,Easy access: The depressed share prices of public-listed companies due to Covid-19 have technically helped make it easier to carry out M&As.
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RECENT privatisation attempts which have failed to be completed have raised the issue of whether Malaysia’s takeover code is in need of a revamp.
It is understood that some company owners and advisers have been grumbling about the strictness of the current rules. Their argument is that the rules ought to be relooked at considering that the current climate needs more merger and acquisition (M&A) activities to build stronger companies to emerge from the Covid-19 doldrums.
The most recent privatisation bid which did not materialise was the RM1.30 share offer tabled by the Federal Land Development Authority (Felda) for FGV Holdings Bhd.
In a nutshell, privatisation under the takeover code requires an acceptance level of 90% of the voting shares of the company (excluding shares already owned by the offeror or persons connected with the offeror) before the buyer can enforce compulsory acquisitions from the remaining minority shareholders.
Takeovers and M&As in Malaysia are primarily governed by the Securities Commission (SC) under the Capital Markets and Services Act, namely via the Malaysian Code on Take-overs and Mergers 2016 and the Rules on Take-overs, Mergers and Compulsory Acquisitions.
The SC is said to be undertaking a review of the takeover regulations “to enhance clarity and ensure continued relevancy.”
Its chairman Datuk Syed Zaid Albar had told StarBizWeek last month that it has been five years since the rules were issued, and should be in time for a post-implementation review.
He said that it was part of the SC’s process to conduct a post-implementation review on any regulation that has been put in place and any framework review would “take into account the objective of facilitating market activities in a fast changing environment while ensuring appropriate shareholder protection.”
However, it should be noted that the takeover code was devised with the intention of also protecting minority shareholder rights. Loosening the rules could impede those rights.
Former investment banker Ian Yoong says while the market can certainly do with more M&A activities on Bursa Malaysia, the way to do it is not by widening the goal.
“The current takeover code is generally fair to stakeholders. The 90% threshold for compulsory acquisition ensures that the takeover price has to be attractive for the vast majority of shareholders to accept the takeover price.
“The acquiring party can indeed make a higher and more attractive bid after the cooling off period, or perhaps a lower bid like in the case of Yee Lee Corp Bhd