canadian takeover rules All non-exempt take-over bids must be subject to a mandatory tender condition that a minimum of more than 50% of all outstanding target securities owned or held by persons other than the bidder and its joint actors be tendered and not withdrawn before the bidder can take up any securities under the take-over bid. The purpose of this requirement is to ensure that the acquisition of control of a target through a take-over bid will occur only if a majority of independent shareholders support the transaction.
My understanding is that this prevents Delek from acquiring more than the 20% they currently own but doesn’t prevent a shareholder friendly to the bid buying shares in the open market to be deposited in the tender. Conversely, it doesn’t prevent a shareholder opposed to the bid price acquiring additional shares (subject to 20% limit) in order to apply leverage on Delek, e.g. force an improved offer.
Minimum tender threshold is irrevocable and subject to mandatory 10 day extension if achieved within (in this case) 35 days.
If the minimum threshold (50%) is reached Delek must pay the bid price. If this threshold is achieved on, say, day 35 then holdouts will have a further 10 days to deposit their shares. This means that any shareholder opposed to the current bid price can hold out at no risk beyond the 35 day limit.
If the bid price is raised during the 35 days there is a mandatory extension of 10 days for tenders to be deposited. All tenders deposited will receive the increased bid price.
In the RNS Delek state,’ There is no obligation to the Company to undertake any form of subsequent acquisition transaction to acquire the remaining shares of Ithaca.’ (This is the second stage amalgamation squeeze I refer to below.)
If Delek fail to secure two-thirds of the outstanding equity of Ithaca it prevents them from squeezing out the remaining one-third at the same price paid in the take-over bid.
In theory I believe the bid could fall into this ‘no man’s land’, 20% plus 40% (50% of 80%) plus managements 2.5% = 62.5%, but in practice Delek would probably raise the bid to ensure they reached the two-thirds. And yes, contrary to the RNS statement I believe they would then effect a second stage amalgamation squeeze to acquire all shares. If they achieve 90% in the initial offer they can effect a compulsory purchase. If Delek achieve their minimum tender offer, why wouldn’t they then seek to acquire the entire share capital of Ithaca?
This is my interpretation. I’m sure there are posters here who have experienced this process. If your interpretation differs please post a response.
I guess the offer document will clarify the process but I thought it might be helpful to assist investors looking to make a decision before the end of March.
This was my primary reference
londoner7