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A Global Guide to Take-Private Transactions June 2020

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A Global Guide to Take-Private Transactions June 2020 For further information or assistance with take-private transactions, please reach out to any of the contacts listed below or your usual Baker McKenzie contact. A GLOBAL GUIDE TO TAKE-PRIVATE TRANSACTIONS JUNE 2020 TRANSACTIONAL POWERHOUSE A GLOBAL GUIDE TO TAKE-PRIVATE TRANSACTION | 1 INTRODUCTION Recent falls in equity markets will mean that many listed companies may appear attractively priced, for a period at least. With significant levels of dry powder available to financial investors and potential delays to at least some private M&A processes, we expect the focus on “take- private” to increase during the next phase of the cycle. Take-private transactions are transactions where companies whose shares are publicly listed on one or more listing venues are acquired and de-listed. There are a number of reasons why we are likely to see a prevalence in take- private transactions over the coming months, including: • share prices of listed companies - particularly those in some of the worst affected sectors - have fallen significantly from their pre- Covid-19 highs; • the speed of any recovery in many economies is difficult to predict but there seems to be growing consensus that it will be slower than previously thought; • owners of private companies who may be contemplating a sale process will in many cases prefer to delay running such a process until market conditions improve, meaning fewer quality private company assets are likely to come to market in the short term and, in turn, prompting some acquirers to widen their focus to encompass listed company targets; • founders, management teams and/or majority shareholders of listed companies may feel that “their” companies are intrinsically worth much more than the valuation placed on them by the public markets and they can unlock the true value of these assets by buying them back at attractive prices, often in conjunction with financial sponsors; • listed companies may face pressure from shareholders, and campaigns from activists, focused on driving fundamental changes, sometimes including agitating for take-private transactions; and • private equity, traditionally a major protagonist in take-private transactions, is sitting on record levels of dry powder and, when debt markets, stabilise, will look to deploy it. All of these, and other, factors will likely catalyse the market for de-listings and take-private transactions in 2020 as companies and management seek to earn respite from the market, re-organise and restructure, retire existing debt, raise fresh capital and build value for the long term - all without the scrutiny of the public markets and the pressure of public reporting cycles. Take-private transactions that involve financial sponsors invariably require the buyer to raise new debt to fund a proportion of the purchase price. Such transactions often require the buyer to retain the existing management teams of the target companies, and to put in place management incentivisation plans. As such, these transactions tend to throw up a different set of challenges for buyers more accustomed to transacting in the private context, they typically require more time to plan and implement and usually involve a greater number of parties to the deal. These factors mean that these transactions, as well as being more complex than private M&A transactions, are often more complex than other public M&A. ` INTRODUCTION At Baker McKenzie, we are a transactional powerhouse with extensive experience of leading public deals across multiple borders and legal frameworks including deep knowledge and experience of take-private transactions. We have the market knowledge, legal expertise and creativity needed to execute complex and high profile transactions successfully. Our experience of leading these deals, combined with our deep sector knowledge and our ability to work seamlessly across borders on these deals, has allowed us to produce this guide, which sets out a comparison of some of the noteworthy features and requirements applicable to take-private transactions in a number of jurisdictions around the globe. In this guide, Baker McKenzie lawyers share their high-level views on these key questions: 1. What are the thresholds for: (a) when a mandatory takeover offer obligation (if any) is triggered; (b) minority squeeze-out by the bidder? 2. What are the requirements as to offer price: (a) in relation to minimum offer price; (b) form of offer consideration? 3. What is the nature of the evidence of funding capability required to be demonstrated prior to the launch of an offer? Is there a requirement that funding documents must be made public? 4. What conditions may be attached to the offer? 5. When do parties to the offer have to notify the regulator or announce an offer? Are there any particular obligations on the parties prior to announcement? 6. What is the typical basic timeline for a takeover offer? 7. Aside from general offers, what other methods are commonly used in take-private transactions? 8. Is it possible to obtain undertakings from shareholders to support the transaction (i.e., to accept the offer or vote in favor of a proposal)? If yes, when would a bidder approach such shareholders? Aside from obtaining undertakings to support the transaction, what other deal protections and other means are available to the bidder to secure the support of major shareholders or management? 9. Are there any particular restrictions on management incentivization in a public-to-private transaction or treating certain shareholders differently from others? 10. Does the existence of target management in a public-to-private transaction present any other particular challenges in the process? 11. Are there any other particular challenges or sensitivities that a bidder in a public-to-private transaction might face in your jurisdiction? You may also wish to refer to Baker McKenzie’s Global Public M&A Guide, which provides an overview of some of the key legal considerations associated with public M&A transactions in 42 jurisdictions across the globe. We will be happy to provide more details of the rules and practice in any of these jurisdictions. The content of this guide is current as of 29 June 2020 and does not constitute legal advice. For further information or assistance regarding take-private transactions, please reach out to the contacts listed in the Guide or to your usual Baker McKenzie contact. CONTENTS For further information or assistance with take-private transactions, please reach out to any of the contacts listed below or your usual Baker McKenzie contact. Americas ..........................................................5 Asia Pacific ................................................25 EMEA .................................................................97 Brazil Australia France Canada China Germany United States Hong Kong Italy Indonesia Netherlands Japan South Africa Malaysia Spain Philippines Sweden Singapore Turkey Taiwan UK Thailand Vietnam A GLOBAL GUIDE TO TAKE-PRIVATE TRANSACTION | 4 UNITED KINDGOM For further information or assistance with take-private transactions, please reach out to any of the contacts listed below or your usual Baker McKenzie contact. A GLOBAL GUIDE TO TAKE-PRIVATE TRANSACTIONS AMERICAS Brazil .................................................................... 6 Canada ..............................................................11 United States .......................................... 17 A GLOBAL GUIDE TO TAKE-PRIVATE TRANSACTION | 5 BRAZIL For further information or assistance with take-private transactions, please reach out to any of the contacts listed below or your usual Baker McKenzie contact. Felipe K. Calil Daniel Facó Anna T. Mello Partner Partner Partner +55 (11) 3048-6913 +55 (11) 3048-6904 +55 (21) 2206-4915 [email protected] [email protected] [email protected] Mauricio M. Pacheco Lara Schwartzmann Evaristo Lucena Partner Partner Foreign Legal Consultant +55 (11) 3048-6795 +55 (11) 3048-6828 +1 416 865 3871 [email protected] [email protected] [email protected] Bruno Dreifus Marcelo Moura Senior Associate Senior Associate +55 (11) 3048-6553 +55 (11) 3048-6554 [email protected] [email protected] 1 What are the thresholds for: A. when a mandatory take-over offer obligation (if any) is triggered B. minority squeeze-out by the bidder A. A mandatory offer is triggered in three circumstances: • First, when a person (or a group of people acting together) acquires from a controlling shareholder an interest in a company’s shares which gives that person, or group, a power to control the company (the tag-along offer); • Second, when a controlling shareholder (or a person related to the controlling shareholder) acquires an additional interest in shares [which combined with an existing holding will] equal one- third of the outstanding shares (free-float) of the company (the free-float reduction mandatory tender offer); and/or • Third, if the company, or its controlling shareholder, intends to take the company private (the public-to-private transaction). In addition to the legal and regulated mandatory tender offer rules there are additional provisions which may be applicable, for example: • A ‘contractual’ tender offer may be required pursuant to the B3 (the Brazilian stock exchange) segments’ rules (like the tender offers for delisting from Novo Mercado, Nível 2 and Nível 1); and • The bylaws of some Brazilian public companies require a person to launch a
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