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SEMINAR 1 - INTRODUCTION TO M&A

DRIVERS OF M&A

GROWTH

•

Need for growtho Organic growth – interna – !"!ce#ti$e to !ow rate!o Inorganic growth – e%terna thro"gh co'$ination! and ac("i!ition! – with a )iew to

increa!e #ace• Deter'inant! of growth

o Si*e+re)en"e!o ,ro-ta$iit.

• ,inning down the o#ti'a e)e of growtho Ma%i'i!e ret"rn! to !harehoder!o ,re!er)e or increa!e !harehoder )a"eo Agenc. theor. of cor#orate aw

Manager! 'a. ha)e contrar. incenti)e!

• Growth #ro!#ect! de#end on t.#e of ind"!tr.o Odecono'. /$ric0and'ortar1o Newage /0nowedge2 technoog.1

SI3E

• 4eader!hi# in an ind"!tr.o Do'inant #o!itiono 5onfer! !e)era ad)antage!o 5reate! $arrier! for new entrant!o

,hio!o#h. foowed $. GE – 6Fi%2 !e or co!e7 !trateg.

S8NERG8

•  The 69 : 9 ;

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o Financia $ene-t! Acce!! to ca#ita

OTHER FA5TORS

• Other Factor!o  To achie)e greater 'ar0et #ower /ie to increa!e 'ar0et!hare1o Ac("i!ition of R&D ca#a$iitie!o Dereg"ation in an ind"!tr.

 Teeco''"nication!2 Airine ind"!tr.2 >an0ing ind"!tr.o ,ri)ati!ation and di!in)e!t'ent $. the Go)ern'ent in !tateowned enter#ri!e!

• 5ore 5o'#etence and Di)er!i-cationo 5ore 5o'#etence Foc"!ing on core co'#etencie! create! "ni("e2 integrated

!.!te'! that reinforce -t a'ong .o"r -r'B! di)er!e #rod"ction and technoog.

!0i!Ca !.!te'ic ad)antage .o"r co'#etitor! canBt co#.o Di)er!i-cation

5reation of a #ortfoio Deri!0ing !trateg. 6DonBt #"t a .o"r egg! in one $a!0et7 Re!earch on $ene-t! of di)er!i-cation

• Vitiate! #ortfoio theor. of in)e!t'ent!• >ene-t! on. co'#anie! in reated !ector!

• A)aia$iit. of target! at ow #rice!o ?!"a. a reci#e for ho!tie ta0eo)er!o Ho!tie ta0eo)er! "!"a. do what $oard! with #oor cor#orate go)ernance cannot do

• 4ow #rice! co"d $e either d"e too ,oor. 'anaged co'#anie!o ,oor 'ar0et condition!2 eg -nancia cri!i!

• Mar0et for cor#orate controo ,rice! of !hare! are ow in co'#anie! that do not reai!e #otentia or tho!e that are

'i!'anagedo  Thi! i! a!!"'ing that 'ar0et! are ecient /ie ecient ca#ita 'ar0et! h.#othe!i!

/E5MH11o Ma0e! it chea# for ac("i!ition! $. raider! /eg if !toc0 i! trading at a ow ,+E

co'#ared to it! #eer!1• I'#ro)ed 'anage'ent h.#othe!i!

o New 'anage'ent 'a. $e $etter a$e to reai!e #otentia

• On the other hand2 thi! force! e%i!ting 'anager! to !te# "# their act if the. are to #rotect

their o$!o  Thi! 'a. ead to e%i!ting 'anager! to ado#t #ractice! that oo0 good in the !hort

ter' $"t not in the ong ter' In the e%tre'e2 there 'a. $e fra"d"ent acti)itie!

!"ch a! forger. of acco"nt!

4ESSONS OF M&A

• Manageria h"$ri! h.#othe!i! /,ro#agated $. Richard Ro /@11o H"$ri!2 or 'anageria #ride2 #a.! a roe in e%#aining ta0eo)er acti)it.o >eha)io"ra ana.!i!

Manager! of $idder! are aJicted with o)ero#ti'i!' $ia! and irrationait.

9

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 The. tend to $id at )a"ation! that are !"$!tantia. higher than tho!e

deter'ined 'ore o$ecti)e. H"$ri! h.#othe!i! i! a!o !"##orted $. e'#irica e)idence

o St"die! !how decine in 'ar0et )a"e of ac("irerB! !hare! #o!tanno"nce'ent

wherea! targetB! !hare! tend to a##reciate in )a"e• E'#ire$"iding $. 'anager! of ac("irer – A of the!e $ene-t 'anager! 'ore than

!harehoder! of ac("irer• WinnerB! c"r!e

o D"e to infor'ationa di!#aritie!o Seer+target ha! 'ore infor'ation a$o"t it!ef than the ac("irero  The i!!"e i! 'ore ac"te in $idding + a"ction !it"ation!

• How can the!e 'oti)ationa factor! !"rro"nding 'anager! $e addre!!edK

• I! cor#orate go)ernance a !o"tionKo Inde#endent -nancia ana.!i! i! #referred

• ,ro$e'! with integrationo Organi!ationa i!!"e!o 5"t"ra i!!"e!

•  The!e are !oft intangi$e factor! ,roof of the #"dding ie! in deaing with the!e

!"cce!!f".• Howe)er2 in #ractice2 a n"'$er of o$!tace! need to $e !"r'o"nted in thi! #roce!! Note

that the aw i! of )er. itte he# in thi! area

S?55ESS OF M&A

• ?!"a. dic"t to 'ea!"re

• 5annot co'e to de-niti)e conc"!ion!

•  Tran!action! are not ho'ogeno"!

• E'#irica e)idence tend! to $e 'i%edo E)ent !t"die!

Ret"rn! to !harehoder!2 $a!ed on 'o)e'ent in 'ar0et #rice "#on

anno"nce'ent of the tran!actiono Acco"nting !t"die!

Financia #erfor'ance of co'#anie! #re and #o!ttran!action

• 5a!e St"d. – AO4B! 'erger with Ti'e Warnero 5onte%t

5o'$ination of Internet and 'edia co'#anie! AO4 ac("ired Ti'e Warner $. i!!"ing it! own high.)a"ed !toc0 Howe)er2 'erger faied to achie)e an. of the intended $"!ine!! o$ecti)e!

and !.nergie! A 6te%t$oo07 ca!e

o Endogeno"! factor! 5o'#e%it. of the co'#anie!2 their $"!ine!!e! and the dea it!ef  Inade("acie! in !trategic thin0ing on $"!ine!! #ro!#ect! S"gge!tion! of 'anageria h"$ri! Fai"re of #ro#er integration

o E%ogeno"! factor! >"r!ting of the Internet $"$$e Rece!!ion and !toc0'ar0et cra!h

• 5a!e St"d. – SGLB! faied #ro#o!ed 'erger with ASL

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o 5o'$ination anno"nced in Octo$er 9@o Vario"! rea!on! !et o"t in !tate'ent to !harehoder!o  To create the #re'ier internationa e%change in A!ia ,aci-co >"t2 dea faied $efore it co"d $e con!"''atedo ee# in 'ind the roe of nationa intere!t in cro!!$order M&A!

ISS?ES FOR THO?GHTS

• Are M&A tran!action! awa.! $ene-cia too Sharehoder! /of ac("irer and target1Ko Other !ta0ehoder! /eg creditor!+e'#o.ee!1K

• How do we o#ti'i!e )a"e fro' tran!action!K

• How do we c"r$ )a"ered"cing dea!K

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SEMINAR 2 – TRANSACTION STRUCTURES AND TERMINOLOGY 

OVERVIEW

• M&A genera. in)o)e! tran!fer $. a co'#an. of it!o A!!et!P oro 5ontro

• ,o!!i$e thro"gh n"'ero"! wa.! /!tr"ct"re!1• Di=erent ega !tr"ct"re! 'a. $e "!ed to achie)e a !inge co''ercia goa

•  To#ic i! re#ete with argon

• ?nder!tanding of ter'! 'a. )ar. de#ending on )ario"! factor!o Ree)ant "ri!diction2 >"!ine!!+co''ercia )! ega+!tat"tor.2 Ta% con!ideration!2

 Ti'e2 Reg"ation! change!2 5o'#etition aw!

5OMMER5IA4 ?NDERSTANDING

 TAEOVER

• A tran!action or !erie! of tran!action!P

• An ac("irer – indi)id"a2 co'#an. or gro"#P

• Ac("ire! contro ofo  The a!!et! of a co'#an. $. $eco'ing the owner of the a!!et!o  The 'anage'ent of the co'#an. /and o$taining indirect contro o)er it! a!!et!1

• So'eti'e! referred to a! an 6ac("i!ition

• I! there a di=erence $etween ac("iring contro o)er a!!et and ac("iring contro o)er

'anage'entKo 4ia$iitie!o Agenc. co!t!

o 5ontro o)er 'anage'ent i! aornothing – cannot #ic0 and choo!e which a!!et! toinherit

o 5on!oidation /fro' an acco"nting #er!#ecti)e1 – the. are di=erent fro' each other

• A ta0eo)er genera. in)o)e! a arger co'#an. ta0ing contro of a!!et! or 'anage'ent of

a !'aer co'#an.o >"t2 the contrar. i! #o!!i$e too2 and doe! occ"r in reait. /eg re)er!e ta0eo)er!1

5ONTRO4

• A$!o"te – @QP Do'inant – Q /Compulsory Acqus!o"1P S"#er'aorit. –

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MERGER

• Arrange'entP

• A!!et! /and ia$iitie!1 of one or 'ore co'#anie! $eco'e )e!ted in a !inge co'#an.o One of the co'#anie! !"r)i)ingPo Or a new co'#an. e!ta$i!hedP

• Sharehoder! of each co'#an. $eco'e coecti)e owner! of the co'$ined co'#an.

• A co'$ination of a!!et! and owner!hi# /eg 6,ooing of intere!t!71

• Genera. a 6'erger of e("a!7 – 5o'#anie! tend to $e ro"gh. of !a'e !i*e• >"t2 (/%r%"c% !%"(s !o 0% o"% o. "!%"! $"( (%)r%%

• Eg !a'e re!"t a! a 'erger can $e achie)ed thro"gh a ta0eo)er in)o)ing a 6!toc0!wa#7

 TAEOVER >ID

• A 6techni("e7 for e=ecting either a ta0eo)er or 'erger

• In ca!e of a 'erger – it re("ire! conc"rrence of targeto >etween ac("irer and co'#an.

• In ca!e of a ta0eo)er – it can either $e friend. or ho!tieo An o=er i! 'ade to a !harehoder! to ac("ire their !hare! in the co'#an.o >etween ac("irer and !harehoder! on.

• F"nda'enta r"e – a ta0eo)er $id i! .u"($m%"!$lly $ co"!r$c!u$l o/%r 0%!3%%" !*%

$cqur%r $"( !*% s*$r%*ol(%rso Howe)er2 increa!ing.2 thi! i! )itiated $. co'#anie! getting intere!ted in the

'o)e'ent of it! !harehoding!• 5o'#anie! are intere!ted $eca"!e it 'a. re!"t in

o A change in 'anage'ento A change in co'#an. directiono  The $rea0"# or i("idation of the co'#an. if the o=er goe! thro"gh

• Strateg. and re!"t wi de#end on !harehoding !tr"ct"re of the targeto Wide. di!#er!ed !harehoding Greater #o!!i$iit. of ho!tie $id!o E%i!tence of controing !harehoder! Need to o$tain conc"rrence of arge

!harehoder!

4EGA4 STR?5T?RES

• >road. of 0ind!o A!!et + >"!ine!! Ac("i!itiono Stat"tor. Merger + A'aga'ationo Share Ac("i!ition + Ta0eo)er

ASSET + >?SINESS A5U?ISITION

• One of the !i'#er t.#e! of tran!action!

• Ac("irer #"rcha!e! fro' the !eero  The !eerB! $"!ine!! or "nderta0ing

A or !"$!tantia. a of the a!!et!o Seect a!!et! on.

5herr.#ic0ing

• Since the !eer i! foregoing a!!et!2 it i! re("ired to o$tain cor#orate a##ro)a!

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• 4ia$iitie!2 which are "!"a. ded"cted fro' #rice #aid2 'a. not $e 0nown or2 if 0nown2

("anti-a$eo ,o!!i$. 'itigated $. in!"rance $"t it co'e! at a co!t

• ,"rcha!er 'a. di!charge con!ideration thro"gh eithero ,a.'ent of ca!ho I!!"e of it! own !hare!

 Thi! 'a. trigger re("ire'ent of cor#orate a##ro)a! on the #art of the

#"rcha!er

STAT?TOR8 MERGER + AMA4GAMATION

•  Two or 'ore co'#anie! 'erge into one of the' or into a new co'#an.

•  The "nderta0ing! /$"!ine!!2 a!!et!2 ia$iitie!1 of the 'erging co'#anie! are tran!ferred to

the !"r)i)ing co'#an.•  The 'erging co'#anie! are di!!o)ed in the #roce!!

•  The !"r)i)ing co'#an. 'a. di!charge con!ideration $. eithero I!!"ing it! own !hare! to the !harehoder! of the 'erging co'#anie!o ,a.ing ca!h to the !harehoder! of the 'erging co'#anie! /ca!ho"t 'erger1

 To !("ee*e o"t 'inorit. !harehoder!K

• Share! hed $. tho!e !harehoder! in the 'erging co'#an. are canceed

• Mo!t co'#anie! egi!ation contain !#eci-c #ro)i!ion! for 'erger!+a'aga'ation!

•  The!e tran!action! re("ire !harehoder a##ro)a! /and !o'eti'e! the !anction of a co"rt1

• Once a##ro)ed2 the. are 0"(") o" $ll s*$r%*ol(%rso A #ercei)ed ad)antage of thi! arrange'ent

• 5a!ho"t 'erger! can $e "!ed to ei'inate 'inorit. !harehoder!o E%#ro#riation of !hare!K

• 5ertain t.#e! of !che'e! of arrange'ent2 eg red"ction of ca#ita can a!o $e "tii!ed for

thi! #"r#o!e• S("ee*eo"t! + Free*eo"t!

