Public Mergers and Acquisitions in Indonesia: Offer Conditions

SSEK Legal Consultants partner Fahrul S. Yusuf and Michael S. Carl, a senior foreign legal advisor at the firm, have contributed the Indonesia chapter of the new Practical Law global guide to Public Mergers and Acquisitions. SSEK is one of the top M&A law firms in Indonesia, as ranked by leading independent legal directories including Chambers & Partners, IFLR1000, Legal 500 and Asia Law & Practice. SSEK was recognized as a Tier 1 M&A law firm in the 2015 M&A Rankings from Asian Legal Business, one of only four firms in Indonesia to receive the Tier 1 ranking.

The following is an excerpt from Public Mergers and Acquisitions in Indonesia.

What conditions are usually attached to a takeover offer? Can an offer be made subject to the satisfaction of pre-conditions (and, if so, are there any restrictions on the content of these pre-conditions)? Mandatory Tender Offer (MTO)

In most cases, no conditions are applied for an MTO resulting from a change of control. This is because all minority shares are eligible to be offered for purchase by the new controller. The types of conditions to which a takeover offer may be subject generally concern regulatory requirements, depending on the line of business of the target (for example, prior approval from the Financial Services Authority (OJK) is required for an MTO over minority shares in a public commercial bank).

Voluntary Tender Offer (VTO)

For a VTO, which is typically conducted for the purpose of de-listing/going private, conditions include:

• The approval of a general meeting of the shareholders (GM) (simple majority vote, with the GM attended by more than 50% of shareholders with voting rights), (in accordance with the IDX de-listing rule).
• A statement of no objection from the OJK regarding the VTO disclosure of information submitted by the acquiring investor to the OJK (OJK Regulation No. IX.F.1).

De-listing/going private

In the most recent cases of public companies going private, the OJK has also required:

• The approval of independent shareholders (simple majority vote, with the GM attended by more than 75% of independent shareholders with voting rights).
• That the VTO be opened to all shares in the public company (regardless of whether they are founding shares or public shares).

The de-listing/going private transaction will only be effective once all of the requirements are fulfilled and the total number of the company's shareholders is fewer than 50. It is expected that all public shareholders will sell their shares in the VTO during the one-month tender offer period at the price offered by the prospective buyer.

In general, the price for the tender offer must be higher than the average of the highest daily trading price on the stock exchange for the 90 calendar days prior to the tender offer announcement. Once the tender offer process is concluded and the result is that the total number of shareholders has fallen below 50, the company can proceed to change its status to a private company.

However, if the target of having fewer than 50 shareholders is not achieved, the company cannot proceed to go private and the VTO process may need to be repeated (subject to the ruling of the OJK). This may involve an increase in the offering price. This can be a difficult process and may come down to chasing individual shareholders to participate in the VTO process.

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