A Look at Recent Changes to the Mandatory Offer Communiqué

Introduction

The Capital Markets Board effected changes to Communiqué No II-26.1 on Mandatory Offer Requirements (the “Mandatory Offer Communiqué”) on 5 June 2018 to introduce new exemptions to mandatory offer requirements in connection with bank enforcement and transfers to satisfy statutory eligibility criteria for shareholders.

In broad terms, a mandatory offer is a statutory obligation on a person (or persons acting in concert) who acquire management control of a public company to make comparable offers to buy out remaining shareholders. From the investors’ perspective, a mandatory offer provides non-controlling shareholders a path to liquidity and exit following a change in management control.

Bank enforcement exemption

The Capital Markets Law provides secured parties the option of taking ownership of pledged capital markets instruments on enforcement of security.

According to new paragraph (e) of Article 18 of the Mandatory Offer Communiqué, banks will not be required to make a mandatory offer if management control is being acquired as a result of a bank taking ownership of pledged shares on enforcement of security in connection with defaulting bank loans.

Furthermore, banks will also have the ability to transfer shares they have acquired on this basis to a special purpose vehicle (as defined for the purposes of Turkish Accounting Standards) they have established as well as the ability to sell such shares to third parties either directly or through such special purpose vehicle, in each case, without being required to make mandatory offers.

A key point to note is that the amendments to the Mandatory Offer Communiqué introduce a definition for the term bank as “banks defined under the Banking Law No 5411” – which should be understood to mean domestic banks and domestic branches of foreign banks. Accordingly, it appears the exemption is only intended to apply in cases where both the outstanding loans and the associated security are held by domestic banks and further regulatory guidance will be needed to clarify the extent to which syndicated arrangements would be eligible to benefit from the new exemption.

Eligibility criteria exemption

According to new paragraph (f) of Article 18 of the Mandatory Offer Communiqué, a mandatory offer will not be required if a change in management control is being effected to satisfy a statutory eligibility criteria as to the identity of shareholders, such as in the case of certain regulated markets.

Authors:

Murat Soylu

Can Özilhan

Aykut Aydın