SHARE A5U?ISITION + TAEOVER

•  The ac("irer o$tain! contro of the targeto ?!"a. $. ac("i!ition of )oting !hare!

•  The $"!ine!! of the target contin"e! a! #re)io"!.o  There i! no ateration to the targetB! cor#orate !tr"ct"re /e%ce#t !harehoding1

• Ac("irer 'a. di!charge con!ideration either $.o ,a.ing !eing !harehoder! ca!h

Si'iar2 fro' a -nancia and co''ercia !tand#oint2 to a ca!ho"t 'ergero I!!"ing it! own !hare! to the !eing !harehoder!

SOME OTHER VARIATIONS

•  Triang"ar Merger!o  The!e are "!"a. "nderta0en to a)oid cor#orate #roce!!e! in)o)ing arge

co'#anie! – #roce!!e! !"ch a! Sharehoder a##ro)a A##rai!a re'edie!

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• Right of di!!enting !harehoder! to get a fair )a"e for their !hare!

• Rationae for gi)ing !"ch a re'ed. to !"ch e)ent! – the. go to the

heart of the $"!ine!!+cor#orate !tr"ct"re /"ni0e ta0eo)er!2 'erger!

$ind 'inorit. !harehoder! too1 Wh. not "!e !9@ of 5AK A genera re'ed. – not !#eci-c eno"gh – ha)e to

#ro)e o##re!!iono  The!e /ie triang"ar 'erger!1 are #o#"ar in the ?S

DIS5?SSION

• Do the!e tran!action !tr"ct"re! #ro)ide too '"ch eewa. to #artie! and their aw.er! to

de)i!e o#tion! that go again!t the intere!t! of 'inorit. !harehoder!K• How ha)e the co"rt! in the ?S deat with thi!K

• Ha)e co"rt! a##ied a 6!"$!tance o)er for'7 a##roachK Or )ice)er!aK

• What do .o" thin0 of the a$iit. of co"rt! to recharacteri*e tran!action!K

• What a$o"t the conce#t of "e #acto 'erger!K

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SEMINAR 4 – 'USINESS SALES 5 ASSET SALES

DEA4 STR?5T?RE – ASSETS OR SHARESK

• >"!ine!!+A!!et! Saeo Direct #"rcha!e+owner!hi#o A!!et! 'o)e o"t of the !eer and into the #"rcha!er

• Share !aeo ,"rcha!e+owner!hi# of !hare! of the target co'#an.o  TargetB! ega #o!ition i! not atered in an. wa.o Owner!hi# of $"!ine!!+a!!et! contin"e! "na$ated

• 5on!ideration! for choice of !tr"ct"reo  Ta%ation – ac("irer+!eero E%i!tence of other nonreated $"!ine!!e! that the ac("irer i! not intere!ted ino SeerB! re!#on!i$iitie! in the $"!ine!!o Aocation of ia$iitie! of the $"!ine!!o For'aitie! of tran!fero 5on!ent! and #er'i!!ion! nece!!ar. for tran!fer

• 5o'#ari!on $etween an a!!et !ae and a !hare !ae

A!!et Sae Share Sae

• Sae of a $"!ine!! 6a! a going

concern7• >"!ine!! to $e tran!ferred i!

identi-ed in f"nctiona ter'!o ie a that i! re("ired to

en!"re contin"it. of $"!ine!!

with the ac("irer• 4"'# !"' con!ideration

o 5once#t! of 6net worth7 and6goodwi7 – $".er i! wiing to

#a. 'ore than net worth of 

co'#an. – foreca!t of f"t"re

#ro-t!• 4ia$iitie! reating to the $"!ine!!

wo"d go aong with ito ?ne!! e%#re!!. e%c"ded

• Sae of a!!et! on a #iece'ea $a!i!o ?!"a. re("ired in !it"ation!

!"ch a! in!o)enc. or di!tre!!

!ae• A!!et! $eing tran!ferred are

identi-ed thro"gh !#eci-c i!ting• Indi)id"a con!ideration for each

a!!et• 4ia$iitie! /if an.1 wo"d re'ain with

the !eero ?ne!! e%#re!!. tran!ferred

,RO5ESS

 TRANSFERA>I4IT8

• De#end! on nat"re of a!!et! or o$igation! in)o)ed

• 4and and $"iding!o What if the. or other a!!et! are 'ortgaged2 charged in fa)o"r of $an0!K

5reditworthine!!2 aternati)e for'! of !ec"rit.2 re#a.'ent

• Mo)a$e a!!et!o ,ant and 'achiner.

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o F"rnit"re and -%t"re!o ?!"a. tran!ferred $. dei)er.

• Mi%t"re of $oth – con!tr"cti)e dei)er.

4I5ENSES AND A,,ROVA4S TO 5ARR8 ON THE >?SINESS

• Ma. re("ire con!ent of the granting a"thorit.o Identit.2 ("ai-cation!

5ONTRA5TS AND AGREEMENTS

• Right! – cho!e! in actionKo 5on!ent2 #ri)it.2 no)ation2 a!!ign'ent

• O$igation!o Are the!e a!!igna$e in nat"reKo If !o2 do the. re("ire con!ent of the contracting #art.K

• A!!igna$iit. de#end! on the nat"re of the contracto Right! are "!"a. a!!igna$e

?ne!! there i! an e%#re!! #rohi$ition2 or !ti#"ation in the contract which

re("ire! contracting #art.B! con!ent If there i! a $reach of noa!!ign'ent ca"!e2 the , can !"e the !eer $"t

'a. not $e de!ira$e when the !eer i! di!!o)ed or ha! no a!!et! re'aining

Re'ed. 'a. $e i'itedo O$igation! cannot $e a!!igned witho"t con!ent of the $ene-ciar.

No)ation of contract  Tri#artite arrange'ent

• 5ontract! that are #er!ona in nat"re cannot $e a!!ignedo E'#o.'ent contract! are #er!ona in nat"re

In co''on aw2 the. cannot $e tran!ferred Howe)er2 thi! #o!ition ha! $een

'odi-ed $. !tat"te! /Loo6 $! s%c!o" o" %mploy%%s1o What i! the nat"re of a icence granted $. contractK

5ONSIDERATIONS

•  Ti'e

• Ine("ait. of $argaining #ower

• ,redi!co!"re of infor'ation2 e!#ecia. when a #"$ic co'#an. i! in)o)ed

EM,4O8EES

• ,o!ition "nder co''on awo E=ect of a !ae of $"!ine!!

Origina contract i! ter'inated E'#o.ee i! not o$iged to wor0 for the new e'#o.er >rea0 in ength of !er)ice and condition!

• 5o''on aw #o!ition !igni-cant. atered $. !tat"teo ? T?,E Reg"ation!o Singa#ore Em!loyment Act 2 ! @A

• ,re)io"! te!t! in the ? for 6tran!fer7

@

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o Sae a! $ )o") co"c%r"o Whether there i! goodwi2 whether !eer wi di!contin"e the acti)it.

• 4ater te!t! ado#ted in the ? o Foowing E5 inX"enceo Not whether there i! a di!#o!a a! 6a going concern7o >"t2 whether the "nderta0ing retains its identity  with the ac("irer

• Singa#ore Em!loyment Act 2 ! @Ao 6"nderta0ing7 inc"de! an. trade or $"!ine!!

o 6tran!fer7 inc"de! the di!#o!ition of a $"!ine!! a! $ )o") co"c%r" and a tran!fere=ected $. !ae2 a'aga'ation2 'erger2 recon!tr"ction or o#eration of aw

o If an "nderta0ing i! tran!ferred It !ha not o#erate to ter'inate the contract of !er)ice It !ha $e e=ecti)e $is%&%$is the tran!feree a! if e'#o.'ent contract wa!

origina. with it ,eriod of e'#o.'ent with tran!feror !ha $e co"nted2 witho"t a $rea0 in

#eriod of e'#o.'ent  Ter'! and condition! of !er)ice of the e'#o.ee !ha $e #re!er)ed Noti-cation and con!"tation with trade "nion!

• 5o'#ari!on $etween SG and ?+E?

o A going concern – !ee'! to $e mor% co"c%r"%( 3!* !*% m%$"s r$!*%r !*$"!*% %"(K

o Retention of identit. – 'ore concerned with the endo Fir!t te!t – e'#o.ee! !ee' to $ear the o!! re!"ting fro' the ta0eo)er+'erger

whie co'#an.+!harehoder! get the gain! – !ho"d thi! $e the ca!eK ,oic. #oint of

)iewK

5OR,ORATE A,,ROVA4S

• Sae of a $"!ine!! "nderta0ing i! !igni-cant $"!ine!! tran!action – R%qur%s

s*$r%*ol(%r $ppro$l

• 'om!anies Act  /5a#

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 Trigger of Z9@ de#end! "#on #artic"ar ("aitati)e and ("antitati)e

characteri!tic! of the tran!action• U"antitati)e a##roach – !i'#e2 o$ecti)e2 certaint.2 $"t fai! at

$orderine ca!e!• U"aitati)e a##roach – e=ect on re'ainder – e!! ca#a$e of

'ani#"ation /!"$!tance o)er for'1 – ac0 of certaint.  Tran!action '"!t $e )iewed in ter'! of o)era e=ect on the cor#oration

•  There i! no nece!!ar. ("aif.ing #ercentage 65onte%t"a a##roach7 o)er 6de-nitiona a##roach7 – whether

• A!!et! ("antitati)e. )ita to o#eration of cor#oration

• O"t of the ordinar.

• S"$!tantia. a=ect! the #"r#o!e and e%i!tence of the cor#orationo On fact!

5on!idered ("antitati)e. and ("aitati)e.  Teegra#h !ae doe! not a'o"nt to a !ae of !"$!tantia. a of InternationaB!

a!!et! Re'aining a!!et! were !"$!tantia and #ro-ta$e

DIS5?SSION

• How wi a !it"ation !"ch a! ,ollinger  t"rn o"t "nder the Singa#ore 5o'#anie! ActKo Wi it 'a0e a di=erence that it i! a!!et! of the !"$!idiar. that were !odK

• What i! the #o!ition if a!!et! are 'ere. charged or 'ortgaged witho"t a 6!ae7Ko Seing ; a=ecting !harehoder! i''ediate.o Mortgaging ; intention to carr. on $"!ine!! of co'#an.

EFFE5T OF NON5OM,4IAN5E

• 'om!anies Act  /5a#

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Whether 'ere o#tion i! 6di!#o!a7K Do"$ted

• For certaint. – o#tion !"$ect to SH a##ro)a

• O#tion fee a'o"nt to )a"a$e con!ideration Whether a!!et !ae i! #art of $"!ine!! acti)it.K /Eg a rea e!tate co'#an.1

• For #"rcha!ero 5a!h con!ideration – no !harehoder a##ro)a! are re("ired genera.o I!!"e of !hare! a! con!ideration – di"tion concern!

Eg 1inga!ore 'om!anies Act 2 ! @@

• 6/@1 Y the director! !ha not2 witho"t the #rior a##ro)a of theco'#an. in genera 'eeting2 e%erci!e an. #ower of the co'#an. to

i!!"e !hare!7 S"ch re!o"tion i! )aid "nti the ne%t ann"a genera 'eeting

RE5HARA5TERISATION OF ASSET SA4ES

• Stat"tor. 'erger! are !o'eti'e! !tr"ct"red a! a!!et !ae! to a)oid certain !harehoder

re("ire'ent!2 ieo Sharehoder a##ro)a of ac("irero A##rai!a right! to ac("irerB! !harehoder!

•  The!e are !toc0fora!!et ac("i!ition!

• Often2 the !eer co'#an. $eco'e! a !he entit. and i! then i("idated

• Endre!"t i! the !a'e a! a !tat"tor. 'erger

DE FA5TO MERGERS

•  ,eilbrunn $. 1un 'hemical  /De2 @

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6[F\ra'er! of a reorgani*ation #an 'a. re!ort to either t.#e of cor#orate

'echanic! to achie)e the de!ired end• Not on. in M&A $"t a!o other area! – co"rt! are re"ctant to recharacteri!e and

!"$!tit"te the #artie!B "dge'ent! with their own "dge'ent! – r%-c*$r$c!%rs$!o" o"ly

occur " %7!r%m% s!u$!o"s

S?55ESSOR 4IA>I4IT8

• R"eo In an a!!et !ae2 the ac("irer i! not ia$e for the de$t! and o$igation! of the !eer

• >"t2 e%ce#tion! – Ac("irer 'a. $e hed ia$e ifCo It e%#re!!. or i'#ied. a!!"'ed !eerB! ia$iit.o  There wa! a con!oidation or 'erger of the !eero Ac("irer wa! 'ere. a contin"ation of the !eero  Tran!action entered into fra"d"ent. to e!ca#e ia$iit.

•  1chumacher $. 2ichar"s 1hear 'o /N82 @1o In"r. ca"!ed $. !hearing 'achineo RS52 who 'an"fact"red 'achine2 !od !"$!tantia. a a!!et! to 4oge'anno Whether 4oge'ann i! ia$e for tortio"! cond"ct of RS5 or for it! own cond"ct

!"$!e("ent to the ac("i!itiono 5o"rt

 The tran!action did not fa within an. of the e%ce#tion! A! regard! 6contin"it. of the enter#ri!e72 it "!"a. a##ie! when the !eer

cor#oration i! di!!o)ed Here2 that wa! not to $e the ca!eo Here2 it !ee'! to gi)e too '"ch eewa. for #artie! to !tr"ct"re tran!action! to a)oid

ia$iit.•  Bran"on $. A34 Associates /th  5ir2 9"t2 the. for'ed another co'#an. St 5air to !("irre awa. a!!et! of A,M and

a)oid reco)er. in fa)o"r of #ainti= o A,M wa! eft a! a !he entit.o 5o"rt /"dge ,o!ner1

6The e)a!i)e #"r#o!e of creating St 5air i! #ain and !"##ort! o"r

inter#retation of the r"eB! !co#e The r"e that a cor#oration canBt ha)e a

!"cce!!or if it ha!nBt $een di!!o)ed2 Y i! not intended to de#ri)e the )icti'

of a fra"d of hi! ega re'ed.2 a! the defendant! atte'#ted to do here $.

