Tender Offers

Report prepared by: Diaz de Rivera, Jon Vincent

Advanced Securities Regulation 1st Term A.Y. 2014-2015

Definitions [SRC Rule 19 (1)]

Bidder means any person who makes a tender offer or on whose behalf a tender offer is
made.
Security holders mean holders of record and beneficial owners of securities that are the
subject of a tender offer.
Target company means any issuer of securities that are sought by the bidder pursuant to
tender offer.
Tender Offer means a publicly announced intention by a person acting alone or in
concert with other persons to acquire equity securities of a public company as defined in
SRC Rule 3.

Security
Holders

Bidder

Tendering
Shareholders

Security
Holders
B
Target Company

Mandatory Tender Offers

Who is/are required to make tender offers?

SRC Rule 19 (2) (A)

Any person or group of persons acting in concert who intends to acquire thirty five
percent (35%) or more of equity shares in a public company shall disclose such intention
and contemporaneously make a tender offer for the percent sought to all holders of such
class, subject to paragraph (9)(E) of this Rule.
In the event that the tender offer is oversubscribed, the aggregate amount of securities to
be acquired at the close of such tender offer shall be proportionately distributed across
both selling shareholder with whom the acquirer may have been in private negotiations
and minority shareholders.

SRC Rule 19 (2) (A)

Any person or group of persons acting in concert who intends to acquire thirty five
percent (35%) or more of equity shares in a public company shall disclose such intention
and contemporaneously make a tender offer for the percent sought to all holders of such
class, subject to paragraph (9)(E) of this Rule.
In the event that the tender offer is oversubscribed, the aggregate amount of securities to
be acquired at the close of such tender offer shall be proportionately distributed across
both selling shareholder with whom the acquirer may have been in private negotiations
and minority shareholders.

SRC Rule 19 (2) (B)

Any person or group of persons acting in concert, who intends to acquire thirty five
percent (35%) or more equity shares in a public company in one or more transactions
within a period of twelve (12) months, shall be required to make a tender offer to all
holders of such class for the number of shares so acquired within the said period.

SRC Rule 19 (2) (B)

Any person or group of persons acting in concert, who intends to acquire thirty five
percent (35%) or more equity shares in a public company in one or more transactions
within a period of twelve (12) months, shall be required to make a tender offer to all
holders of such class for the number of shares so acquired within the said period.

SRC Rule 19 (2) (C)

If any acquisition of even less than thirty five percent (35%) would result in ownership of
over fifty one percent (51%) of the total outstanding equity securities of a public company,
the acquirer shall be required to make a tender offer under this Rule for all the outstanding
equity securities to all remaining stockholders of the said company at a price supported
by a fairness opinion provided by an independent financial advisor or equivalent third
party. The acquirer in such tender offer shall be required to accept any and all securities
thus tendered.

SRC Rule 19 (2) (C)

If any acquisition of even less than thirty five percent (35%) would result in ownership of
over fifty one percent (51%) of the total outstanding equity securities of a public company,
the acquirer shall be required to make a tender offer under this Rule for all the outstanding
equity securities to all remaining stockholders of the said company at a price supported
by a fairness opinion provided by an independent financial advisor or equivalent third
party. The acquirer in such tender offer shall be required to accept any and all securities
thus tendered.

SUMMARY:
Who is/are required to make tender offers?

Any person or group of persons acting in concert who intends to acquire thirty five
percent (35%) or more of equity shares in a public company.
Any person or group of persons acting in concert, who intends to acquire thirty five
percent (35%) or more equity shares in a public company in one or more transactions
within a period of twelve (12) months.

If any acquisition of even less than thirty five percent (35%) would result in ownership of
over fifty one percent (51%) of the total outstanding equity securities of a public company.

Does the rule on mandatory tender

offer applies to indirect acquisition
of shares in a listed company?
CEMCO Holdings vs. National Life Insurance, G.R. No. 171815, August 7, 2007

Union
Cement
Holdings
Inc.
(UCHC)
60.51%

Bacnotan Consolidated
Industries, Inc.
(BCI)
21.31%
Atlas Cement Corporation
(ACC) (Subsidiary of BCI)
29.69%
Cemco

Cemco
Holdings,
Inc.
(Cemco)
17.03%
Union Cement Corporation
(UCC)
Publicly-Listed Company

9%

Union
Cement
Holdings
Inc.
(UCHC)

Bacnotan Consolidated
Industries, Inc.
(BCI)

60.51%

51%
Cemco
9%

Cemco
Holdings,
Inc.
(Cemco)
17.03%
Union Cement Corporation
(UCC)
Publicly-Listed Company

Union
Cement
Holdings
Inc.
(UCHC)

Bacnotan Consolidated
Industries, Inc.
(BCI)

