Q&A: completing public M&A transactions in Thailand

Completing the transaction

What are the special considerations for unsolicited transactions for public companies?

Unsolicited transactions for public companies are very rare in Thailand. This is because most public companies have control or a substantial shareholding vested in a family or group of shareholders, or government authorities, who will need to agree the terms for the transaction to be successful. Thus, a tender offer without a price being negotiated with the major or controlling shareholders in advance is likely to fail. In addition, there is no minority squeeze-out mechanism in Thailand.

A hostile acquisition could, in theory, be structured as a mandatory tender offer. If the acquirer obtains 25 per cent, 50 per cent or 75 per cent or more of the total voting rights of the target company, the acquirer will be required to make a mandatory offer for all the securities of the target company. Alternatively, the acquirer can make a voluntary tender offer for all shares of the target company.

Which types of break-up and reverse break-up fees are allowed? What are the limitations on a public company’s ability to protect deals from third-party bidders?

Break-up fees, although permitted under Thai law, are not as common as other deal protection mechanisms, such as non-refundable deposits or exclusivity undertakings. These techniques are typically used to protect the bidder rather than the target company, as the target company is already protected under the tender offer rules via the bidder’s limited rights to cancel the tender offer.

In addition, Thai courts award damages only if the actual damage suffered by the non-breaching party as a result of a breach can be proved to the satisfaction of the court. The court may, at its discretion, adjust the amount of the break-up fee agreed by the parties if such a fee is deemed to be disproportionately high.

On the other hand, a non-refundable deposit is not considered a stipulated penalty; therefore, the court is not empowered to adjust the amount of the non-refundable deposit, despite its disproportionately high amount. However, if the non-breaching party makes a claim for further damages, the non-refundable deposit retained by the non-breaching party will be taken into account when considering the damages award.

Other protection mechanisms include an exclusivity arrangement between the acquirer and the major shareholder of the target or the seller, and a lock-up agreement requiring major shareholders to tender their shares to the acquirer.

Other than through relevant competition regulations, or in specific industries in which business combinations or acquisitions are regulated, may government agencies influence or restrict the completion of such transactions, including for reasons of national security?

No.

What conditions to a tender offer, exchange offer, merger, plan or scheme of arrangement or other form of business combination are allowed? In a cash transaction, may the financing be conditional? Can the commencement of a tender offer or exchange offer for a public company be subject to conditions?

A conditional tender offer is allowed only in the case of a voluntary tender offer, whereby the acquirer may commence the process of a tender offer once all conditions precedent specified by the acquirer are fulfilled, provided that these conditions are announced to the public at the earliest opportunity; for example, if an approval from a regulatory authority or the shareholders of the acquirer or financing for the tender offer must be obtained before conducting the tender offer.

In any tender offer scenario, the offeror may cancel the offer if an event or action occurs after the offer document has been filed with the Securities and Exchange Commission of Thailand (SEC) but during the offer period that causes or may cause serious damage to the target’s business, and the act or event does not result from an action of the offeror or an act for which it is responsible. In addition, a voluntary tender offeror may cancel the tender offer if, upon the c of the closure of a specified offer period, the number of shares tendered is lower than the number of shares specified as a condition for the tender offer. The offeror must clearly specify the conditions and the cancellation events in the tender offer document.

If a buyer needs to obtain financing for a transaction involving a public company, how is this dealt with in the transaction documents? What are the typical obligations of the seller to assist in the buyer’s financing?

The acquisition financing obtained through capital is not always detailed in the transaction documents unless the financing materially affects the certainty of the transaction. In such cases, it is customary to stipulate the successful acquisition of financing – typically the bank’s approval of the loan – as one of the condition precedents or undertakings in the transactional agreement, depending on the dynamics of the transaction.

There is no particular requirement with respect to financing for buyers, except for the tender offer rules that require the offeror to provide the SEC with the information and evidence in relation to sources of funds used by the offeror for the takeover. A seller’s obligation to assist in the buyer’s financing is not typical.

May minority stockholders of a public company be squeezed out? If so, what steps must be taken and what is the time frame for the process?

There is no minority squeeze-out mechanism under Thai law.

Other than as set forth in the competition laws, what are the relevant waiting or notification periods for completing business combinations or acquisitions involving public companies?

There are no requirements for waiting periods for completing business transactions.

Notification may be required according to the licences or contracts of the target company.