#re!er)ing a gho!t. e%i!tence for A,M7 6A,M i! $rain dead2 $"t i! $eing 0e#t on cor#orate ife !"##ort in order to

#re)ent [the #ainti=\ fro' getting hod of an. of St 5airB! a!!et! Y [the #ainti=\ i! entited to ignore the for'ation of St 5air and treat it!

a!!et! a! if the. were A,M!•  National abour $. Inn 're"ible 'aterers /9d 5ir2 9@1

o D"t. i'#o!ed on !"cce!!or of $"!ine!! to $argain with e'#o.ee! S"$!tantia contin"it. te!t S"cce!!or ha! hired a !"$!tantia and re#re!entati)e co'#e'ent of

e'#o.ee!• Howe)er2 a 'ore narrow inter#retation ado#ted in other ca!e!

o  1emenet5 $. 1herling 0 6al"en /N8 91

@

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o *allenberg $. Argomac /Wi!c @1

RATIONA4ES >EHIND S?5ESSOR 4IA>I4IT8 REGIMES

• 5o"rt! !ee' 'ore o#en to i'#o!e !"cce!!or ia$iit. in a!!et !ae tran!action! co'#ared

to treating the' a! "e #acto 'erger for #"r#o!e! of #rotecting 'inorit. !harehoder

intere!to What 'ight $e the rea!on for thi!K

SH! ha)e re'edie! "nder co'#an. aw 5reditor! ha)e right! "nder in!o)enc. regi'e!P their intere!t! ha)e to $e

ta0en into acco"nt when $ordering in!o)enc.o 5an we ded"ce an. #oic. rationaeK

 To #rotect in)o"ntar. creditor! who 'a. not ha)e the contract"a right! that

)o"ntar. creditor! #o!!e!! – co"rt! ha)e to !te# in to #rotect the intere!t! of

the!e in)o"ntar. creditor!• O$ecti)e! that !o'eti'e! conXict

o Deterrence for tortfea!or!o Faciitate a!!et tran!fer! that are )a"egenerating for the econo'.

• Dic"tie! with c"rrent #o!itiono Inade("ate deterrence $eca"!e tran!fer of a!!et! #er'it! tortfea!or to e!ca#e

ia$iit.o ?ncertaint. in a'o"nt of ia$iit. #re)ent! ecient a!!et tran!fer!

• ,ro#o!ed 'ode /Har) 4 Re) Note1o  ,re!"'#tion in fa)o"r of !"cce!!or ia$iit.

S"cce!!or! wi $e hed genera. ia$e for #redece!!orB! tort! Ac("irer wi tend to red"ce the #rice to a$!or$ co!t! of ia$iit. ta0en o)er Or !ee0 inde'nit. fro' !eer – what ha##en! if !eer ha! no 'ore a!!et! –

!ee0 g"arantee! of a!!et!+#arent!K Sette'ent #rior to the dea Incenti)e! to !eer! to #re)ent ia$iit. in the -r!t #ace

o Mandator.itigation ca!! action #rior to tran!fer  To aggregate a c"rrent and f"t"re tort cai'! ,a. e!ti'ated da'age!  Then2 tran!fer a!!et! free and cear of a tort ia$iit.

• (iscussion -uestionso I! thi! a wor0a$e 'odeK

What ha##en! to "na!certained f"t"re cai'!K 5a!! action! wor0a$e in other "ri!diction!K

• Incenti)e of ?S aw -r'! to $ring !"it! /contingenc. fee!1  Ti'e co!t – )a"ation of $"!ine!!+a!!et! 'a. change Infor'ation a!.''etr. $etween $".er and !eer

o What are the #ractica i!!"e! in it! i'#e'entationK

@

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SEMINAR 8 – SC9EMES O: ARRANGEMENT ;1<

,?R,OSE AND O?T5OME OF S5HEMES

• Ac("i!ition of !hare!o 5anceation !che'eo  Tran!fer !che'eo >inding on 'inorit. – no choice $"t to co'#.

E!#ecia. good when $".er want! @Q of co'#an. Stat"tor. initiator target 5O2 other #artie! are ac("irer & SH!

o A! o##o!ed to ta0eo)er – where 'inorit. ha! o#tion whether to e%it or not  Ta0eo)er code the initiator i! the ac("irer2 other #artie! are SH!

• Stat"tor. a'aga'ation + 'ergero  Thro"gh co"rt #roce!!

• O"tco'e of a'aga'ation

• A$!or#tion of the entire "nderta0ing of one or 'ore co'#anie! into a !"r)i)ing co'#an.o S"r)i)ing co'#an. 'a. $e an e%i!ting co'#an. or a new co'#an.

• 5on!ideration i! #aid $. the !"r)i)ing co'#an.o ?!"a. in the for' of i!!"e of it! own !hare!2 !o'eti'e! in the for' of ca!h or $oth

5O?RT>ASED A,,ROA5H

STAT?TOR8 ,ROVISIONS

•  Traditiona. "!ed /and c"rrent. e%i!t!1 in the 5o''onweatho Sing 5A2 !! 9@9@9o ? 5o'#anie! Act2 92 ,art 9 /#re)io"!. !! 9

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 All these shoul" take !lace among !eo!le )ho share similar interests so that

they )on;t be !ersua"e" to $ote against that by !eo!le )ho "on;t share the

same interest o 6hat is the rationale7

• Rationae to promo!% co"sul!$!o" $mo") p%rso"s 3!* commo" "!%r%s!

• What i! a 6ca!!7Ko 6'"!t $e con-ned to tho!e #er!on! who!e right! are not !o di!!i'iar a! to 'a0e it

i'#o!!i$e for the' to con!"t together with a )iew to their co''on intere!t7

1o$ereign i#e Assurance 'o. $. (o""•  Te!t! for co''onait. of intere!t

o Si'iarit. of right! a! !harehodero Si'iarit. of e=ect "nder !che'e

•  In re ,ellenic 0 *eneral ene-t! )! co!t!o In Singa#ore /TT Internationa12 i!!"e! of ca!!i-cation i! !o 0% (%$l! $! !*% %ry

ou!s%!

INFORMATION

• Di!!e'ination of infor'ationo E!!entia for !harehoder! to $e in a #o!ition to 'a0e a rea!oned deci!iono 5o"rt! #ace !igni-cant reiance on thi! factor

Ee'ent of tran!#arenc.

•  6ah uen Electrical  /92SG1o 65o"rt wo"d ta0e into acco"nt the ade("ac. of infor'ation #ro)ided in deter'ining

whether to !anction the !che'e7o

Sche'e of co'#ro'i!e $etween co'#an. and it! creditor!o 5ertain reated #art. creditor! )oted co''on. with other creditor!o 5o"rt fo"nd ac0 of tran!#arenc. with re!#ect to reated #art. de$t!

It 6#re)ented the co"rt fro' 'a0ing a co'#etent a!!e!!'ent of the bona

f"es of the reated #art. )ote!7 5reditor! were not in a #o!ition to a!!e!! the fairne!! and rea!ona$ene!! of

the !che'eo In!"cient infor'ation on whether ret"rn! in #ro#o!ed !che'e were greater than in

i("idation

@

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o  Issu% - Is prop%r $"( $(%qu$!% (sclosur% o. ".orm$!o" mor% mpor!$"!

!*$" cl$ss?c$!o">

•  2e Econ 'or! /92SG1o ?nder the !che'e2 creditor! were to recei)e !hare! of #arent co'#an. EI4 in ret"rn

for foregoing de$t owed to the'o Howe)er2 di!co!"re regarding EI4 and it! -nancia #o!ition /o!!e!1 wa! fo"nd

ac0ing 5reditor! are entited to thi! infor'ation $efore deciding – !o'ething

intrin!ica. ree)anto 5o"rt ref"!ed to a##ro)e the !che'e

MAORIT8

• A##ro)a of ca!!e! of !harehoder!o M$@or!y " "um0%r re#re!enting !*r%%-.our!*s " $lu%

9 re("ire'ent!

•

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 The tran!fer ta0e! #ace #"r!"ant to aw

• Stat"tor. contract or co"rt orderKo Whether !"ch a !anction draw! it! #ower fro' the for'er or atter

Stat"tor. – co"rt! canBt )ar. itP co"rt order – can )ar. it SG5A ca!e of Reiance Genera A!ia

o Di=ering )iew! a'ong "ri!diction! Howe)er2 S")$por% !$6%s !*% pos!o" !*$!

!*% sc*%m% (r$3s .orc% $s $" or(%r o. !*% cour!

O?TOF5O?RT A,,ROA5H

STAT?TOR8 ,ROVISIONS

• Introd"ced 'ore recent. in the 5o''onweatho Sing 5A2 !! 9@

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Query =*%!*%r cl$ss m%%!")s $r% r%qur%( " $ s!$"($r( $m$l)$m$!o">

o 4ac0 of g"idance fro' co"rt!o >"t2 acade'ic )iew i! that it co"d $e tanta'o"nt to a re("ire'ent for ca!!

'eeting! Doe! it 'a0e the o"tofco"rt #roce!! too onero"!K What a$o"t ri!0! a!!ociated with ca!! 'eeting!K ?ncertaint. in ca!!i-cation

etco 5a!! 'eeting! a for' of 'inorit. !harehoder #rotectionK

SO4VEN58

• Rationae for !o)enc. re("ire'ent in o"tofco"rt a'aga'ation!

• So)enc. !tate'ento Re("ired in the ca!e of a'aga'ated co'#an. and each a'aga'ating co'#an.o 5a!h Xow !o)enc. : $aance !heet !o)enc.

5a!h Xow i! indicati)e of !hort ter' de$t! >aance !heet i! indicati)e of a onger ter'

o A!o2 that co'#an. wi contin"e to #a. it! de$t! for @9 'onth!

• -uerieso How doe! thi! i'#act the a$iit. of co'#anie! to i'#e'ent o"tofco"rt

a'aga'ation!Ko What i! the e=ect of the !o)enc. !tate'ent re("ire'ent on director!K

Doe! it 'a0e a di=erence if the. are inde#endent director!Ko Are the ia$iit. #ro)i!ion! a deterrentK

Wh. doe! !che'e of arrange'ent ha)e no !"ch re("ire'ent!K 5reditor!

ha)e a##ro)a right! : co"rtB! a##ro)a i! re("iredo Wi thi! ha)e a chiing e=ect on o"tofco"rt a'aga'ation!K

EFFE5T OF AMA4GAMATION

• S 9@oth right! and o$igation! can $e tran!ferred

  S!$!u!ory co"!r$c! – "o cour! or(%r "ol%(o Achie)e! the !a'e e=ect a! a )e!ting order "nder ! 9@9

MINORIT8 ,ROTE5TION

•

A=ected !harehoder! and creditor! 'a. a##roach the co"rt #er !9@

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DE4AWARE ,OSITION

• E!!entia. foow! the o"tofco"rt a'aga'ation #roce!!

• Inc"de! $oth !hortfor' and !tandard 'erger!o Shortfor' – on. re("ire Q !harehoding in !"$!idiar. – no need for #arent SH

a##ro)a – r'$r that 'inorit. ha! a##rai!a right! – not on. #re!ent and )oting – a

of tho!e entited to )ote2 #re!ent or not•  Sharehoder 'aorit. thre!hod 'ore onero"!

o 6'aorit. of the o"t!tanding !toc0 of the cor#oration entited to )ote thereon7Z9

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SEMINAR + – SC9EMES O: ARRANGEMENT ;2<

• >ac0gro"nd of !("ee*eo"t!o  To 'a0e the co'#an. a who.owned !"$!idiar.

 To a)oid the co!t of 'aintaining and !er)icing !'a !harehoder! For o#erationa ea!e – no need to contin"e deaing with ar'!ength

o Minorit. !harehoder! are o=ered an e%it fro' otherwi!e ii("id in)e!t'ent!

o S("ee*e o"t "!"a. foow! a ta0eo)er o=er /and dei!ting in the ca!e of #re)io"!.i!ted co'#anie!1

o Share! #ro)ide a $"nde of right! in a co'#an. /Eg2 ! @9@2 Sing 5A1 Mo)a$e #ro#ert.2 tran!fera$e in the 'anner #ro)ided $. the artice! of the

co'#an.o ,ro#ert. right a)aia$e to !harehoder

Fairne!! )er!"! ecienc. ,roced"ra fairne!!

o An. denia of the right of hoding or di!#o!a rai!e! i!!"e! Arg"a$. a'o"nt! to e%#ro#riation >"t2 !"ch right i! not "nconditiona – it i! !"$ect to !tat"te

METHODS OF SU?EE3EO?TS

• 5o'#"!or. ac("i!ition2 eg ! 9@

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• Hence2 the #ro)i!ion ha! $een rare. "!ed

• ,artie! ha)e atte'#ted to o)erco'e the onero"! nat"re of the #ro)i!iono >. ha)ing a reated #art. 'a0e the -r!t o=er2 !o a! to o$tain Q 'aorit.o Howe)er2 cour!s *$% 0%%" quc6 !o plu) !*% loop*ol%

  In re Bugle 3ress /E5A2 @1

• Doe!nBt !ati!f. fairne!! re("ire'ent – not done in good faith – m%r%

!%c*"c$l compl$"c% s "suBc%"! – a !ha' tran!actiono  Thi! add! to the #ractica dic"tie! in "!ing thi! #ro)i!ion

RED?5TION OF 5A,ITA4

• 5o'#anie! egi!ation #ro)ide for !che'e! in)o)ing red"ction of ca#itao Eg !! AI2 Sing 5A

• ,recondition!o S#ecia re!o"tion of !harehoder!o Sanction of the co"rt /in !o'e ca!e!1

• 5o'#ari!on with !9@< co'#"!or. ac("i!itiono 5an $e !eecti)e in canceing !hare!