60.51%

51%
Cemco
9%

Cemco
Holdings,
Inc.
(Cemco)
17.03%
Union Cement Corporation
(UCC)
Publicly-Listed Company

Union
Cement
Holdings
Inc.
(UCHC)
60.51%
Cemco
Holdings,
Inc.
(Cemco)
17.03%
Union Cement Corporation
(UCC)
Publicly-Listed Company

Cemco
60%

Particulars

Percentage

Existing Shares of Cemco in UCHC

9%

Acquisition by Cemco of BCIs and

ACCs shares in UCHC

51%

Total stocks of Cemco in UCHC

60%

Percentage of UCHC ownership in UCC

60%

Indirect ownership of Cemco in UCC

36%

Direct ownership of Cemco in UCC

17%

Total Ownership of Cemco in UCC

53%

Supreme Court Ruling:

The Coverage of the mandatory tender offer rule covers not only direct acquisition but
also indirect acquisition or any type of acquisition.
The legislative intent of Section 19 of the Code is to regulate activities relating to
acquisition of control of the listed company and for the purpose of protecting the minority
stockholders of a listed corporation.

Exemptions from Mandatory

Tender Offer
Who is/are exempted from making tender offers?

SRC Rule 19 (3) (A)

Any purchase of shares from the unissued capital stock provided that the acquisition will
not result to a fifty percent (50%) or more ownership of shares by the purchaser.

Any purchase of shares from an increase in authorized capital stock.

Purchase in connection with foreclosure proceedings involving a duly constituted pledge
or security arrangement where the acquisition is made by the debtor or creditor.
Purchases in connection with privatization undertaken by the government of the
Philippines.
Purchases in connection with corporate rehabilitation under court supervision.
Purchases through an open market at the prevailing market price.
Merger or consolidation.

Tender Offer by an Issuer / Buy Back

When can an issuer reacquire or repurchase its own shares of stock?
What should be disclosed in a summary publication of an issuer tender offers?
What are the limitations with regard to issuer tender offers?

Security
Holders
A

Issuer Tender Offer

Security
Holders
B

Target Company
Issuer

Requirements for Buy Back

The issuer has unrestricted retained earnings in its books to cover the amount of shares to
be purchased.
It is pursuant to any of the following purposes:
To implement a stock option or stock purchase plan;
To meet the short-term obligations which can be settled by the re-issuance of the repurchased
shares;
To pay dissenting or withdrawing stockholders entitled to payment for their shares under the
Corporation Code;
Such other legitimate corporate purpose/s.

Publication
Contents of Publication [SRC Rule 19 (4) (C)]
The identity of the issuer or affiliate making the tender offer;

The amount and class of securities being sought and the price being offered;
The information required by paragraph 8 of this Rule;
A statement of the purpose of the issuer tender offer; and
The appropriate instruction for security holders on how to obtain promptly, at the expense of
the issuer or affiliate making the issuer tender offer, the information required by paragraph 7 of
this Rule.
It should be published in a newspaper of general circulation, prior to the commence of the offer.
PROVIDED, that such announcement shall not be made until the bidder has the resources to
implement the offer in full.

Limitations
Until the expiration of at least ten (10) business days after the date of termination of the issuer
tender offer, neither the issuer nor any affiliate shall make any repurchase, otherwise than
pursuant to the tender offer of: [SRC Rule 19 (D)]
Any security which is the subject of the issuer tender offer, or any security of the same class and series, or
any right to repurchase such securities; and

In the case of an issuer tender offer which is an exchange offer, any security being offered pursuant to
the exchange offer, or any security of the same class and series, or any right to repurchase any such
security.

The said rule shall not apply to: [SRC Rule 19 (E)]
Calls or redemption of any security in accordance with the terms and conditions of its governing
instruments;
Offers to repurchase securities evidenced by a certificate, order form or similar document which
represents a fractional interest in a share of stock or similar security.

Other Requirements
Filing Requirements
Disclosure Requirements
Dissemination Requirements

Filing Requirements
No bidder shall make a tender offer unless at least two (2) business days prior to the date of the
commencement of the tender offer, such bidder:
Files with the Commission copies of SEC Form 19-1, including all exhibits thereto, with the prescribed filing
fees; and
Hand delivers a copy of such SEC Form 19-1, including all exhibits thereto to the target company at its
principal executive office and to each Exchange where such class of the target companys securities
are listed for trading.

The bidder shall file with the Commission copies of any additional tender offer materials as
exhibit of SEC Form 19-1 and, if a material change occurs in the information set forth in such SEC
Form, copies of an amendment to such form. Copies of such additional tender offer materials
and amendments shall be hand delivered to the target company and to any Exchange as
required above.
The bidder shall report the results of the tender offer by filing with the Commission, not later than
ten (10) calendar days after the termination of the tender offer, copies of the final amendments
to SEC Form 19-1.

