A cash offer is a proposal made by an offeror to all shareholders of a company at a specific time, offering to purchase the company's shares at a uniform price. The purpose is often to gain control of the company and/or to privatize it.
1.Classifications
Cash offers can be divided into voluntary offers and mandatory offers based on whether the offeror makes it voluntarily.
1.1 Voluntary offer
A voluntary offer is when the offeror decides on their own to make an acquisition. Based on the target company's total share capital, they choose the proportion of shares they want to acquire. Then, they make a cash offer to all shareholders of the target company for the proportion of shares.
1.2 Mandatory offer
A mandatory offer happens when the offeror holds a certain percentage of the target company's issued shares and gains control of the company. The law requires them to make a cash offer to all shareholders to acquire all their shares. Mandatory offers can be conditional or unconditional, depending on whether the acceptance of voting rights exceeds 50%.
Acquisition code
According to the Acquisition Code, when an investor's or a group's acquisition triggers a mandatory offer obligation but their voting rights in the listed company are below 50%, the investor or group may choose to attach the condition allowed under Rule 26.2 of the Code.
Rule 26.2 of the Code allows only one condition to be attached in a mandatory offer: the offeror receives acceptances of voting rights such that, together with the voting rights held or agreed to be acquired before or during the offer period, the offeror and any person acting in concert with them would hold more than 50% of the voting rights. If this condition is met, the offer becomes unconditional and is valid; otherwise, if the condition is not met within the specified period, the offer is invalid.
Examples
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If the number of shares accepted by shareholders plus the offeror's shares exceeds 50%, the conditional offer becomes unconditional, and the offeror can acquire the shares of all accepting shareholders.
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If the number of shares accepted by shareholders plus the offeror's shares does not exceed 50%, the offer does not become an unconditional cash offer and is deemed invalid. The shares of the accepting shareholders will not be traded, and they will continue to hold their shares.