Note that there are !o'e for'! of red"ction that '"!t $e #ro ratao Doe!nBt in)o)e tran!fer of !hare! /!ide note no !ta'# d"t.K1o Financia o"ta. co'e! fro' the co'#an.2 not the 'aorit. SH/!1

• S("ee*eo"t!o  Thro"gh !eecti)e red"ction of ca#itao Minorit. !harehoder!B !hare! are $o"ght $ac0 $. the co'#an. and canceedo Maorit. !harehoderB! !harehoding wi there$. increa!e to @Q to achie)e

!("ee*eo"t• 5o"rt! are genera. o#en to aowing !"ch !che'e!2 !"$ect to co'#iance with

o ,roce!!o Fairne!! in #ricing

• Genera #ro#o!ition! in reation to "!e of red"ction of ca#ita for !("ee*eo"t!o Seecti)e red"ction of ca#ita i! #o!!i$e – !A aow! the co'#an. to red"ce it!

ca#ita in an. wa. 5o"rt! are deferentia to the co'#an.B! deci!ion a! to who!e !hare! are to $e

red"ced and $. how '"cho Se#arate ca!! 'eeting! need not $e hed for 'aorit. !harehoder! and 'inorit.

/who are $eing !("ee*ed o"t1 Howe)er2 in ?2 the ca!e of Ro$ert Ste)en! Hoding! !tated that thi! 'a. $e

needed IndiaB! #o!ition i! that it i! "nneeded a! the Act did not e%#icit.

!tate !o Singa#oreB! #o!ition i! "n!ettedo 5o"rt #erfor'! on. a !"#er)i!or. roe whie !anctioning a red"ction !che'e

S5HEME OF ARRANGEMENT

•  The e%#re!!ion 6arrange'ent7 i! wide eno"gh to co)er !("ee*eo"t tran!action!

• E%e'#i-ed in ,ellenic 0 *eneral

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• Wh. "!e !che'e of arrange'entK Man. ta0eo)er doc"'ent! in Singa#ore are !tr"ct"red

a! !che'e! of arrange'ent $eca"!eo It aow! the ac("irer to !("ee*e o"t 'inorit. !harehoder!2 #o!!i$. witho"t their

a##ro)ao It aow! the ac("irer to o$tain @Q contro

• Other con!ideration!o Whether 'aorit. and 'inorit. !harehoder! wi $e treated "nder the !a'e ca!!K

No See ,ellenic 0 *eneral

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o I! the a'aga'ation #roced"re too enient toward! 'aorit. !harehoder! in

!("ee*ing o"t 'inorit.K

A4TERATION OF ARTI54ES

• 5a"!e in the artice! #ro)iding 'aorit. !harehoder a right to re("ire 'inorit. to !eo Inc"!ion in the artice! at the ti'e of incor#oration of co'#an.P oro S"$!e("ent inc"!ion thro"gh ateration of artice

• Ateration of artice!o S#ecia re!o"tion of !harehoder!o  Al!%r$!o" mus! 0% 0o"$ ?(% .or !*% 0%"%?! o. !*% comp$"y $s $ 3*ol%

  Allen $. *ol"ree#so 5o"rt! ha)e aowed ateration in certain circ"'!tance!

1i"ebottom $. ersha)  A'end'ent that re("ire! co'#etitor! to e%it the

co'#an. i! )aid and wa! "#hedo Ga'$otto /A"!t1 o#ined that co'#"!or. ac("i!ition a'o"nt! to a for' of

e%#ro#riation Whether thi! i! a##ica$e in the wider 5o''onweath i! ("e!tiona$e

•  -uestion In what t.#e of co'#anie! wi thi! o#tion wor0Ko 4i!ted

4i!ting re("ire! !o'e for' of !harehoding! hed $. the #"$ic A!o2 reg"ator 'a. ta0e action

o ,"$ic ?ni!tedo ,ri)ate

5HOI5E OF O,TION

•  The 'o!t a##ro#riate o#tion '"!t $e cho!en de#ending on fact! and circ"'!tance!o A)aia$e 'aorit.o Wiingne!! to ado#t the co"rtro"teo A##ro#riatene!! of an a'aga'ationo Wiingne!! to #ro)ide !o)enc. certi-cate

?S –FREE3EO?T MERGERS

• Si'iar to the ca!ho"t 'erger! in Singa#oreo Minorit. !harehoder! wi $e co'#"!ori. $o"ght o"ght thro"gh #a.'ent of ca!h

•  Traditiona re'edie! "nder ?S !tate awo A##rai!a right!o Howe)er2 the. are not entire. e=ecti)e here

 Tran!action !tr"ct"re! that a)oid a##rai!a Indi)id"a cai'! to $e 'ade – not e)er. SH wi 'a0e !"ch a cai' – 'ore

i0e. to $e in!tit"tiona in)e!tor! who ha)e the 'oti)ation to 'a0e !"ch

cai'! – co!t ine=ecti)e 4ac0 of reco)er. on f"t"re )a"e "#on 'erger

 

N%%( .or ?(uc$ry (u!y cl$ss $c!o"so Again!t controing !harehoder! /owed to 'inorit. and 51o  (iscussion -uestion Doe! thi! rai!e an. #ec"iar #ro$e' "nder cor#orate awK

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5o''onweath – D! donBt owe a direct d"t. to SH!P ?S – D! 'a. owe a direct

d"t. to SH! Ateration of artice! – 'aorit. ha! to en!"re that ateration i! $ona -de

o ?ti'ate.2 ha)e to $e cogni!ant that r+! $etween 'aorit. and 'inorit. i!

#redicated on contract /artice! or SH! agree'ent1 Ma. ha)e additiona !tat"tor. d"tie! !"ch a! no o##re!!ion and )ote $ona

$ide• A)aia$iit. of ca!! action 'echani!' – no coection action #ro$e'K

• On"! on co'#an. to !how that tran!action wa! 6entire. fair7 to the !harehoder!• S"ita$e re'ed. can $e crafted $. the co"rt

o A##rai!a right!o In"nction again!t the 'erger

 

Weinberger v. UOP ;D%l SC 14< FFF

o Signa owned

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SEMINAR – NATURE O: TAHEOER REGULATION

NEED FOR REG?4ATION

•  Di!co!"reo Of !harehoding – info a!.''etr. for o=ereeo Of infor'ation in a ta0eo)er $id /e!# !hare!wa#1

A##ro#riate to ena$e !harehoder! to 'a0e a deci!ion whether to e%it or !ta.– $idderB! -nancing o#tion!

 To #re)ent fa!e $id! – #ro!#ect of !"cce!! F"t"re of co'#an. – whether $idder 'a. !e a!!et!

•  E("ait. of O##ort"nit.o Right of !harehoder! to tender their !hare!o Right to recei)e !a'e #rice a! other !harehoder!

,re)ent 9tier #ricing that ind"ce! !"$o#ti'a deci!ion!

• Hi!torica a##roach i! deference to 'ar0et Howe)er2 recent a##roach i! 'ore of

reg"ation• Down!ide of di!co!"re – 'a. enco"rage in!tit"tiona in)e!tor! !"ch a! hedge f"nd! in

$".ing !hare! in antici#ation of a ta0eo)er which i! !hortter' in nat"re for the f"nd!B own

$ene-t!

REG?4ATION IN THE ? 

5IT8 5ODE

• 5it. 5ode on Ta0eo)er! and Merger!o 5a'e into e=ect in @o A !.!te' of 6)o"ntar. !efreg"ation7

E!ta$i!hed and ad'ini!tered $. 'ar0et #artici#ant! ,ro'inence of in!tit"tiona in)e!tor! in the ? conte%t

o Rationae for a )o"ntar. !.!te' – aw.er! no incenti)e to $.#a!! the awo S#eed in actiono Fe%i$iit.o A)oidance of enforce'ent 'echani!'! a! a 6#o.7

• Str"ct"re of the 5it. 5odeo Genera ,rinci#e!

6!tate'ent of !tandard! of co''ercia $eha)io"r7o R"e!

,roced"re to go)ern !#eci-c for'! of ta0eo)er! E%a'#e! of a##ication of the Genera ,rinci#e!

• Neither a !tat"tor. enact'ent nor !"$!idiar. egi!ationo 5hanging 'ar0et condition! – ta0eo)er! !en!iti)e to 'ar0et condition!P !#eed.

re!o"tion i! e!!entiao Strong in!tit"tiona in)e!tor intere!t!

,ANE4

•  Ta0eo)er ,ane

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o >od. which ad'ini!ter! the 5it. 5odeo 5o'#ri!e! genera. of ind"!tr. #artici#ant!o >odie! of the ,ane

5ode 5o''ittee Hearing! 5o''ittee ,ane E%ec"ti)e /for da.toda. f"nctioning1

•  Ta0eo)er ,ane #o!!e!!e! !"$te #ower! to en!"re co'#ianceo ,"$ic cen!"ring

o 65od !ho"dering7o Other #ower!

Refer the 'atter to DTI for in)e!tigation

• Whether action! of the ,ane can $e chaenged $. aggrie)ed #art.K Refer to Data-n ca!e

ENFOR5EMENT OF ,ANE4 DE5ISIONS

•  (atafn 5a!e /5A2 @1o  Two $idder! Norton O#a% /NO1 and Data-n 'ade o=er! to ta0e o)er Mc5or("odaeo NO wa! acting in concert with Greenwe Montag" which wa! in t"rn acting with IO

5oncert #artie!

o U"e!tion whether NO wa! therefore acting in concert with IO2 a! IO had 'ade#"rcha!e! of target !toc0 that wo"d ha)e changed ter'! of the o=er

o ,ane conc"ded that the. were not acting in concerto Deci!ion chaenged $. Data-n $efore ower co"rt and then 5o"rt of A##eao U"e!tion whether deci!ion! of ,ane are !"$ect to "dicia re)iewo 5o"rt of A##ea

,ane i! a $od. who!e action! are !"$ect to "dicia re)iew Not a co"rt of a##eaP on. a co"rt of re)iew ,ane 6o#erated a! an integra #art of a !.!te' which #erfor'ed #"$ic aw

d"tie!7 S"##orted $. #"$ic aw !anction!

• Eg2 if there i! e%ce!! of "ri!diction2 ac0 of bona f"es Sco#e of "dicia re)iew i! 6caref". and narrow. de'arcated7 62elationshi! bet)een the 3anel an" the court has to be historic rather than

contem!oraneous7• 6The co"rt !ho"d aow conte'#orar. deci!ion! to ta0e their co"r!e2

con!idering the co'#aint and inter)ening2 if at a2 ater and in

retro!#ect $. decarator. order!7 ,re!ent #artie! cannot get i''ediate reief $"t decarator. order! wi $ene-t

f"t"re ca!e! – )o"ntar. nat"re of ,ane• Red"ce incenti)e to !ee0 re!o"rce thro"gh co"rt! – no #oint !#ending

'one. itigating witho"t an. $ene-t! >"t2 on fact!2 the 5o"rt of A##ea ref"!ed to o)ert"rn the r"ing of the ,ane

• ,ower! of the ,ane *uinness 'ase /5A2 @1o  Ta0eo)er $id $. G"inne!! for Di!tier! #co ,i#etec AG aeged to ha)e acted in concert with G"inne!! in #"rcha!e of TargetB!

!hare!o R"ing $. ,ane to increa!e the #rice in G"inne!!B o=ero G"inne!! !o"ght re)iew of the deci!iono 5o"rt of A##ea

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6The 5o"rt wo"d on. inter)ene $. wa. of "dicia re)iew where it wa!

!ati!-ed that the o"tco'e re!"ted in in"!tice7 E'#ha!i! on #rinci#e! of nat"ra "!tice

•  The need to gi)e !"cient o##ort"nit. + hearing

• 6G #c wa! a witne!! in in("i!itoria #roceeding! rather than a

defendant to a di!ci#inar. or cri'ina chargeP and that2 according.2

the #aneB! deci!ion!2 whie in!en!iti)e and "nwi!e2 were not !"ch a!

re("ired the co"rt to inter)ene $. wa. of "dicia re)iew7  The chaenge did not !"cceed on fact!

5HANGES TO ? REG?4ATION

• E? Ta0eo)er! Directi)eo Made e=ecti)e in 9o  To $ring a$o"t "nifor'it. in ta0eo)er regi'e a'ong E? co"ntrie!o Signi-cant dea. in i'#e'entation of the Directi)eo ,oint! of contention

Ho!tie ta0eo)er! and roe of the targetB! $oard Non!harehoder intere!t! /eg e'#o.ee!1

•  Ta0eo)er ,ane now ha! !tat"tor. !tat"! "nder the 5o'#anie! Act2 9

• Additiona #ower!o  To !ee0 enforce'ent $. co"rto  To order co'#en!ationo >"t )aidit. of tran!action! not a=ected

•  (iscussion -uestion What change!2 if an.2 'ight there $e to the o#eration of the 5it.

5ode and the ,ane in #racticeKo E)en with the change!2 it i! i0e. that the c"rrent 'ar0et #ractice wi contin"e to

hod !wa.

REG?4ATION IN THE ?S

• Stat"tor. for' of reg"ationo Sec"ritie! E%change Act of @o A! a'ended $. the Wiia'! Act of @

 To introd"ce e("ait. of treat'ent a'ong !harehoder!o State cor#orate aw! – the d"tie! a!#ect2 $eha)io"r of #artie!

• Reg"ation i! often detaied

• Enforce'ent $. reg"ator /SE51

• ?S reg"ation! in)o)e chec0! and $aance!o Finance and cor#orate #rofe!!iona!o Federa reg"ator!

Mandate for in)e!tor #rotectiono State egi!ator!

InX"enced $. deci!ion of cor#orate 'anager! to incor#orate in !"ita$e

 "ri!diction! 4e)e and e%tent of cor#orate d"tie! in a ta0eo)er !it"ation deter'ined $.

!tate aw /eg Deaware1

REG?4ATION IN SINGA,ORE

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• E!!entia. trac0! the #ree%i!ting ? 'ode

• Reg"ation thro"gh a )o"ntar. code rather than egi!ation

• Singa#ore 5ode on Ta0eo)er! and Merger!

