The Capital Market Board of Turkey (hereinafter referred to as the "CMB") has issued a new Communiqué.  The terms and provisions of the new Communiqué  No: 44, Serial No: IV that has been published in the Official Gazette No: 27337 dated September 2, 2009 (hereinafter referred to as "the Communiqué"), govern and regulate the terms for the acquisition of the shares of a publicly held company by making a call to the shareholders (either voluntary or mandatory) and in case of a mandatory call, the conditions for the obligation for the person(s) acquiring shares exceeding certain ratios, to make a call to the other shareholders to purchase the remaining shares.

The Communiqué defines the concept of "call" as a proposal, either mandatory or voluntary, made to the shareholders of a publicly held company to acquire their respective shares in the company.  Therefore, public calls are analyzed under two categories: (i) Mandatory and (ii) voluntary.

 

 

I. MANDATORY CALL

A. IN GENERAL

To begin with, in a nutshell, under the terms of the Communiqué, a public call to the other shareholders of a publicly held company is mandatory under the following circumstances:

1.     In case of the acquisition of 50% or more of the share capital or voting rights of the publicly held company, either directly or indirectly and either individually or by group of people acting in concert, OR

2.     Irrespective of the percentage of the share capital or voting rights acquired, in case of the acquisition of privileged shares granting the right to appoint the absolute majority of the board of directors of the company or granting the right to nominate the absolute majority of the board of directors at the general assembly of shareholders.

The abovementioned circumstances are defined as a "change of control of management".  In case of a change of control of management due to an indirect ownership of shares, the relevant criterion to determine whether there is a change of control is to establish that there has been a change of control of management at the level of majority/controlling shareholder of the publicly held company or at the level of entities controlling the majority/controlling shareholder of the publicly held company.  Irrespective of the number or percentage of indirectly acquired shares, if the acquirer or transferee obtains the ability to appoint the absolute majority of the board of directors of the publicly held company, it is deemed as a conclusive presumption of change of control of management of the company.

Under Article 6 of the Communiqué, the obligation for a mandatory public call arises when the shares granting management control is acquired either directly or indirectly and either individually or by group of people acting in concert, through a voluntary partial public call (explained below), block or individual acquisition or by way of any other method.

There are certain general principles with respect to the public calls under the terms of the Communiqué such as:  The shares belonging to the same group should be treated equally, i.e. in case the management control is obtained due to the acquisition of a particular group of shares, the call must be made protecting the rights of all shareholders belonging to the same group or any other groups.

Notwithstanding the explanations mentioned above, for the mandatory call obligation to be triggered, as per Article 6(2), under the following cases, the obligation to make a call is deemed not to have arisen (which is different than the concept of exemption from a call, explained below):

Article 6(2) of the Communiqué:

a)     In the event that the acquisition of the management control takes place as a result of a voluntary public call causing the acquisition of all of the shares held by all of the shareholders of the publicly held company,

b)     In the event that the management control is shared equally (i.e, each party having the same number of directors) with the person or persons who had the control of the management prior to the acquisition;

c)     The acquisition of 50% or more of the share capital or voting rights of the publicly held company by a shareholder or the persons acting in concert with such shareholder, if such shareholder had been previously asserting management control by way of holding privileged shares;

d)     In the event that the shareholder holding management control re-acquires 50% or more of the share capital or the voting rights following the decrease of such shareholding below 50% but prior to the management control is transferred to any third party;

e)     if the shares and the voting rights giving management control of the company are acquired by the transfer of shares within the group controlled by the same real person or the legal entity.

The shareholders responding to the call shall deliver their shares to an intermediary institution within the scope of the information form annexed to the Communiqué and in line with the general provisions.  It should be noted that all kinds of announcements and advertisements within the scope of the public call are subject to the prior approval of the CMB.  Information which is not mentioned in the information form shall not be disclosed in any of the announcements and advertisements.  CMB has the right to amend disclosure information and such disclosure shall not be published before the relevant amendments are made.

B. RELEVANT PERIOD AND DEADLINES

It is obligatory to apply to the CMB within 6 business days following the acquisition of the shares and voting rights granting the management control of the publicly held company, together with the information and documents included in Annex 1 of this Communiqué (the Information Form).

