Takeovers Panel rules a special waiver from the general offer obligation ......

Takeovers Panel rules a special waiver from the general offer obligation may be granted to Broad Gongga for an involuntary disposal that leads to a change in concert group leader

The Takeovers and Mergers Panel has ruled that a special waiver from the general offer obligation under the Takeovers Code (Note 1) may be granted to Broad Gongga Investment Pte. Ltd. as a result of foreclosure sales by third-party creditors of Jinke Property Group Company Limited of its interest in Jinke Smart Services Group Co. Ltd. which would lead to Broad Gongga holding more Jinke Smart Services shares than Jinke Property (ie, a seller-forced disposal).

Both Broad Gongga and Jinke Property are shareholders of Jinke Smart Services and are considered as acting in concert. In the event of a seller-forced disposal, Broad Gongga would become the new leader of the concert group, thereby triggering a general offer obligation for the shares of Jinke Smart Services under the Takeovers Code.

The Panel considered the special circumstances surrounding the seller-forced disposal, including that Broad Gongga would have no control over the process, and decided that a special waiver from the general offer obligation would, in principle, be appropriate.

Nevertheless, as the seller-forced disposal has yet to occur, the Panel does not consider it appropriate to grant any waivers at this time. Broad Gongga should apply for the special waiver as and when a seller-forced disposal occurs or is imminent, and the Takeovers Executive (Note 2) should consider the application in accordance with the principles decided by the Panel.

Broad Gongga consulted the Takeovers Executive on whether a mandatory general offer obligation would be triggered by a seller-forced disposal. While the Takeovers Executive would not normally consider hypothetical questions, the matter was referred to the Panel as there were particularly novel, important or difficult points at issue. The Panel met on 25 July 2022 to consider the referral.

A copy of the Panel’s decision can be found in the “Takeovers and Mergers Panel and Takeovers Appeal Committee decisions and statements” section of the Securities and Futures Commission’s (SFC) website.

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Notes:

1. Note 1 to Rule 26.1 of the Takeovers Code provides that there may be “circumstances where there are changes in the make-up of a group acting in concert that effectively result in a new group being formed or the balance of the group being changed significantly. This may occur, for example, as a result of the sale of all or a substantial part of his shareholding by one member of a concert party group to other existing members or to another person.”

2. This refers to the Executive Director of the SFC’s Corporate Finance Division or its delegate.