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High costs for takeovers lurk

Economy

The takeover regulations of the new companies act could apply to offers involving private and shelf companies, while more litigation around the fair value of offers could also be seen, according to Werksmans attorneys.

Director at commercial specialists Werksmans, Shaun Teichner, cautioned on Wednesday that a new takeover section of the Act, which became effective in May, included a private company if the percentage of the issued securities of that company, that had been transferred other than between inter-related persons, exceeded 10% within 24 months before the date of the affected transactions.

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His concern is that the new rules will add additional burdens and the need for a separate exemption from the application of the raft of rulings that now apply to takeovers via the new Takeover Regulation Panel. The panel has been approached to see if there is any way to ease out these new onerous rules, but apparently they admit they are hamstrung by the wording of the Act.

Teichner, however, says lawyers will now need to structure transactions to ensure the 10% limit is not broken, until more clarity or simple exemptions can be achieved, or else will need to approach the regulator each time.

It is envisaged that SA could see more litigation relating to the fair value of offers in takeovers or mergers by disgruntled shareholders, similar to what occurs in the US. Teichner, who achieved his Master of Law at Harvard, says courts in the US have in some cases awarded premiums in the order of 400%, with costs of proceedings often as high as US$1 million. He does, however, not envisage these extremes applying in SA takeover cases at present. - I-Net Bridge

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