Furthermore, as explained below, any application for exemption should be made to the CMB within 6 business days following the date on which the obligation to make a public call is triggered.

It is obligatory to implement the procedures for the public call in order to purchase the shares held by other shareholders of the company within 45 business days following the date of occurrence of the public call obligation.

The actual duration period of the call should be between 10 business days and 20 business days.

The actual duration period of the call shall start at the latest within 6 business days following the approval of the information form by the CMB.

C. PRICE

The price to be paid for each share in the call can be in the form of cash in Turkish Lira or securities or partially cash and partially in the form of securities.  The call price should be in the form of cash if such is requested by the relevant shareholder. Should the call price   be, entirely or partially, in the form of securities, the securities should be listed on the stock exchange. The unit price or exchange ratio for the securities and the method used in determination of such price or exchange ratio should be disclosed in the information form.

The price for the mandatory call shall be determined as follows:

1) In case of mandatory call obligation arising due to the direct acquisition of the shares of the publicly held company, the price to be offered to the shareholders should be at least equal to the highest price paid for the shares of the same group of shares by persons making a call within a period of 6 month preceding the date that the call requirement has arisen.  Any event causing an increase in the price to be calculated due to the mechanisms for the price adjustments, the additional bonus payments or similar elements shall be considered in the calculation of the call price.

2) In the event of an indirect change in the management control of the publicly held company, the call price shall be at least equal to the highest of the following amounts:

a) price which will be determined as a result of the evaluation report which will be prepared by an institution to be determined by the CMB, by taking into consideration the price paid for the shares of the majority / controlling shareholder,

b) the highest price paid by persons making a call or by the persons acting in concert with the persons making the call, when acquiring the shares of the publicly held company subject to the call within a period of 6 months preceding the date, if any, of the public disclosure of the execution of the share purchase agreement with respect to the majority / controlling shareholder.

c) in the event that the shares subject to the call are traded on the stock exchange, the stock market price average of the daily stock exchange within a period of 6 months preceding the date of the public disclosure of the execution of the share purchase agreement with respect to the majority / controlling shareholder.

3) In the event that there is more than one group of shares subject to the call, the call price to be paid for the shares belonging to the groups which are not subject to the share transfer causing the call shall be:

a) price to be determined by the evaluation report prepared by an institution to be determined by the CMB taking into consideration the difference in the privileges accorded to different groups,

b) the highest price paid by persons making the call or by the persons acting in concert with the persons making the call, when acquiring the shares that do not belong to the group subject to the share transfer causing the call, within a period of 6 months preceding the date, if any, of the public disclosure of the execution of the share purchase agreement with respect to the majority / controlling shareholder.

c) in the event that the shares that do not belong to the group subject to the share transfer causing the call, are traded on the stock exchange, the stock market price average of the daily stock exchange within a period of 6 months preceding the date of the public disclosure of the execution of the share purchase agreement with respect to the majority / controlling shareholder.

If the call price can not be determined as per the methods indicated above, the CMB shall request a valuation report in order to determine the call price.

Please note that as per Article 9 of the Communiqué, in the event during the period between the announcement of the call and the expiration of the call period, the shares subject to the call are acquired by persons making call or by the persons acting in concert with the persons making the call at a price higher than the announced call price, then the call price shall be re-determined making sure that the new call price shall be at least equal to the highest price paid during such period.

Issues with Respect to Exchange Rate and Interest:

In case when the price of transaction subject to the call is determined by Turkish Lira and if the procedures for the call have not been implemented within 45 business days as of the date of occurrence of the call obligation, an amount of interest which will be calculated by adding 30% to the weekly TRLIBOR rate announced by Turkish Bank Association shall be added to the call price for each day of delay.

In the event that the call price is in a foreign currency, the call price shall be the highest of the buying exchange rate announced by Turkish Central Bank at the date of the transfer of shares and the buying exchange rate announced by Turkish Central Bank on the day before the date of commencement of the call period.  In case of delay, an amount of interest which will be calculated by adding 30% to the weekly EURIBOR for Euro amounts and LIBOR for USD amounts shall be added to the call price for each day of delay.

