Public offer – Transparency regime

Section 24 of Decree No 677/01 sets forth certain provisions establishing a regime whereby companies whose shares are listed may elect not to be subject to the mandatory public tender offer regime provided thereby.

1. Mandatory Public Tender Offer

Any individual or legal entity that intends to make a public tender offer (“PTO”) and/or an exchange of shares or securities convertible into shares must previously request the authorization of the Comisión Nacional de Valores (“CNV”) in the terms and conditions of Section 22 of Decree No 677/01 and of CNV Resolution No 401/02.

Any person who aims to obtain control of a company whose shares are admitted to the public offer regime and intends to purchase for a consideration a number of shares with voting rights that give right to a “material shareholding” in the corporate capital and/or in the votes of the company (equal or exceeding 35% and 51%, as applicable), must previously launch a mandatory PTO. The PTO shall be addressed to all shareholders and shall refer as a minimum to the shareholdings and the obligation to launch total or partial tender offers which would differ in the percentage of the corporate capital and the votes that the offeror intends to obtain, pursuant to CNV Resolution No 401/02.

This obligation does not apply when the purchase of the material shareholding does not entail the intention to obtain control of the company. It does not apply either in cases of change of control resulting from corporate reorganizations, mergers or spin-offs.

The mandatory PTO regime does not apply either to the purchase of shares or other securities convertible into shares which, considered as a whole, do not exceed the material shareholding benchmark. The principle of free negotiation among parties prevails when the purchase is below the material shareholding limit.

2. Optional Regime

Section 24 of Decree No 677/01 provides that companies whose shares are admitted to the public offer regime shall automatically be comprised in the mandatory PTO regime provided in Section 23 as of the closing of the first shareholders’ meeting that is held twelve months after the date when the relevant regulations became effective, that is, April 6, 2002 (CNV Resolution No 401/02).

In order to avoid being comprised in the mandatory PTO regime, a company whose shares are listed must make an express resolution in the first shareholders’ meeting held after April 6, 2003 to include a clause in its by-laws stating that the “Company is not subject to the Optional Mandatory Public Tender Offer Regime provided by Law”.

In reply to a specific request, the Board of Directors of the CNV, clarified that: “... The automatic inclusion of a company within the mandatory public tender offer regime shall be effective as of the closing of the first shareholders’ meeting held after April 6, 2003, that is twelve months after the date when the relevant regulations entered into force (CNV Resolution No 401/02) unless such shareholders’ meeting decides to include a clause in its by-laws providing otherwise”.

Once the non-adhesion to the regime has been considered at the extraordinary shareholders’ meeting or, at the latest, eighteen months after April 6, 2002, all financial statements and management discussion and analysis of operations (memoria) as well as any other documents that the CNV may indicate, must include a legend in a visible place stating that the “Company is not subject to the Optional Mandatory Public Tender Offer Regime provided by Law”.

3. Conclusion

The PTO aims at assuring an equal treatment for all shareholders with respect to financial and economic aspects, as well as any other condition relating to the relevant purchase. Consequently, if the company is subject to the mandatory PTO regime and there is a sale of a material shareholding that entails a purchase of control, minority shareholders are entitled to participate in the same conditions as the majority shareholders in the control premium.

If a company wishes to avoid being automatically included in the mandatory PTO regime, it must include a clause stating that it does not adhere to the regime under analysis at the first shareholders’ meeting held after April 6, 2003.