Disclosure Requirements

The bidder shall publish, send or give to security holders in the manner prescribed under paragraph 9 of this Rule, a report
containing the following information:
The identity of the bidder including his/its present occupation;
The identity of the target company;
The amount of class of securities being sought and the type and amount of consideration being offered therefore;
The scheduled expiration date of the tender offer, whether the tender offer maybe extended and, if so, the procedures for
extension of the tender offer;
The exact dates when security holders who deposit their securities will have the right to withdraw their securities pursuant to
this Rule and the manner in which shares will be accepted for payment and in which withdrawal may be effected;
If the tender offer is for less than all of the securities of the class and the bidder is not obligated to purchase all securities
tendered, the exact date of the period during which securities will be accepted on a pro rata basis under this Rule and the
present intention or plan of the bidder with respect to the tender offer in the event of an oversubscription by security holders;
The confirmation by the bidders financial adviser or another appropriate third party that resources available to the bidder
are sufficient to satisfy full acceptance of the offer; and
The information included in SEC Form 19-1

If any material change occurs in the information previously disclosed to security holders, the bidder shall disclose promptly such
change in the manner prescribed by this Rule.

Dissemination Requirements
A bidder or an issuer shall disseminate the tender offer by complying fully with one of the
following methods of dissemination:
Long Form Publication The bidder shall publish in two (2) newspapers of general circulation in
the Philippines on the date of commencement of the tender offer and for two (2) consecutive
days thereafter the information required by paragraph 7 (A) of this Rule; or
Summary Publication The bidder shall publish in two (2) newspapers of general circulation in the
Philippines on the date of commencement of the tender offer and for two (2) consecutive days
thereafter the information required by paragraph 7(a)(i) through (viii) of this Rule, including
appropriate instructions for security holders on how to obtain promptly, at the expense of the
bidder, the information included in SEC Form 19-1, and furnish promptly a copy of such form to
any security holder who requests a copy of such information.

Period and Manner of Making

Tender Offer
How can you make a tender offer?
How long does a tender offer remain open?
When can a shareholder withdraw its tendered shares?

Period and Manner of Making Tender Offer

The tender, unless withdrawn, shall remain open until the expiration of:
At least twenty (20) business days from its commencement; provided however, that an offer
should generally be completed within sixty (60) days from the date the intention to acquire is
publicly announced; or
At least ten (10) business days from the date the notice of a change in the percentage of the
class of securities being sought or in the consideration offered is first published, sent or given to
security holders.

Where a mandatory tender offer is required, the bidder is compelled to offer the highest
price paid by him for such shares during the past six (6) months. Where the offer involves
payment by transfer or allotment of securities, such securities must be valued on an
equitable basis.

Limitations on Target Company [SRC Rule 19 (9) C]

Limitations on Target Company (except, in case of buy backs) during the course of a tender offer, or before the
commencement thereof if its board has reason to believe that an offer might be imminent.
Issue any authorized but unissued shares;
Issue or grant option in respect to any unissued shares;
Create or issue, or permit the creation or issue of, any securities carrying rights of conversion into, or
subscription for, shares;
Sell, dispose of or acquire, or agree to acquire, any asset, the value of which amount to five percent (5%) or
more of the total value of assets prior to acquisition; or
Enter into contracts otherwise done in the ordinary course of business.

EXCEPTIONS: if such transaction is in pursuance of a contract entered into earlier, or with the approval of
shareholders in a general meeting or, where special circumstances exist, Commission approval has been
obtained.

Withdrawal of Securities Tendered [SRC Rule 19 (9) (D)]

The bidder in a tender offer shall permit securities tendered to be withdrawn:

At any time during the period such tender offer remains open; and
If not yet accepted for payment, after the expiration of sixty (60) business days from the
commencement of the tender offer.

Other Provisions
If the tender offer shall be for less than the total outstanding securities of a class but a
grater number of securities is tendered pursuant thereto, the bidder shall be bound to take
up and pay for the securities on a pro rata basis, disregarding fractions, according to the
number of securities tendered by each security holder during the period such offer
remains open.
In the event the bidder in a tender offer shall increase the consideration offered after the
tender offer has commenced, such bidder shall pay such increased consideration to all
security holders whose tendered securities are accepted for payment by such bidder,
where or not the securities were tendered prior to the variation of the tender offers terms.
The bidder in a tender offer shall either pay the consideration offered, or return the
tendered securities, not later than ten (10) business days after the termination or the
withdrawal of the tender offer.

Limitations on Buyer PRIOR to

Commencement of Tender Offer.

If a person shall become aware of a potential tender offer before the tender offer has
been publicly announced, such person shall not buy or sell, directly or indirectly , the
securities of the target company until the tender offer shall have been publicly
announced. Such buying or selling shall constitute insider trading under Section 27.4 of the
Code

Application
Acquisition by PLDT of Digitel Shares