D. EXEMPTIONS

Under the following cases, the CMB in its sole discretion may, grant an exemption to the shareholder who is obliged to make a public call as per the explanations above (hereinafter referred to as the "Purchaser"), from the public call obligation:

Article 11 of the Communiqué

a)     If the acquisition of the shares or the voting rights of the publicly held company takes place as a result of a change in the capital structure which is required for the strengthening of the financial structure of the company experiencing financial difficulties; in this case CMB may require the injection of new funds, or may require that this need for change in the capital structure to be evidenced by an independent institution's report;

b)     If the Purchaser divests or undertakes to divest the portion of the shares causing a mandatory call obligation, within a period of time determined by the CMB. This exemption application requires that there shall be no change in the board of directors of the publicly held company during the period accorded by the CMB until the time of the divestiture.

c)     If the change of control of management in the majority /controlling shareholder does not aim a change of control of management in the publicly held company. The CMB would take into consideration whether the majority/controlling shareholder's holding in the publicly held company amounts to less than 10% of the total assets on the latest balance sheet of such shareholder, whether the publicly held company has a significant position within the commercial activity volume of the shareholder and other grounds.

d)     The purchase of shares held by the public administration in companies under privatization.

Please note that the application for exemption should be made to the CMB within 6 days following the date on which the obligation to make a public call has arisen. In the event that CMB decides that appropriate conditions have arisen, then Purchaser shall be exempted from the mandatory call obligation.

Please also note that in the event that the exemption application is not approved by the CMB, 45 business days of actual public call period mentioned above shall be applied as 30 business days starting from the rejection decision of the CMB.

In case of a rejection of the exemption application, the Purchaser shall be required to apply to CMB for the public call within 6 business days starting from the rejection decision of the CMB.

 

II. VOLUNTARY CALL

The shareholders of a publicly held company or third persons not holding shares of the company are entitled to make a call to the shareholders for the acquisition of the whole or a portion of the share capital of the company.  This is defined as a "voluntary call".  Where the voluntary call is made for a portion of the share capital for the certain shares and where the amount of the shares of the shareholders accepting the offer exceed the amount of the shares offered to be acquired, the call shall be concluded in accordance with proportional distribution method to avoid any inequality between shareholders.

The purchasers willing to participate in a voluntary call will be entitled to refrain from acquiring the shares and abandon the voluntary call until the actual initiation of the call period.  The actual initiation shall start within 6 business days starting from the decision of the CMB and the period for acquisition shall be between 10 and 20 business days.

 

III. INFORMATION FORM

The Information Form which is an annex to the Communiqué must be filled in to make an application to the CMB for a public call. The content of the form is set forth in Section VIII below.

Information Form is signed by company officials who are subject to the call, real persons and/or legal entities who make the call and the intermediary institution officials.  However, in voluntary calls company officials who are subject to call are not obliged to sign the Information Form.  In this case the signatures of real persons and/or legal entities that make the call and the intermediary institution's officials are sufficient.

Following the approval by the CMB, the Information Form shall be announced in at least two newspapers that are distributed throughout Turkey.  For the company's shares which are listed, the Information Form is also sent to stock exchange for the announcement. Additionally in mandatory calls, the information form is published on the web page of the company and the intermediary financial institution.  Newspapers where the call is announced shall be sent to CMB within 6 business days following the first announcement date. 

IV. BROKERAGE AGREEMENT

A brokerage agreement must be executed between the Purchaser and the bank or intermediary institution, which will carry out the public call formalities. A copy of the Brokerage Agreement must be enclosed with the application to the CMB.  The CMB may grant an exemption from the brokerage agreement if the subject matter shares are not listed on the stock exchange. 

The Brokerage Agreement shall include the following:

• Number and nominal value of the share which will be acquired through the public call, whether they are registered or bearer shares, whether they are privileged shares and if they are, the privilege group and nature of the privilege;

• The commencement and termination dates of the actual call;

• Purchase price or securities to be paid for each share;

• The fees, commissions and other benefits payable to the bank or intermediary institution;

• The amount of funds to be deposited by the Purchaser to the bank or intermediary institution, information regarding the procedures to be followed in case such amount is not sufficient and the responsibilities of the bank or intermediary institution;

• The party who will be responsible for the announcements and advertisements to be made and the information to be submitted to the CMB;

• Sufficient information relating to the parties, date of execution and authorized signatories.