• Sec"ritie! Ind"!tr. 5o"nci /SI51

•  (iscussion -uestionso Do .o" thin0 thi! a##roach i! a##ro#riateK

SI5 'ore Xe%i$e2 'ore !"ita$e for a e!!itigio"! en)iron'ent2 can gi)e

ightto"ch !anction! /to a=ect the re#"tation1o What i! the i'#act of recent change! in the ?K Sho"d it ater Singa#oreB!

a##roachK Si'iar to the ?2 the SI5 ha! 'o)ed toward! greater !tat"tor. recognition

SE5?RITIES AND F?T?RES A5T /SFA1 & THE SE5?RITIES IND?STR8 5O?N5I4/SI51

• 5ode now ha! !tat"tor. recognitiono SFA2 ! 9@o >"t2 not !"$!idiar. egi!ation

• SI5 too ha! !tat"tor. recognitiono SFA2 !! @@o S @/1 – 6The Sec"ritie! Ind"!tr. 5o"nci 'a. i!!"e r"ing! on the inter#retation

of the genera #rinci#e! and r"e! in the Ta0eo)er 5ode Y2 and !"ch r"ing! or

#ractice !ha $e -na7• I!!"e – can SI5 r"ing! $e chaenged "dicia.K Finait. i! i'#ortant for certaint. $"t i! it

!"!ce#ti$eKo ,rinci#e! of ad'ini!trati)e aw 'a. aow "dicia re)iew

• SI5 deci!ion! are i0e. to !"$ect to "dicia re)iew2 !i'iar to the ? 

• Howe)er2 no !#eci-c co"rt r"ing! .et in Singa#ore a$o"t re)iewa$iit. of SI5 deci!ion!

• Other deci!ion! "nder ad'ini!trati)e aw 'a. #ro)ide !o'e ight

•  3etaling

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o FFF T*s proso" $llo3s (r%c!ors !o .ollo3 SIC rul")s 3!*ou! 0r%$c*")

!*%r ?(uc$ry (u!%s FFF

• 4i!ting Man"a of the SGLST /5ha#ter! @ and @@1o For i!ted co'#anie!o Di!co!"re and !harehoder a##ro)a!

@

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SEMINAR J – TAHEOERS ;1<

,RE>ID AND >ID ,RO5ED?RES

,RE,ARATION OF A >ID

•

Factor! to con!idero 4i0e. attit"de of the TargetB! $oard

Goe! into for'"ation of !trateg. in 'a0ing the o=ero Sharehoder #ro-e of the Target

F&N ta0eo)er – O=eror $o"ght !hare! direct. fro' O5>5 witho"t going

thro"gh the $oardo Arg"'ent! to $e #re!ented to TargetB! !harehoder!o Arg"'ent! to $e #re!ented to O=erorB! !harehoder! /in a !hare o=er1

5OMMEN5EMENT

•

A##roach to the Target /? r @P Sing r @1o O=er !ho"d in the -r!t in!tance $e m$(% !o !*% 0o$r( o. T$r)%! or !s $(sors

(iscussion -uestion Wh. !ho"d the $oard $e in)o)ed in a tran!action

#ertaining to the O=eror and the TargetB! !harehoder!K• >oard can #ro)ide g"idance to SH!

• >oard i! 'ore infor'ed than SH! a$o"t the detai!+!tr"ct"re+fairne!!

• >oard wi 'a0e deci!ion in the $e!t intere!t

• >oard can 'o"nt !"ita$e defence! if nece!!ar. Howe)er2 it 'a. not $e good for 5O

• >oard 'a. ha)e a !ide dea /goden #arach"te1 for a !econd$e!t o=er

• >oard 'a. $oc0 a good ta0eo)er o=er if the. are afraid of $eing

 etti!oned – not in $e!t intere!t of co'#an.• >oard 'a. $e co!e. reated to o=eror /rea conXict of intere!t1 eg

M>O• Sati!faction of the >oard /Sing r @1

o  That O=eror i! in a #o!ition to co'#ete the o=ero 5o'fort+a!!"rance fro' the O=erorB! -nancia ad)i!oro  To #re)ent 'a0ing of a fa!e $id /di!tortion of !hare #rice+fri)oo"! $id!1

INFORMATION

• 5ontain'ent and 'anage'ent of infor'ation i! cr!c$l in an ta0eo)er !it"ation

• Infor'ation regarding a ta0eo)er i! #rice!en!iti)e in nat"re – reate! to in!ider tradingo Reca #re)io"! di!c"!!ion on Ecient 5a#ita Mar0et! H.#othe!i!

• S%cr%cy s o. u!mos! mpor!$"c% /? r 9@P Sing r 91o Fow of infor'ation '"!t $e channeed and ti'ed caref". – on a need! $a!i!o Ear. anno"nce'ent – attract ri)a $id!2 #re'at"re o=er!o Other than need! $a!i!2 enter into con-dentiait. arrange'ent

• Sharing of infor'ation $. Target /? r 9P Sing r 1o Infor'ation 'a. $e #ro)ided to O=eror /eg d"ring d"e diigence1

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o It '"!t $e pro(%( %qu$lly .ully $"( promp!ly !o $"y o!*%r comp%!")

o/%ror2 e)en if not weco'e $. the Target An!wer! to !#eci-c ("e!tion! Ri!0 of o)er$road di!co!"re to initia O=eror

INSIDER TRADING

•  Trading on the $a!i! of #rice!en!iti)e infor'ation /,SI1 not 0nown to the #"$ic

• I'#ending ta0eo)er i! genera. #rice!en!iti)e

• ?!e $. O=eror of infor'ation gathered fro' Target to #"rcha!e !hare! in the 'ar0eto >"t2 O=erorB! 0nowedge of it! own acti)itie! and intention! to 'a0e an o=er i! not

a $ar ie !afe har$o"r "nder Sec"ritie! and F"t"re! Act

o  Wh.K Faciitate! ta0eo)er!2 aow! for a #re'i"' /o=eror! e!! ad)er!e to o=ering a

#re'i"'12 "nifor'it. of o=er 'ade to a SH! $a!ed on ,SI• Vario"! !cenario!

o Scenario @ – o=eror ha! ,SI and 'ade and o=er – !afe har$o"ro Scenario 9 – o=eror ha! ,SI and #"rcha!e! 'ore than 9Q of !hare!2 $e it #ri)ate.

or on the 'ar0et – in!ider tradingo Scenario – o=eror 'a0e! an o=er witho"t ,SI #ri)ate. – !afe har$o"r /!91 – not

in!ider trading $eca"!e the o=er wa! not 'ade on the $a!i! of the ,SI

MARET MANI,?4ATION

• Fa!e trading with a )iew to arti-cia. inXate or deXate the 'ar0et #rice of !hare!

• A##ie! to $oth Target a! we a! O=eror /in the ca!e of a !hare o=er1o  Target – to deter $id or ange for a $etter #riceo O=eror – to 'a0e it! o=er 'ore attracti)e in ca!e of !hare !wa#!

  FFFC$r% mus! 0% !$6%" !o %"sur% !*$! s!ruc!ur") o. !r$"s$c!o" $"( !m") o.

$""ou"c%m%"! comply 3!* s%cur!%s l$3s $"( r%)ul$!o"sFFF

ANNO?N5EMENT OF OFFER

• When i! an anno"nce'ent of o=er nece!!ar. /? r 99P Sing rr @1Ko When a -r' intention to 'a0e an o=er i! noti-ed to the $oard of the Targeto Ac("i!ition of !hare! re!"ting in o$igation to 'a0e a 'andator. o=ero When Target $eco'e! the !"$ect of r"'o"r or !#ec"ation2 or there i! "ntoward

'o)e'ent in #riceo E%ten!i)e negotiation! for a #o!!i$e o=ero ,"rcha!er $eing !o"ght for a arge !harehoder /hoding Q or 'ore1

• O$igation /? r 99P Sing rr @1o Initia. ie! with the O=eror /ie $efore the TargetB! $oard i! a##roached1o  Thereafter with the Target /ie after it! $oard ha! $een a##roached1

•  T.#e of !tate'ento De-niti)eo Hoding anno"nce'ent

5reate! di!tortion in 'ar0et – "ncertaint.  Target and in)e!tor! 'a. not weco'e the "ncertaint.  Ti'e$o"nd re("ire'ent! in the ? /r 91

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• 6,"t "# or !h"t "#7 regi'e /changed after raft5ad$"r. ta0eo)er1 –

intention ha! to $e 'ade cear within 9 da.! or o=eror i! #re)ented

fro' $idding for target for 'onth! ,er'itted in Singa#ore $"t need to $e renewed e)er. 'onth 5an

theoretica. $e e%tended fore)er "nti SI5 !te#! ino Re("e!t to !toc0 e%change to !"!#end trading in the !toc0

(iscussion -uestion What 'ight $e the rea!on for thi! re("ire'entK

• ,re)ent! X"ct"ation of !toc0 #rice

• ,re)ent! in!ider trading• 5ontent! of o=er anno"nce'ent/? r 9P Sing r oo"s 1harehol"er itigation

• Ad)i!or to a ta0eo)er

•  Tran!action! with other #artie!

• In)o)e'ent in $".er !ide -nancing

•  Treated a! conXict on the #art of ad)i!or  I'#o!e! onero"! re!#on!i$iitie! on ad)i!or! and a!o $oard! a##ointing the'

•  TargetB! >oardo Acce#t and !"##ort the $id

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o Reect and o##o!e the $ido Ado#t a ne"tra !tance

• 5o''"nication to !harehoder! /? r 9a!ic ter'! for !harehoder!

O=er #eriod – 'ini'"' 9 da.! Mini'"' #rice Sharehoder withdrawa right! ,ro rata acce#tance! for o)er!"$!cri$ed o=er! Infor'ation right!

o  Tender o=er! dei$erate. not de-ned $. SE5

5OM,ARISON >ETWEEN ?S AND ?+SG A,,ROA5HES

•  O=er 'ade to SH! rather than $oard

•  Greater #ower of the $oard

• Howe)er2 $oardB! #ower i! e%erci!ed 'ore tactica. co'#ared to the ad)i!or. a##roach in

?+SGo Note thi! di=erence in the conte%t of defence! – ?S $oard! ha)e 'ore #ower to

'o"nt defence! in the face of ho!tie $id! co'#ared to ?+SG $oard!

DIS54OS?RE OF INTEREST

•  Tran!#arenc. i! 0e. to ta0eo)er reg"ation in a the "ri!diction! $eing e%a'ined

• Di!co!"re of ac("i!ition of !hare!o >. O=eroro >. #er!on! 6acting in concert7

• (iscussion -uestion What i! the rationae for re("iring di!co!"re of !harehodingKo If o=eror ha! a arge !harehoding2 the o=er i! 'ore i0e. to !"cceed – other SH!

need to 0now•  Ti'ing of di!co!"re

o

D"ring the o=er #eriod /? rr @P Sing @9@@91o ,rior to an. o=er2 "#on e%ceeding #re!cri$ed i'it of

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o ?!e of deri)ati)e in!tr"'ent! /with "nder.ing !hare! of Target1 to 'a!0

!harehoding intere!t! in co'#anie!o S"dden a"nch of o=er!+di!co!"re! "#on "nwinding deri)ati)e #o!ition!

 

S*oul( $cqur%rs o. C:Ds 0% comp%ll%( !o (sclos%>

o One co"d arg"e that the ac("irer i! a 6$ene-cia7 owner So'e co"rt! ha)e went to the e%tent of characteri!ing in!tr"'ent! a! !"ch

o Howe)er2 the reg"ation of a ta0eo)er i! a$o"t contro /ie )oting right!1 Here2 the ac("irer on. ha! econo'ic right! It doe!nBt ha)e )oting right!

o One co"d a!o arg"e that the 5FD it!ef 'a. gi)e de facto contro to ac("irer Howe)er2 thi! doe!nBt a'o"nt to acting in concert $eca"!e acting in concert

canBt $e done with re!#ect to the s$m% s%! o. s*$r%so Sette'ent of contract – how doe! the contract "nwind at it! ter'inationK

If #h.!ica !ette'ent /ie co"nter#art. gi)e! !hare! to ac("irer12 there i!

gro"nd! for di!co!"re

DEFINITION ?NDER THE 5?RRENT REGIMES

• 5it. 5ode in the ? ha! $een a'ended to inc"de deri)ati)e! within 7intere!t in !ec"ritie!7

• Singa#ore 5ode wa! a'ended in 9@9 to recogni!e deri)ati)e! – !ee note! /a1/iii1 and

to r @9• In the ?S2 !#eci-c r"e! $eing #ro'"gated $. SE5 in connection with deri)ati)e! and

di!co!"re – "nder Dodd Fran0 Act

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SEMINAR – TAHEOERS ;2<

,RO5ED?RES AND O>4IGATIONS

D?TIES OF OFFEROR

 

G%"%r$l (u!%so  To 'a0e co'#ara$e o=er! where Target ha! '"ti#e ca!!e! of !hare!

On. a!!licable to e?uity shares2 not in!tr"'ent! con)erti$e to e("it. !hare!

• Reco''ended a##roach – con)erting in!tr"'ent! into e("it. !hare!

• Another o#tion i! to inc"de hoder! of !"ch con)erti$e in!tr"'ent! in

the o=er2 at a di=erent #riceo  To ta0e into acco"nt con)er!ion right!2 o#tion! and !"$!cri#tion right! in TargetB!

!hare!o  To o=er "nifor' ter'! to a !harehoder!

 To a)oid 6!idedea!7 with !#eci-c !harehoder! that are not a##ica$e to

other!

 T.#e! of !idedea!• Additiona #re'i"'+di=erent #rice

• Nonco'#ete fee!

• Ac("irerB! gi)ing !hare! to 'anage'ent "#on co'#etion of deao What if it wa! gi)en at a di!co"ntK Goden #arach"teKo Ar'B! ength te!t : #re)aiing 'ar0et rateo Do the other SH! 0now a$o"t !"ch ter'!K

 TERMS OF THE OFFER

• Greater Xe%i$iit. to O=eror " !*% c$s% o. $ olu"!$ry o/%r

A55E,TAN5E 5ONDITION /? R @P SING R @

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o S*oul( !*%r% 0% $cc%p!$"c% co"(!o"s .or m$"($!ory o/%rs> /!ee $eow1

OTHER 5ONDITIONS

• ,er'itted on. in !#eci-c circ"'!tance! /? r @@P Sing r @an0r"#tc.2 >oard2 Sharehoding #attern

Mi!re#re!entation E%terna – reg"ator! e!! incined for !"ch ca"!e!

