acronym “Ofertas Públicas de Adquisición”). 

 

The Resolution includes comments and suggestions received during the Participatory Rules Elaboration Process opened in mid-2018 (see our comments at: https://www.marval.com/publicacion/nueva-reglamentacion-de-las-ofertas-publicas-de-adquisicion-opa-13204&lang=en).

 

The Resolution introduces the definitions of the Public Offer of Acquisition (OPA), both Mandatory and Voluntary, changes to the procedure for delisting and cancellation from the public offering regime, incorporates a launch notice template, and introduces changes to the Prospectus template.

 

The Resolution also confirms the elimination of 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.

 

We summarize below the main guidelines of the tender offer regulation in force as from December 28, 2018, pursuant to the LMC , as amended by the LFP, and the Resolution.

Public Offer of Acquisition and/or Exchange (OPA)

In general terms, 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, offers to acquire and/or exchange shares with the right to vote of a listed company, 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 granted by the issuing company on those shares, of convertible debt securities or other similar securities that may directly or indirectly give the right to subscribe, and/or acquire negotiable securities, or convert into shares with voting rights.

The Resolution further clarifies that the abovementioned obligation must include the shares with voting rights, in accordance with the applicable laws, regulations and by-laws, at the time of requesting the authorization of the offer to the CNV.

Mandatory OPA 

The LMC provides that a mandatory OPA at an equitable price is required to be made by a person who, acting individually or in concert with other person/s, has effectively reached the control of a listed company.

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).

In line with the above, 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:

1. through the acquisition of shares or subscription rights or options granted by the issuing company on those shares, of convertible debt securities or other similar securities that may directly or indirectly give the right to subscribe and/or acquire negotiable securities, or convert such shares into shares with voting rights in said company;
2. 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, 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. The CNV clarifies that: (a) this assumption will be applicable when: 1) the parties to the agreement have acquired the shares with voting rights of the company, acting individually or in concert within the 12 months prior to signing the agreement ; or 2) when a new shareholder fosters and signs an agreement with others in order to determine joint control of the target company due to its entry as a shareholder; and (b) this assumption will not apply when a stake of less than 50% is acquired in a controlling company of a listed company when there exists a previous agreement to which the new shareholder adheres, occupying the position held by the selling shareholder, without modifying the parent company's participation in the affected company; or
3. indirectly or as a result of a corporate reorganization process.

The Resolution introduces clarifications to the assumptions of concerted action already provided for in the CNV rules, and incorporates the assumption of concerted action in the case of shareholder agreements that allow appointing or revoking the majority of the administrative body and supervisory committee, or regulate the voting rights exercise in the administrative body or in whom it delegates management.

A relevant fact (“hecho relevante”) must be published immediately when a controlling interest in a listed company is reached.

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

The Resolution provides that the OPA must be completed within 90 calendar days as from the date it becomes mandatory.

Voluntary OPA

Voluntary OPAs may be for an amount of securities equal to or lower than the total amount of these, provided that the offeror does not fall within the scope of acquisition of control (Section 87 of the LMC), squeeze-out OPA (Section 91 of the LMC), or voluntary delisting OPA (Section 98 of the LMC).

The voluntary OPA may be conditioned to: (i) the approval of amendments to the by-laws of the target company 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 of the offer by the shareholders of the bidding company; and/or (iv) authorization of the operation by other state agencies.

The controlling shareholder of the company affected by a Voluntary OPA launched by a third party, in the event of accepting such offer, must make it public by means of a relevant fact (“hecho relevante”) within the first 10 calendar days of the start of the offer term.

Competing offers

The Resolution establishes new conditions, terms and procedures for the authorization of competing tender offer bids. The launch notice must inform the reasons for launching the offer and the objectives pursued.

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 10% the value of the consideration offered. 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 95% or more of the subscribed capital stock of the listed company (Section 92 of the LMC).

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” (see below: “Offered price in OPAs - Other mandatory tender offer cases”); 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.

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, following the procedure provided for in the LMC and the Resolution.

Offered price in OPAs

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:

1. 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, without taking into account acquisitions of volumes that are not significant –i.e. 5% or less of the total traded volume in the trading day of acquisition- and purchased at trading price, and including any other additional consideration paid or agreed with respect to such securities. The Resolution provides that if the final purchase price were subject to adjustments, the offered price must be recalculated and adjusted if the result is higher. When the adjustment occurs after the term of the offer is finished, the additional amounts, if any, must be paid to the holder who accepted the offer within 10 calendar days as from payment of such increase; and
2. the average price of the securities subject to the offer during the semester immediately prior to the date in which the offeror is obliged to publish notice of the announcement of the transaction by which the change in the controlling interest was 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 provides that the following price criteria must be considered:

1. 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 (Section 91 LMC) or from delisting resolution (Section 98 LMC);
2. 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 (Section 91 LMC) or as of the delisting resolution (Secton 98 LMC);
3. the equity value of the shares, considering a delisting special balance sheet, if applicable;
4. the value of the company calculated according to criteria of discounted cash flows and/or indicators applicable to comparable companies or businesses; and
5. 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.

When the equitable price is the highest price paid or agreed and is expressed in a currency other than Argentine pesos, the settlement and payment must be made in the same currency or in Argentine pesos converting that price at the exchange rate quoted by the Banco de la Nación Argentina the day before the settlement date.

The CNV has a period of 20 business days to resolve on the authorization of the OPA and to object to the offered price, counted as of the time all the documentation is collected and no new observations and information requests are made.

The refusal of authorization and/or price objection by the CNV is appealable before the Federal Court of Appeals with jurisdiction in commercial matters within 30 business days of notification of the resolution. The appeal will be filed with the CNV who will grant the appeal and remit the proceedings to the corresponding Courts within 20 business days as from receipt of the appeal, along with the CNV’s response and the Court will resolve after prior hearing of the Public Prosecutor's Office (Sections 143 to 146 LMC).

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.

Voluntary OPA: In the case of a voluntary OPA, the offeror may set the price at its own discretion. The guidelines and criteria applied for the price determination should be disclosed and, if applicable, the valuation reports that have been taken into account should be published. The CNV will not issue an opinion on the offered price, but will formally authorize the realization of the offer if it complies with the requirements established by the Resolution.

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.

Terms and deadlines: The offeror must publish the OPA Prospectus within 5 calendar days of being notified of the CNV resolution approving the offer. The term granted to investors to accept or reject the offer will be set between a minimum of 10 business days and a maximum of 20 business days. In addition, the offeror may grant an additional term of no less than 5 business days.

Exceptions to the OPA obligation: The Resolution introduces clarifications and new cases in which it will not be mandatory to launch a tender offer.

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.

Guarantee: The Resolution allows tender offers to be guaranteed by local financial entities, and broadens the scope of guarantors to include: (i) foreign financial entities that have a branch or permanent representation in Argentina; or (ii) 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. 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 order the auctioning of the acquired shares. The non-compliant obligors will also be subject to the penalties provided by the LMC.  Those who breach the obligation to launch a mandatory OPA will not be able to exercise the political rights of the acquired shares.