Takeover rules in the spotlight, again

EVERY time a listed company on Bursa Malaysia faces a buyout offer, the issue of takeover rules comes to mind.

This week, Genting Bhd, which owns around 50% of Genting Malaysia Bhd (GenM), launched a takeover bid for the remaining shares at RM2.35 per share.

In other words, Genting is seeking to buy back the 50% of GenM it does not already own.

Malaysia’s takeover laws of public companies are enshrined in the Capital Markets and Services Act 2007 (CMSA) and the Takeovers and Mergers Code 2016.

One key provision is that an offerer must secure 90% acceptance of the shares it did not own at the time of the general offer in order to compulsorily acquire the remaining shares – and proceed with the delisting and privatisation of the target company.

In Genting’s case, this means it must secure 90% of the remaining 50% of GenM shares – effectively needing to own 95% of the company for the privatisation to go through.

If just 10% of the remaining shareholders hold out for a better deal, the privatisation cannot proceed.

This holdout group can effectively block the deal.

This is what is meant when we say minority shareholder protections are enshrined in the CMSA and the Takeovers and Mergers Code.

And yet, some offerers attempt to pressure minority shareholders into accepting offers by citing technical provisions in Bursa Malaysia’s listing requirements.

One such rule states that if a company’s public shareholding spread (or “free float”) falls below 25%, its shares may be suspended. If the free float falls below 10%, the company may be delisted.

These provisions often alarm minority shareholders – especially in situations where the offerer has not yet reached the required 90% acceptance threshold.

However, it’s important to note that delisting under these rules is not automatic.

Bursa Malaysia has the discretion to decide whether or not to suspend or delist a company, particularly when minority interests are at stake.

Minority shareholders of GenM who are holding out for a higher offer ought to take note of this – and the legal protections afforded to them under the CMSA and the Takeovers and Mergers Code.