• Decrea!e in ind"!tr. #ro!#ect!2 Financia cri!i! /eg -nancing1 – h"ge

de$ate Reg"ator. a##ro)a

• What if a##ro)a i! gi)en !"$ect to condition! which 'a. $e too

onero"!K

5OM,ETITION 4AW 5ONSIDERATIONS /? R @9P SING R REA5H OF OFFERORBS O>4IGATIONS

• 5a!e St"d. of ade Technoogie!o O=er $. A!ia ,aci-c 4in0! 4td /A,41 to !hare! of ade Technoogie! 4i'ited /ade1o O=er di!co!ed that A,4 hed

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o Action $. SI52 again!t Dr Soh

• Anno"ncing an o=er witho"t $eing a$e to i'#e'ent in f"

• Mi!eading di!co!"re! a! to !harehoding in ade

• Sae of !hare! in ade d"ring o=er #eriod

• 5on!e("ence!o ,rohi$ition! fro' 'a0ing a ta0eo)er o=er2 fro' $".ing and

!eing on !toc0 e%change2 and fro' $eing a director on a i!ted

co'#an. O5>5 /-nancia ad)i!or1

• Fai"re to )erif. a)aia$iit. of f"nd! – !ho"dnBt ha)e rea. reied on Dr

SohB! )eri-cation• >"t2 $reache! were e!! c"#a$e d"e to cond"ct of Dr Soh

• 5on!e("ence!o Vo"ntar. a$!tention fro' -nancia ad)i!or. wor02 and donation

of S^ @ 'iion• >"t2 )indication of O5>5B! cai' in the High 5o"rt

Aen & Gedhi /!oicitor!1

• >reach a! to O=erorB! di!co!"re!

• Atho"gh #ri'ar. o$igation to di!co!e re!t! with Dr Soh

• ,artnerB! )o"ntar. a$!tention fro' wor0 reating to Ta0eo)er 5odeo SI5 didnBt

5o'#e the co'#etion of ta0eo)er – ac0 of -nancia re!o"rce! Comp%"s$!o" o. !$r)%!Ks S9s – do"$t a! to whether it had the #ower to

do !o•  S"$!e("ent reg"ator. a'end'ent! e%#re!!. conferred !"ch #ower

on SI5• ,art. a! a re!"t of thi! ca!e

o ,rof ?'a0anth $eie)e! that thi! ca!e "#! the !tandard for a #a.er! in an M&A

dea2 e!#ecia. in a !it"ation where the O=eror ha! to #" o"t

MANDATOR8 OFFERS

RATIONA4E

• In ca!e of ac("i!ition of2 or change in2 6contro7o Need to #ro)ide e%it o#tion to !harehoder!o ,art of the r"e of e("ait. of o##ort"nit.

• Ac("irer to 'andatori. 'a0e an o=er to a !harehoder! /? r @P Sing r @@1o 5once#t doe! not e%i!t in the ?S Wh.K

5oncentrated !harehoding – "!"a. O=eror! wi "!t 'a0e an o=er to thecontroing SH

Di="!ed !harehoding /'ore #re)aent in ?S1 – O=eror! ha)e to 'a0e a

#artia o=er to a SH! F"nni.2 ? ha! re("ire'ent to 'a0e 'andator. o=er! de!#ite 'o!t 5O!

ha)ing di="!ed !hare hoding!• (iscussion -uestions

o What i! the rationae for 'andator. o=er!K /a! a$o)e1

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N%%( !o pro(% %7! op!o" !o s*$r%*ol(%rs

 

#$r! o. !*% rul% o. %qu$l!y o. oppor!u"!y

 

 The!e tr"'#! O=erorB! choiceo Are the. rea. re("ired to 'aintain e("ait.K I! e("ait. nece!!ar.K

5ontro #re'i"' – wh. !ho"d 'inorit. SH! recei)e contro #re'i"'K In reait.2 'o!t 'inorit. SH! are "!t !hortter' SH! /eg hedge f"nd!

#ri)ate e("it. f"nd!1 The. are #ro$a$. !o#hi!ticated eno"gh to #rotect

the'!e)e!

• Are 'andator. o=er! an o)er0iKo ,rof ?'a0anth !ee' to thin0 !o $"t #ro$a$. not a #re!!ing i!!"e of refor' for

reg"ator!

5ONTRO4

• De-nition of 6contro7o S"$ecti)e criteria

De#end! on fact! and circ"'!tance! ,attern of !harehoding! genera. in co'#anie!

o O$ecti)e de-nition /fa)o"red in ? and SG1  Thre!hod -%ed at 4, o. o!") r)*!s

 

Discussion questionso Do .o" agree with ha)ing a #ercentage thre!hodK

O$ecti)e

• 5ertaint. /eg 9Q1

• Howe)er2 'a. $e #rone to technica !0irting+a$"!e S"$ecti)e

• ,re)ent a$"!e $. oo0ing at the !it"ation hoi!tica.

• ,ace! a $it of "ncertaint.o What i! the rationae for -%ing QK

Doe! a !'a a'o"nt /eg 9Q1 'ean no e=ecti)e controK

• Di="!ed !harehoding – 'ore #ower than SHing /9Q )er!"! other

di="!ed SH!1• Artice! aowing for e=ecti)e contro 'ore than what SHing #re!cri$e!

Wh. QK

• 9

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• 5ertain ac("i!ition! attract 'andator. o=er re("ire'ent!o ? An. ac("i!ition of )oting right! $. ac("irero Sing Ac("i!ition of 'ore than @Q )oting right! in an. #eriod of 'onth!

• >"t2 $e.ond

• 4i'itation on i'#o!ing !"$ecti)e condition!o 4i'ited e%ce#tion for co'#etition aw 'atter!

• Hence2 need to a)oid a 'andator. o=er /thro"gh !hare ac("i!ition!1 d"ring an e%i!ting

)o"ntar. o=ero A! 'ore onero"! re("ire'ent! a##.

@

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RO4E OF TARGETBS >OARD

MARET FOR 5OR,ORATE 5ONTRO4

• 4aw and econo'ic! ana.!i! /Ea!ter$roo0 & Fi!che1o ,re'i!ed on 9 co"nt!

• Ecienc. of the ca#ita 'ar0et!o

A!!"'ing 'ar0et! are ecient2 !hare #rice of a Target wi reXect #erfor'ance of it!'anager!o Agenc. co!t! in co'#anie!

Shir0ing $. 'anager! Sefdeaing $. 'anager!

AGEN58 5OSTS

• Agenc. co!t! can $e red"ced $. 'onitoring the 'anager! in the intere!t! of !harehoder!

• >"t2 who i! to 'onitorKo Manager! are in!ider! and 'a. not 'onitor e=ecti)e.P a!o2 'ea!"re'ent

#ro$e'!o Sharehoder! "ti'ate re!id"a $ene-ciarie! of 'anager!B action!2 $"t !"=er fro'

coecti)e action #ro$e'!o Hence2 e%terna $idder+raider act! a! a cor#orate contro chec0 on 'anager!

• If !toc0 #rice i! ang"i!hing d"e to #oor #erfor'ance of 'anager!o  Then #re'i"' o=er $. $idder wi act to #rotect !harehoder!B in)e!t'ent

,re'i"' reXect! $idderB! e%#ectation of generating greater ret"rn! fro' the

in)e!t'ent than #re!ent 'anage'ento Aternati)e.2 the #o!!i$iit. of a $id it!ef wi force 'anager! to act in the intere!t!

of !harehoder!• Howe)er2 thi! 'ean! that 'anager! 'a. !#end 'ore ti'e and re!o"rce! defending

again!t ta0eo)er! in!teado 4ead! to !hortter'i!' in ter'! of #erfor'ance /("arter.1 – d"e to de#endence on

!hare #rice!o Di!torted incenti)e to act fra"d"ent – windowdre!!ing of acco"nto Mo)e! $. 'anager! to !ee0 goden #arach"te! fro' wo"d$e o=eror!

MANAGERIA4 ,ASSIVIT8K

• A"thor! arg"e for managerial !assi$ity in the conte%t of ta0eo)er!o Manager! are inherent. intere!ted in a ta0eo)er o=ero A! their #o!ition + contin"ance i! at !ta0e

• (iscussion -uestionso Do .o" agree with the a"thor!B ana.!i!Ko Are there an. aternati)e a##roache!K

• Sho"d 'anager! ha)e no roe at aKo Ea!ter$roo0 arg"e! to the e%tent of reco''endation on.

• Sho"d the director! owe it! d"t. to the co'#anie! /inc e'#o.ee! etc "nder !@

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S"$ect to d"tie! to !harehoder! when faced with a ta0eo)er $id #er the

 Ta0eo)er 5ode• 5an director! enter into a $inding agree'ent with O=eror to #o!iti)e. reco''end the $id

/e)en tho"gh the $id wo"dB)e $een reco''ended "nder inde#endent d"e diigence1Ko 4oo0! i0e it can $e done2 at ea!t in the ?S2 $"t on the condition of a -d"ciar. o"t

/ie director! can o#t to re!cind the reco''endation if at !o'e #oint in ti'e the.

are ad)i!ed to do !o $. their inde#endent ad)i!er!1

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SEMINAR – TAHEOER DE:ENCES

>A5GRO?ND

• Di=erence! a'ong "ri!diction!o ?+Singa#ore

 Ta0eo)er! are e!!entia. a 'atter! $etween o=eror! and !harehoder!  >oard can on. #ro)ide ad)ice and infor'ation

• >"t cannot ta0e action too Fr"!trate the o=erP oro  Ta0e awa. the a$iit. of !harehoder! to 'a0e a deci!ion

regarding their in)e!t'ent Weigh! in fa)o"r of a s*$r%*ol(%r prm$cy $ppro$c*

o ?S /Deaware1 >oard!+director! are conferred a greater roe in ta0eo)er!  >oard! can decide the re!#on!e! to an o=eror  The. 'a. a!o !et "# )ario"! ta0eo)er defence!

• Greater freedo' to $oard co'#ared to ?+Singa#ore Arg"a$. weigh! in fa)o"r of a (r%c!or prm$cy $ppro$c*

 TAEOVER DEFEN5ES IN ?+SINGA,ORE

FRAMEWOR OF >OARDBS ,OWERS

•  The $oard ha! i'ited #ower! to #rotect a co'#an. fro' an "nwanted /ho!tie1 o=eror

•  The roe of the $oard i! deter'ined $. two !et! of d"tie!o D"tie! "nder the Ta0eo)er 5ode

 To act in the intere!t! of the co'#an. a! a whoeP not to den. !harehoder!

the o##ort"nit. to decide on the 'erit! of a $id /? G, 1 Not to fr"!trate an o=er or to ta0e other !i'iar action witho"t con!ent of the

!harehoder! /? r 9@@P Sing r

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o When i! it con!idered 6i''inent7K ,o!!i$. when r"'o"r! !tart and there i! !hare

#rice 'o)e'ent• E%a'#e! are

o  Voting agree'ent! $etween !harehoder!  To o$tain contro of the co'#an. 5a"tion again!t #artie! to the agree'ent $eing treated #er!on! acting in

concerto  Interoc0ing or circ"ar !harehoding!

5o'$ined with co''on $oard 'e'$er!hi#o  ,.ra'iding

A$iit. to o$tain !igni-cant contro with 'ini'a econo'ic owner!hi#o I!!"e or !ae of !hare! to a friend. hoder /!i'iar to a white 0night1

Eg to an e'#o.ee tr"!t /with a co'#an. oan1

• Whether thi! a'o"nt! to a prop%r purpos%K

• Wi thi! a'o"nt to p$r!%s $c!") " co"c%r!K

• See ,ogg $. 'ram!horn – .rus!r$!o" o. $" o/%rK

• Wi thi! re!"t in u"$u!*ors%( ?"$"c$l $sss!$"c%Ko S"$!e("ent whitewa!hingK

• ?!"a. need to !how that the !rus!%% s "(%p%"(%"! .rom 0o$r(

"u%"c% Eg to a coa$orator or $"!ine!! #artner

o  Defen!i)e 'ergero  Di=erentia !hare!

With no )oting right! or i'ited )oting right! /eg Bushell $. >aith1 Googe !toc0 – #o!tI,O Howe)er2 re!tricted in the Singa#ore conte%t – ! of the 5o'#anie! Act

• S ,ro)ide! for a 6 one!hare one)ote 7 r"e on a #o

• Howe)er2 !/

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o Entering into contract2 inc"ding !er)ice! contract2 outsi"e the or"inary course o#

business• I!!"e of !m") – ag 'a. red"ce ecac. of defence

• Appro$l – SH! 'a. not a##ro)e of !"ch defence!o E)en if SH! a##ro)e2 the. 'a. not e)en acce#t !"ch o=er! in the -r!t #ace

• In addition2 there are certain co'#an. aw re("ire'ent! to o$tain !harehoder! a##ro)a

for !#eci-c action!o Eg i!!"e of !hare! /Sing ! @@2 5o'#anie! Act1

• If the co'#an. i! 'ere. gi)ing e=ect to #ree%i!ting o$igation!2 then T$6%o%r #$"%l or

SIC mus! 0% co"sul!%(o Eg con)er!ion of #rei!!"ed !ec"ritie!o E%erci!e of o#tion! #re)io"!. i!!"edo ,erfor'ance of contract #re)io"!. entered into

D?TIES OF DIRE5TORS

• ,ri'ar. d"tie! in the conte%t of ta0eo)er!o  To act in the $e!t intere!t of the co'#an.

Who!e intere!t! are re#re!ented $. the co'#an.K Do director! ha)e to con!ider the intere!t! of #re!ent !harehoder! or tho!e

in f"t"reK Sho"d director! ta0e into acco"nt !hortter' intere!t! of !harehoder! or

ongter' intere!t!K• Eg that o=er #rice i! fair and to con!ider co'#eting $id!

