Under the Securities Law 2019, a proposed buyer (the Buyer) who wish to acquire 25% or more of total shares (the Sale Shares) of a public company (the Target) must comply with tender offer requirements (see here). However, based on the new potential exemption of tender offers  available at law, there may be a potential way of not having to follow the tender offer procedures by merging the buyer and the seller’s relevant entities of as follows:

• Step 1: The selling shareholder (the Seller) sets up a special purpose company for this sale transaction (the SPV1) by way of contributing all the Sale Shares into the SPV1. This step does not trigger a tender offer requirement since it is an intra-group transfer of the Sale Shares.

• Step 2: The Buyer sets up another special purpose company for this transaction (the SPV2) by way of contributing to the SPV2 an amount of cash equivalent to purchase price of Sale Shares; and

• Step 3: The Buyer and the Seller merges SPV1 into SPV2 so that the Sale Share will be owned by SPV2 and the purchase price will be owned by the Seller. This can be done via a cash-out merger. If a cash-out merger cannot be implemented, then the SPV2 may use the cash contributed by the Buyer to buy-back the shares in SPV2 from Seller or may conduct a de-merger to spin-off the cash portion to a new entity owned by Seller. This Step 3 does not trigger a tender offer requirement since SPV2 owns the Sale Shares through a merger which is exempted under the Securities Law 2019.

 We summarize the above step in the following chart:

This post is written by Le Minh Thuy and Nguyen Quang Vu.