Bapepam issues ruling on hostile takeover

JAKARTA (JP): The Capital Market Supervisory Agency (Bapepam) finally issued a long-awaited ruling yesterday which is designed to prevent the takeover of listed companies.

Bacelius Ruru, the chairman of the capital market watchdog, said that under the new ruling, which became effective immediately, the purchase of 20 percent or more of the shares in a listed company must be publicly tendered.

Bapepam's plan to introduce the tender offer requirement code was unveiled a week after the controversial purchase of a majority shareholding in the publicly-listed Bank Papan Sejahtera by businessman Joppie Widjaya in early June.

However, Ruru denied yesterday that the ruling had been issued in response to the June takeover, saying that the new provision had been in the works for a long time.

The public tender offer requirement extends to transactions which result in an increase in the holding of an existing shareholder to 20 percent or more.

Under the new ruling, the tender offer must be announced in at least two widely-circulated newspapers and be submitted to Bapepam for an approval.

The target company, its affiliates or those simultaneously making a similar bid are allowed to oppose the tender offer by issuing a written statement to the first bidder, a copy of which must also be sent to Bapepam.

"If the management or the supervisory board of the target company feel that the information published by the bidder is misleading, they are also allowed to announce their objections in newspapers up to 15 days before the end of the bidding period," Ruru said.

Higher

He said the bidding price must be higher than the price of the shares within 90 days before the tender offer is announced or, alternatively, be higher than that offered by the first bidder.

He said that if the purchase of a company's shares results in a decrease in the number of shareholders to below the exchange's mandated minimum number of 200, the target company shall be delisted or "sent private".

"If that happens, the bidder must buy all the shares held by the investing public under the same price arrangement," he said, adding that if the takeover is made under a stock-swap arrangement, the investing public must be given two alternatives: to receive shares or cash.

Another significant provision in the ruling prohibits a bidding party from leaking their bidding plan to any parties within 15 days before the tender offer is formally announced to the public, a rule designed to prevent insider trading.

In addition, the bidder must prove that it has adequate funds to carry out the purchase, Ruru said, adding that the bidder is not allowed to withdraw its bid once the offer has been disclosed to the public.

Asked why the tender offer requirement applies only to the purchase of 20 percent of shares or more, given the fact that in many listed companies a controlling stake could be reached at a much lower level, Ruru said that the ceiling is based on a ruling of the Minister of Finance which defines a majority shareholder as one owning 20 percent of a listed company's shares and a controlling shareholder as one owning 25 percent or more.

In certain listed companies such as Astra International, the largest shareholder owns only approximately 10 percent of the total shares, due to a wide distribution of shares.

"In such a case, we have to abide by the Minister of Finance's ruling," he said.

Regarding the takeover of at least 20 percent of shares of listed company by its affiliated firms, Ruru said that such a transaction is not covered by the newly-issued tender offer ruling.

"The ruling is aimed only at an independent buyer," he said, adding that the purchase of shares by affiliated firms is regulated under a different ruling which regulates share transactions by parties in respect of which there is a conflict of interest.

The sale of shares among affiliated shareholders requires the approval of at least 55 percent of independent shareholders. (hen)