• Shortter' SH intere!t wi ne)er ta0e into acco"nt other !ta0ehoder!B

intere!t!P• O)er ong ter'2 there i! an intere!t in !"!taina$iit. – #artic"ar. ac"te

toda.o Other intere!t! – creditor intere!t! + e'#o.ee intere!t!

•

A ot of SH! now are !hortter' SH! /eg hedge f"nd!1o Do the. re("ire !"ch #rotection!K Sho"d !"ch SH! $e

di!enfranchi!edKo Sho"d SH! $e re("ired to hod their !hare! for a 'ini'"'

#eriod of ti'e $efore $eing aowed to !e the'o  To e%erci!e #ower! for #ro#er #"r#o!e

Need to $e e%erci!ed for the #"r#o!e the #ower! were granted for – not

di"tion+atering contro+'inorit.•  ,o)ar" 1mith $. Am!ol 3etroleum /@2 ?,5 /A"!t11

o Ri)a ta0eo)er o=er for target co'#an.2 RW Mier /Hoding!1 4tdo 5o'#eting $idder! were Howard S'ith and A'#o /which aread. hed

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5o"rt wi gi)e credit to $ona -de o#inion of director!2 and re!#ect thei

o#inion a! to 'atter! of 'anage'ent >"t2 on tria2 it wa! fo"nd that #"r#o!e of Mier!B i!!"e of !hare! wa! to di"te

'aorit. )oting #ower hed $. A'#o Director! cannot "!e the #ower for !hifting contro in the co'#an. Hence2 #ower wa! i'#ro#er. e%erci!ed $. the director! of Mier

•  ,eron International t" $. or" *ra"e /@2 E5A1o  Target co'#an. A!!ociated 5o''"nication!o  Ta0eo)er $id! fro' two co'#anie!2 >e and Herono  Tran!fer of )oting !hare! #o!!i$e on. to #er!on no'inated $. the director!o 5o"rt of A##ea

When director! ha)e (%c(%( !*$! !*% comp$"y 0% sol(2 the o"ly (u!y o.

!*% (r%c!ors s !o o0!$" !*% 0%s! prc%

• Once the director! decide to hand o)er contro of 5O2 the (u!y s*.!s

.rom !o3$r(s !*% lo")-!%rm S9 "!%r%s! !o s*or!-!%rm S9

"!%r%s! Where director! are to (%c(% 0%!3%%" r$l 0((%rs2 the i"!%r%s! o. !*%

comp$"y mus! 0% !*% "!%r%s! o. !*% curr%"! s*$r%*ol(%rso Note 5o'#are thi! with the #o!ition in Deaware the 2e$lon 'ase /di!c"!!ed ater1

 TAEOVER DEFEN5ES IN ?S /DE4AWARE1

>OARDBS D?TIES

• In a ta0eo)er !it"ation2 the $oard wi $e "dged again!t one of three !tandard!o >"!ine!! "dg'ent r"eo Enhanced !tandard /@nocal te!t1o Entire fairne!! !tandard

Reca earier di!c"!!ion reating to free*eo"t of 'inorit. !harehoder!

/6einberger $. @31• M"ch of the Deaware "ri!#r"dence on $oardB! d"tie! re)o)e! aro"nd the a##ro#riate

!tandard to $e a##ied to a gi)en ca!e

FRIEND48 TAEOVERS

• In thi! ca!e2 genera. the 0us"%ss @u()m%"! rul% ;'R< s $ppl%(

• Sco#e of the 'us"%ss u()%m%"! Rul% ;'R<o >"!ine!! and a=air! of a co'#an. are 'anaged $. it! $oard of director!o >R 6e%i!t! to #rotect and #ro'ote the f" and free e%erci!e of #ower! granted to Y

director!7 if not director! wi act in a ri!0ad)er!e 'anner

o It i! a #re!"'#tion that in 'a0ing a $"!ine!! deci!ion2 director! ha)e acted in goodfaith and hone!t $eief that action wa! in the intere!t! of co'#an.

o  The #art. attac0ing the $oardB! deci!ion '"!t !how that the deci!ion wa! not an

infor'ed one•  1mith $. Van *orkom /@oard of T? a##ro)ed the 'ergero >"t2 the $oard

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DidnBt ade("ate. infor' the'!e)e! of Van Gor0o' B! roe in ad)i!ing the

'erger• ?naware of #reci!e ter'! of 'erger agree'ent

  Did not o$tain ade("ate infor'ation regarding )a"ation

• No e%#ert wa! a##ointed

• Va"ation e%erci!e "nderta0en $. 5FO Ro'an! wa! indicati)e and for

#"r#o!e of e)eraged $".o"t• Mere #re'i"' o)er 'ar0et #rice 'a. not reXect the tr"e worth of the

co'#an. in the f"t"re Wa! negigent in a##ro)ing the tran!action at !"ch !hort notice – '"!t gi)e

at ea!t !o'e ti'e for d"e diigence! Note nowada.!2 COs usu$lly %mploy $" "(%p%"(%"! M&A !%$m

o 5o"rt hed !harehoder!B a##ro)a wa! o$tained witho"t #ro)iding !"cient

infor'ation

 TAEOVER DEFEN5ES

• t.#e! of ta0eo)er defence!o

 Tho!e that r%qur% s*$r%*ol(%r r$!?c$!o"o  Tho!e that can $e $(op!%( (r%c!ly 0y !*% 0o$r(o  Tho!e that are 0$s%( o" corpor$!% po3%rs )r$"!%( u"(%r corpor$!% s!$!u!%s

REU?IRING SHAREHO4DER RATIFI5ATION

• Eg !har0 re#eent charter doc"'ent a'end'ent!

• Staggered $oard

• 4i'it! on !harehoder )oting2 ca#! on )oting right!2 etc

• S"#er'aorit. right! for $ac0end 'erger!

5AN >E ADO,TED DIRE5T48 >8 THE >OARD

 

#oso" #ll #l$"so Di!tri$"tion of !toc0 right! to !harehoder! /in the for' of di)idend1

S"ch #an! "!"a. fo"nd in charter doc"'ento Granting !harehoder the right to con)ert to co''on !toc0 at !"$!tantia di!co"nt

When an ac("irerB! hoding cro!!e! a thre!hod /"!"a. @

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• ?!ed to 'a0e the target "nwanted to an ac("irer /eg !ae of 0e. a!!et! /crown ewe!11

• Hand!o'e reward! to 'anager! /goden #arach"te!1

• Ac("i!ition of another entit. to attract co'#etition aw concern!

• 4a"nch of a $id on the ac("irer /,acMan defence1

HOSTI4E TAEOVERS

• In ho!tie ta0eo)er! /which in)o)e! the e'#o.'ent of ta0eo)er defence!12 the enhanced

!cr"tin. /Unocal !%s!1 i! a##iedo Wh. i! >R not a##ica$e in ho!tie ta0eo)er!Ko Enhanced !cr"tin. te!t !ee'! to $e ongter' rather than !hortter' /reate! to

cor#orate #oicie!1• Dic"t. in a##.ing >R !er se

o Director! are confronted with an inherent conXict of intere!to 6Y o'ni#re!ent !#ecter that a $oard 'a. $e acting #ri'ari. in it! own intere!t!2

rather than tho!e of the cor#oration and it! !harehoder!7 /@nocal1

S5O,E OF THE ENHAN5ED S5R?TIN8 TEST /@N'A1

• >efore the targetB! $oard i! accorded #rotection of the >R2 it '"!t e!ta$i!ho Reasonableness !%s! that $oard had rea!ona$e gro"nd! for $eie)ing a 6danger

to cor#orate #oic. and e=ecti)ene!!7 e%i!ted fro' the ho!tie o=ero Proportionality !%s! that the $oardB! defen!i)e re!#on!e wa! rea!ona$e in

reation to the threat #o!ed

RE5ENT ,OSITION – AIRGAS

•  Air 3ro"ucts $. Airgas /9@@2 De1o ,oi!on #i $. Airga! to #re)ent ta0eo)er $. Air ,rod"ct!

o O=er at ^ a !hare con!idered inade("ateo director! no'inated to the $oard $. Air ,rod"ct!

• ,ainti= #ra.ed for in)aidit. of #oi!on #i and for it to $e redee'edo Gro"nd – director! of Airga! faied to f"- their d"tie!

• 5o"rto A##ied the two @nocal te!t!o >if"rcated the a##ication into /whether there wa!1

S!ruc!ur$l co%rco" – eg 9tiered !hare o=er! /SH! _coercedB to acce#t the

o=er d"e to ignorance+fear1 Su0s!$"!% co%rco" 

• ?+SG – $oard can on. reco''end+reect

• ?S – $oard ha! 'ore action! /eg #oi!on #i1o In thi! ca!e2 co"rt deferred to $oard $eca"!e mor% !*$" *$l. o. Ar)$s S9s $r%

s*or!-!%rm "%s!ors $"( $r0!r$)%urs I(%"!!y $"( mo!$!o" o. S9s (%!%rm"% how '"ch pro!%c!o"  the.

!ho"d $e gi)eno Hed that Airga! $oard 6acted in good faith and in the hone!t $eief7

No $reach of d"t. Action! of the $oard with!tood the enhanced te!t

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4ESSONS FROM AIRGAS

• Us%.ul"%ss o. !*% poso" pll co"!"u%s /no a##ea to Deaware S"#re'e 5o"rt in thi!

ca!e1o Wh. no a##eaK 5irc"'!tance! !"ch a! !hare #rice 'a. ha)e changedo A!o2 co!t! of a##ea are too highK

• Reiance on aw aid down $. the Deaware S"#re'e 5o"rt

 

A @us!-s$y-"o (%.%"c% s $l(o E)en tho"gh director! ha)e not ta0en an. additiona defen!i)e action!

 

#roc%ss .ollo3%( $cqur%s mpor!$"c%

o Eg retention of o"t!ide ega and -nancia ad)i!or!o ,erha#! inde#endence of the $oard wa! a factor

On. in!ider of the $oard wa! the 5EO E)en Air ,rod"ct!B no'inee director! agreed with Airga! $oard deci!ion

  Rol% o. s*or!-!%rm "%s!ors & $r0!r$)%urs

5OM,ETING OFFERS – REV4ON ,OSITION

•  2e$lon Inc. $. 4acAn"re)s 0 >orbes /@2 De S51o O=er $. ,antr. ,ride for !hare! of Re)on – "!ing "n0 $ond -nancingo Reected $. Re)on "#on ad)i!e of in)e!t'ent $an0o In!tead2 Re)on i'#e'ented !hare re#"rcha!e #rogra' and a note #"rcha!e

#rogra' /ha)ing the e=ect of a #oi!on #i1o Re)on !e#arate. had negotiation! with another $idder For!t'anno Director! agreed to a e)eraged $".o"t $. For!t'anno 5o"rt

Atho"gh the ado#tion of the #i wa! )aid "nder the circ"'!tance!2 it!

co"!"u%( us% 3$s "o! It $eca'e a##arent that $ 0r%$6-up o. !*% comp$"y 3$s "%!$0l% Recognition that the comp$"y 3$s up .or s$l%  Thi! !igni-cant. atered the $oardB! re!#on!i$iit. "nder the @nocal !tandard  There wa! "o !*r%$! !o corpor$!% polcy $"( %/%c!%"%ss Director!B roe changed fro' 6defender! of cor#orate $a!tion to $uc!o"%%rs

c*$r)%( 3!* )%!!") !*% 0%s! prc% .or !*% s!oc6*ol(%rs  at a !ae of

the co'#an.7• 6Seecti)e deaing to fend o= a ho!tie $"t deter'ined $idder wa! no

onger a #ro#er o$ecti)e In!tead2 o0!$"") !*% *)*%s! prc% .or

!*% 0%"%?! o. !*% s!oc6*ol(%rs s*oul( *$% 0%%" !*% c%"!r$l

!*%m% )u(") (r%c!or $c!o" Th"!2 the Re)on $oard co"d not

'a0e the re("i!ite !howing of good faith Y7

DIS5?SSION U?ESTIONS A>O?T ,OISON ,I44S

• In the c"rrent era of !hort ter' in)e!tor! and ar$itrage"r!2 wo"d the co"rt in Re)on ha)e

decided di=erent. and ga)e SH! !o '"ch #rotectionK• Re)on ca!e that !how! con)ergence $etween ?S and ? "dicia attit"de! toward! $oard

cond"ct in ta0eo)er!o Rea.Ko Sho"d Heron $e decided di=erent. if a 'aorit. of it! SH! are ar$itrage"r!K

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• When do ca!e! !hade fro' defending the 5O /#er ?noca1 into $rea0ing"# /#er Re)on1Ko What ha##en! when 9 o=er! co'e in – a ower o=er that wonBt $rea0"# the 5O or a

higher o=er that wi $rea0"# the 5OK No $rea0"# ; need to defend again!t threat to cor#orate #oic. and

e=ecti)ene!! /?noca1 >rea0"# ; o$tain $e!t #rice #o!!i$e for SH! /Re)on1

STAGGERED >OARDS

• ,oi!on #i and other e'$edded defen!e! are !"$ect to rede'#tion $. the $oard or

!harehoder!• O=eror 'a. !ee0 to o$tain rede'#tion $. ta0ing contro of the $oard – thro"gh o$taining

eno"gh !hare! to 'o"nt a #ro%. -ght• Hence2 in order to en!"re ro$"!tne!! of defen!e2 poso" plls $r% usu$lly $ccomp$"%(

0y $ s!$))%r%( 0o$r(

WHAT IS A STAGGERED >OARDK

•

Str"ct"re of a !taggered /or ca!!i-ed1 $oardo >oard i! di)ided into ca!!e! /"!"a. ca!!e!1o Each ca!! of director! wi retire each .ear /ie a third of the $oard change! each

.ear1o Each director wi therefore ha)e a ter' of .ear!