 

V) PROCEDURAL REQUIREMENTS

The procedures with respect to initiating a public call shall be as follows:

Application to the CMB

The "Brokerage Agreement"

The "Information Form"

Other Requirements by the CMB

Although not mentioned in the Communiqué, in practice the CMB also requires the following:

1.   Approval of the Competition Board in respect of the acquisition

(Under the relevant legislation, approval of the Competition Board is required in respect of the mergers and acquisitions which are above certain thresholds. However, in practice the CMB may require such approval even if the acquisition is far below such thresholds.)

2.   The declaration by the shareholder(s) transferring their shares to the Purchaser before the call (in the form of a Board Resolution where such shareholder is legal entity, and in the form of a written declaration in case such shareholder is a real person) to the effect that they will not respond to the public call.

3.   Articles of Association of the parties as currently in effect

4.   Independent auditor report regarding the financial statements of the company covering the relevant fiscal period

5.   Signature Circulars of the company and the bank or intermediary institution which ill conduct the public call

6.   Information regarding the activities of the Purchaser, and the financial statements of the Purchaser covering the previous year

7.   Information regarding the capital structure and shareholders of the purchaser making the public call

8.   Bank receipts evidencing the payment of the purchase price for the acquired shares.

Steps following the Application to the CMB

Steps of the public call following the application to the CMB are briefly as follows:

• Following the approval by the CMB of the Information Form to be announced, the public call and the Information Form are announced in at least two newspapers that are distributed throughout Turkey. It should be reiterated that all kinds of announcements and advertisements within the scope of the public call are subject to the prior approval of the CMB.

• Within latest one week following the termination of the public call period, the latest capital and management structure of the publicly held company must be reported to the CMB, and in case the shares are traded at the Stock Exchange, to the Stock Exchange.

 

VI) REPORTING REQUIREMENTS

The publicly held companies are subject to certain reporting and announcement requirements under the terms of the "Communiqué on Disclosure Requirements" (Serial VIII, No 54) issued by the CMB.

Under Article 17 of the Communiqué, any decision of making a public call, occurrence of a mandatory public call, whether an application for exemption will be made, if any, the grounds for such an application for exemption by referring to the specific provision of the Communiqué, any actual application for exemption and the result of such an application, the results of the evaluation reports, any acquisition of the shares of the publicly held company during the call period, the result of the public call together with the number of the shares acquired and the number of shareholders responding to the call, the shareholding and management structure of the publicly held company following the completion of the public call and if any, any withdrawal of a voluntary call should be disclosed to the public in accordance with the provisions of the Communiqué on Disclosure Requirements Serial VIII, No 54.

VII) OTHER ISSUES

Competition Board Approval

On occasions where the proposed acquisition gives rise to the risk of prevention of competition as described under the Law No: 4054 regarding the Protection of Competition, an application has to be made to the Competition Board for obtaining the prior approval of the Competition Board for the acquisition. The application to the Competition Board is compulsory where the market share of the parties exceed 25% of the relevant market as a result of the transaction, or if the total turnover of the parties exceed TL25 million.  As mentioned in Section (III) above, however, where a public call application is concerned, the CMB may require the approval of the Competition Board even if the amounts involved are below these limits.

Other Approvals

Depending on the type of the company, there may be other approvals needed, such as approval of the Banking Regulatory and Supervisory Authority, if it is a bank or an approval from the Capital Markets Board, if it is a brokerage house.

VIII) INFORMATION FORM

1.     Information regarding to the company subject to the call,

2.     Information regarding the real person/legal entity that make the call,

3.     Information regarding the acquisition that causes the call/reason for the voluntary call,

4.     Information regarding the shares that are subject to call,

5.     Information regarding the call price,

6.     Information regarding the founds that will be used for purchasing the shares,

7.     Information regarding the legal transactions that will be done when acquiring the   management of the company,

8.     Information regarding the Bank

9.     Steps and Procedures of the call,

10. Commencement and termination dates of the call,

11. Opinions of other public authorities,

12. Other issues.

 

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