New rule on tender offer eyed

SHAREHOLDERS Association of the Philippines (SharePhil), a group advocating for investor protection, will ask the Philippine Stock Exchange to come up with a new rule that will ensure fair pricing on voluntary tender offers of companies.

SharePHIL president Francis Lim, former president of the PSE, said the new rules would address investor complaints on the pricing of tender offers made by companies that were not covered by the mandatory tender offer under Section 19 of the Securities Regulation Code (SRC).

Section 19 of the SRC requires any person or group intending to acquire at least 15 percent of any class of equity of a listed corporation with assets of at least P50 million and having 200 or more stockholders—or who intends to acquire at least 30 percent of such equity over a 12-month period—to make a tender offer to the rest of the shareholders.

The new framework to be proposed by SharePHIL will cover the hiring of the appraisal or valuation company and the framework for determining the fair pricing for the tender offer taken as a voluntary act, such as when an issuer is intending to delist from the bourse.

The proposal was an offshoot of complaints received by SharePHIL from minority shareholders on voluntary tender offers for the purpose of delisting by companies like Liberty Telecom Holdings Inc. and Splash Corp.

On the appraisal company, Lim said the issuer or tender offeror was the one hiring such entity. As such, he said minority shareholders were sometimes skeptical on how an entity whose fees were paid by the issuer could be impartial. When he was president of the PSE, Lim recalled that he required the accreditation of appraisal companies to ensure that they would not just be a rubber-stamp entity in issuing fairness opinion on pricing.

“But it appears that notwithstanding that, there are still some complaints,” Lim told reporters at the sidelines of SharePHIL’s meeting last Friday. “So SharePHIL is going to propose for the consideration of PSE that perhaps it’s the PSE that will hire the third-party independent appraisers at the expense of the company.”