• Nothing #re)enting !taggered $oard arrange'ent! in ?+SG $"t it wonBt $e a! e=ecti)e a!

in ?So A"yo"% 3!* co"!rol o. CO c$" smply r%mo% %"!r% 0o$r( " UH5SG

o E)en tho"gh thi! i! on. a##ica$e to #"$ic 5O!2 $ear in 'ind that for #ri)ate 5O!2

there i! no need to a##roach $oard  8o" #ro$a$. ha)e to a##roach the SH! /which are 'o!t i0e. the one! in

contro1 direct.• In ca!e the O=eror need! to ac("ire contro of the $oard2 it '"!t wait two eection c.ce!

o ie to o$tain 'aorit. on the $oard

• In addition2 aw and con!tit"tiona doc"'ent! of Deaware co'#anie! contain !trict

re!triction! on re'o)a of director!o Sharehoder! can re'o)e director! on. for _ca"!eB

Eg !e)ere 'i!cond"ct2 o=ence of 'ora t"r#it"de2 etco >"t2 )r%$!%r r%mo$l r)*!s !o s*$r%*ol(%rs " UH5S")$por%

•  Thi! 'a0e! s!$))%r%( 0o$r(s $ .orm($0l% (%.%"s% " !*% UPSPo O/%ror !o u"(%r!$6% prolo")%( pro7y ?)*!s in order to o)erthrow the $oardo D%l$ys $"( cos!s 'a. re!"t in o=eror !"rrendering in their ta0eo)er atte'#t!

Eg Recent Airga! ta0eo)er $atte

,ROL8 FIGHTS

• O=eror`! atte'#t! to recon!tit"te the $oard are ta0en thro"gh #ro%. -ght!o O=eror ca! for a !harehoder!B 'eeting where it !ee0! to #ro#o!e it! own

candidate! for director!hi#o  The!e candidate! are co"ntered $. the 'anage'ent

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•  The #roce!! of )oting i! i'#ortant >aance i! "!"a. tited in fa)or of 'anage'ento It ha! acce!! to the #ro%. 'achiner.

4i!t of !harehoder!o 4e!! co!t. for 'anager!

• >"t2 an e%ten!i)e !et of reg"ation! in the ?S atte'#t! to grant i'ited right! to

!harehoder!o Mo%m%"! !o3$r(s s*$r%*ol(%r prm$cy s %7!r%m%ly slo3 " US

•  Blasius In"ustries Inc. $. Atlas 'or!. /De2 @1o >a!i"! a new !toc0hoder of Ata! /hoding @Q1

,ro#o!ed a re!tr"ct"ring of the co'#an. Intended to o$tain contro $. !ee0ing a##ro#riate re#re!entation on Ata!

$oard – $. increa!ing the $oard !i*e to @< and a##ointing it! own no'inee!o Manage'ent caed an e'ergenc. $oard 'eeting

Added 9 'ore director! /ta0ing the tota to 1  To defeat >a!i"!B a$iit. to a##oint 'aorit. $oard

o E)idence e!ta$i!he! Ata! B #rinci#a 'oti)e for acting a! #re)enting >a!i"! B controo 5o"rt of 5hancer. /Aen2 1

>oard wa! not acting o"t of a !efintere!ted 'oti)e – it acted in good faith

 

Sml$r !o 0%s! "!%r%s!s !%s! " UH5S")$por%

>"t2 ("e!tion whether #rinci#a #"r#o!e of $oardB! action wa! to #re)ent!harehoder! fro' eecting 'aorit. of the $oard

Ordinar. con!ideration! of $"!ine!! "dg'ent! are not #re!ent in 'atter

in)o)ing !harehoder )oting /U"oc$l !%s! "o! $pplc$0l% *%r%1• It i! a qu%s!o" o. $u!*or!y 0%!3%%" !*% 0o$r( $"(

s*$r%*ol(%rs Fact! did not "!tif. coerci)e action $. the $oard There wa! a ol$!o" o.

!*% (u!y o. loy$l!y o3%( 0y !*% comp$"y

• Di!c"!!ion of >a!i"! te!to ?noca )er!"! >a!i"! te!t /acade'ic rationai!ation1

>a!i"! – SH right to )ote /a co'#an. aw right1 ?noca+Airga! – SH right to e%it /a contract"a right1 >oi! down to nat"re of right! $eing interfered withK

o How doe! thi! co'#are with Howard S'ith /#ro#er #"r#o!e te!t1K See'! rather !i'iar

 TAEOVER DEFEN5ES INTERA5TION WITH TAEOVER REG?4ATIONS

• Fina ta0eawa. fro' di!c"!!ion! on ta0eo)er #roce!!2 ho!tie ta0eo)er! and defen!e!

• Roe of reg"ation

• Di=erence! in the ?S and ? #o!ition!o Ana.!i! in artice $. Ar'o"r and S0eeo  There are hi!torica rea!on! wh. reg"ation! ha)e de)eo#ed in a di)ergent 'anner

– need to $e cogni!ant of the #a.er! in)o)ed in !etting "# the!e reg"ation!  T.#e of !harehoding – 'ore di="!ed in ?S+? and 'ore concentrated in SG Which regi'e i! $etterK

 

S*$r%*ol(%r prm$cy ;UH5SG pos!o"<

• M$"$)%m%"! prm$cy ;US pos!o"<o Short ter' SH! /do the. need !o '"ch #rotectionK1

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o >etter a$e to ta0e care of other !ta0ehoder! !"ch a! e'#o.ee!

and creditor! Doe! it 'atter in Ea!t A!ian 5o! when the controing SH! are a!o on the

$oardK• Wh. not gi)e to the $oard !ince the controing SH! can e%erci!e their

#ower thro"gh the $oard! a!oKo St"die! !"gge!t that the ?S a##roach ead to $etter )a"e fro' M&A

• (iscussion -uestion >a!ed on ana.!i! of ta0eo)er reg"ation2 c$" 3% (r$3 som%

s!r$"(s $s !o !*% 0$c6)rou"( $"( r$!o"$l% .or !$6%o%r r%)ul$!o" "

S")$por%Ko ? a##roach – !harehoder #ri'ac.o 5ontroing !harehoder! – #rotection 'echani!'! for 'inorit. !harehoder!

Mandator. o=er! /wh. not a##rai!a right!K1 O##re!!ion re'edie! – !"cientK Ea!. to cai'K

• Recent change! in the ? o Reaction to the 5ad$"r.+raft ta0eo)er – are !"ch reaction! 0neeer0 and "ncaed

forKo 5a for greater #rotection to

 Target co'#anie!2 Manage'ent!2 E'#o.ee!o I'#o!ition of greater re!triction! on O=eror

• (iscussion ?uestion =ll !*% r%c%"! m%$sur%s pl$c% o0s!$cl%s o" *os!l% !$6%o%rs

" !*% UH Ko  8e! – o=eror! 'a. -nd it 'ore e%#en!i)e and ti'e con!"'ing to 'o"nt ho!tie

ta0eo)er!o No – 'ere. cari-cation of c"rrent !tandard! – a!o $oard! in ? !ti not gi)en a!

'"ch atit"de in 'o"nting defence! in the face of a ho!tie ta0eo)er co'#ared to

$oard! in the ?S

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SEMINAR 1, – LEERAGED 'UYOUTS

HOW ARE TAEOVERS FINAN5EDK

• Share !wa#!o No /or e!!1 ca!h o"tXow fro' ac("irero >"t2 di"tion of e%i!ting !harehoder!o ?!ef" for re)er!e ta0eo)er!

When the o=eror ha! a !'aer a!!et !i*e – can $e "!ed to do 6$ac0door

i!ting7o Need for !harehoder a##ro)a! – !@@ 5A SH a##ro)a for !hare i!!"e! $. the $oard

• 5a!h ta0eo)er!o Interna re!o"rce!o >orrowing!

4EVERAGED >?8O?TS /4>OS1

STR?5T?RE

• e. feat"re! of 4>Oo S)"?c$"! us% o. %7!%r"$l ?"$"c") /$an0!2 $ond!1 –

Highe!t tier !enior de$t! /ong ter' $an0 oan!1 Midde tier Me**anine -nancing 4owe!t tier "n0 $ond! /high.ied + highri!01

o ,artia !#on!orf"ndingo  Us% o. !$r)%!s $ss%!s !o l%%r$)% !*% ?"$"c")

Mos!ly 0y 3$y o. s%cur!y or )u$r$"!%% – if not e%terna -nancier! on.

own targetB! !hare!2 not the a!!et! the'!e)e!

o Wh. indirect $orrowing $. !#on!orK To !e#arate and i'it ia$iit. into S,V

• Str"ct"ring I!!"e!o Direct $orrowing! )! "!e of !#ecia #"r#o!e )ehice! /S,V!1

>an0r"#tc. re'otene!! + i'ited reco"r!e -nancing

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• Doc"'entationo Negotiation of condition!o 5on-r'ation of -nancia re!o"rce!

Re'e'$er ade Technoogie! – !*r%s*ol( !r))%r") m$"($!ory

!$6%o%rs "%%( !o !$l6 !o SIC ?rs! A!o need to ta0 to ender /cf danger of info ea01

o Standardi*ation of doc"'entationo Docum%"!$!o" usu$lly pro(%( 0y u"(%r3r!%rs  – !"ch oan! are $inding

"#on condition! #recedent A!o2 !o'eti'e! -nancia ad)i!er! wi ha)e to oo0 at the -nancia !it"ation

of "nderwriter!o I!!"e! for -nancia ad)i!er! to oo0 at

  I! there eno"gh -nancingK Are the doc"'entation done #ro#er.K

• Director! to act in good faith in the intere!t! of the co'#an.o Gro"# co'#an. !it"ation!o When !"$!idiar. #ro)ide! g"arantee+!ec"rit. for #arentB! o$igation!

•  The rul% $)$"s! ?"$"c$l $sss!$"c%o Doe! !ec"rit. g"arantee o)er TargetB! a!!et! a'o"nt to -nancia a!!i!tance $.

 Target to Ac("irer/!1K

FINAN5IA4 ASSISTAN5E

• A##ie! in the ca!e of $cqus!o" o. s*$r%s of the Target /ie in a ta0eo)er1o  ,ro$a$. not an i!!"e if it wa! an ac("i!ition of TargetB! a!!et! $. the S,V

 

Rul% $)$"s! ?"$"c$l $sss!$"c%

o 4arge. to #rotect creditor!o A!o2 to #rotect again!t trac0ing in !hare! + 'ani#"ation of #rice2 etco ,rotect 'inorit. again!t controing !harehoder!

• 5o'e! in the wa. of 4>O tran!action!o #$r!cul$rly " !*% UH $"( S")$por%

4itte !"ch r"e! in ?So UH5SG $(op!s $ mor% rul%s-0$s%( $ppro$c* comp$r%( !o US

WHAT 5ONSTIT?TES FINAN5IA4 ASSISTAN5EK

• Financia a!!i!tance 6.or !*% purpos% o. 7 or 6" co""%c!o" 3!*7o E%a'#e!

S,V $orrow! fro' $ondhoder! and #ro)ide! the !hare! it hod! in the Target

a! !ec"rit. S,V $orrow! fro' $an0! and #ro)ide! TargetB! a!!et! a! !ec"rit. 'onth! after the ac("i!ition2 the Target decare! e%traordinar. di)idend

"!ed $. the S,V to re#a. #art of it! oan to $an0!• FA c$" 0% (r%c! or "(r%c!2 for e%a'#e

o Inter#o!ing another entit. in $etween co'#an. and endero Ac("i!ition of a!!et! $. co'#an. at !"$!tantia )a"e when tho!e a!!et! are not

nece!!ar. for it! $"!ine!!  R%$so" P purpos% ;@us! "%%( !o 0% $ purpos% "o! T9E purpos%<

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o E)en tho"gh 'oti)e /rea!on1 of tran!action 'a. $e "!ti-a$e2 i. purpos% 3$s !o

)% ?"$"c$l $sss!$"c% !o $cqur%r !*%" !r$"s$c!o" " (ou0! E)en if the decaration of di)idend! wa! for the !"$!tanti)e #"r#o!e of

-nancing e%terna ac("irer!2 it wi a'o"nt to FA•  Target co'#an.B! $oard !ho"d s*o3 3*y !*% %"!r% !r$"s$c!o" s 0%"%?c$l !o !*%

!$r)%! comp$"yo Sho"d $e done $. an inde#endent co''ittee of the TargetB! $oard

4oo0 at SG5A ca!e of Intracoo  To #rotect TargetB! creditor!2 a #roce!! caed !tr"ct"ra !"$ordination can $e done

to 'a0e the TargetB! creditor! ha)e #riorit. o)er the TargetB! a!!et! o)er other

creditor! – #o!!i$. !oothing fear! of FA• Grad"a rea%ation in aw

o ? e%ce#tion to pr$!% comp$"%s "nder the 5o'#anie! Act2 9 If target i! #ri)ati!ed after the ta0eo)er2 it can !"$!e("ent. -nance the

ac("irer /eg thro"gh e%traordinar. di)idend!1• How to #ri)ati!eK Do a !("ee*eo"t and forcef". dei!t the co'#an.

5o'#an. '"!t $e #ri)ati!ed within 'onth! of ta0eo)er

• Deter'ination of egait. of FA !ho"d $e whether co'#an. i!

#ri)ati!ed aread. at the #oint of FA How do inde#endent -nancier! en!"re that Target wi end the 'one.

!"$!e("ent.K• 5harge a higher rate of intere!t "nti the Target end! 'one.

• 5anBt create charge! o)er TargetB! a!!et! $eca"!e it 'a. a'o"nt to FAo Eg Singa#ore 5o'#anie! Act2 !

Se)era e%ce#tion! incor#orated 4ending to e'#o.ee! tr"!t /,ogg $. 'ram!horn1 Di)idend in the or("$ry cours% of $"!ine!! Sche'e of arrange'ent – need to get creditor!B a##ro)a and co"rtB!

!anctiono Whitewa!h #ro)i!ion! /co"@u"c!%1 4oo0 at ca!e of NatStee for 4>O and FA

Sharehoder!B a##ro)a So)enc. decaration $. director! S"$ect to re!triction!

• (iscussion -uestion Doe! the ega #o!ition change if the tran!action in)o)e! an

ac("i!ition of a!!et!+$"!ine!!2 and not !hare!Ko No :A proso"s o"ly $pply !o $cqus!o"s o. s*$r%s "o! $ss%!s50us"%ss

/!ee a$o)e1