A New Era for Public Company Acquisitions: Significant Changes Have Been Made for Mandatory Tender Offers

Recent Development

The Capital Markets Board’s (“ CMB “) new Communiqué No. II-26.1.ç Amending the Tender Offer Communiqué No. II-26.1 (“ Communiqué “) entered into force upon its publication on the Official Gazette No. 31630 and dated October 16, 2021.

What Does the Communiqué Say?

As previously discussed in our Legal Alert dated February 10, 2021 , the CMB previously submitted a draft version of the Communiqué (“ Draft Communiqué “) to public opinion on February 1, 2020. The Draft Communiqué’s most significant changes were related to the liability arising from the mandatory tender offer information form, the determination of the shareholders subject to the mandatory tender offer, the offer price, and the exceptions and exemptions applicable to the mandatory tender offer. In this respect, the following changes were made to tender offer obligations.

Liability arising from the mandatory tender offer information form:

The Communiqué includes the investment firm who signs the information form among the persons liable for the information provided therein. Accordingly, the following persons will be liable for the information provided:

the offeror(s),
the investment firm, and
the signatories of the investment firm.

Persons who can benefit from the mandatory offer:

According to the Communiqué, as proposed in the Draft Communiqué, only those who are shareholders as of the date on which the acquisition of management control is disclosed to the public will be able to benefit from the mandatory tender offer.

For companies listed on the exchange, the list of shareholders who can benefit from the mandatory tender offer and their shares that can be subject to the offer will be provided to the investment firm by the Central Securities Depository of Turkey ( Merkezi Kayıt Kuruluşu ) on the business day preceding the launch of the mandatory tender offer.

New exceptions to the tender offer obligation:

The Communiqué foresees new exceptions to the obligation to launch a tender offer:

A shareholder who participated in the capital increase and acquired 50% or less of the voting rights of the public company sharing the public company’s control with the existing controlling shareholders, equally or to a lesser extent, and for the first time through a written agreement.
If change in the management control also triggers squeeze-out and sell-out rights.
For public companies listed on the exchange, changes to management control arising due to acquisition of new shares by existing shareholders by participating in preemptive rights issues (This exception was previously regarded as an exemption to be granted by the CMB).
Unintended changes to management control as a result of third party actions such as suspension of voting rights of certain shareholders, capital decrease through share redemptions, amendments to the privileges assigned to the shares, or share repurchases by the company.

Moreover, according to the Communiqué, those who obtained management control of the company where any of the exceptions applies will be required to make a public disclosure within two business days following the acquisition of management control.

The new exemptions under the Communiqué:

According to the Communiqué, as proposed by the Draft Communiqué, if the acquisition of shares triggering the change of management control results from inheritance or allocation of matrimonial property or legal obligations, the CMB will be able to exempt the acquirer from the obligation to make a tender offer.

Mandatory offer price:

Pursuant to the Communiqué, if the CMB resolves that there are extraordinary developments affecting (i) the Turkish economy or the relevant industry and (ii) the transactions entered into during the periods used as a basis to calculate the daily adjusted average prices applicable to the tender offer price, the relevant time frames referred to in the CMB decision will not be taken into account for the calculation of the mandatory tender offer price. The relevant time frames will be completed by analyzing the preceding periods.

Principles regarding exchange and interest rates while determining the offer price:

According to the Communiqué, as stipulated in the Draft Communiqué, if the offeror has no fault in delay in launching the tender offer, no interest will accrue on the tender offer price.

Moreover, the CMB replaced TRLIBOR, the reference rate applicable to TRY, with TLREF. The Communiqué also sets forth that the rates deemed appropriate by the CMB will be used if the reference interest rates are abolished.

Conclusion

With the Communiqué, the CMB clarified certain matters regarding the tender offer procedure and provided certain flexibility to investors with the new exceptions to and exemptions from the tender offer obligation.

Meanwhile, the CMB’s amendment paves the way to take dynamics in global markets into account while calculating the mandatory offer price.