By this time, Ralcorp had completed the spinoff of its Post cereal division, resulting in approximately the same offering price by ConAgra for a slightly smaller total business. The deal was ultimately made as part of a friendly takeover with a per-share price of $90. High-yield style restricted payments covenants treat repurchases of “subordinated” indebtedness (traditionally, contractually subordinated debt only—i.e., not indebtedness that is structurally junior or unsecured) as a restricted payment. It is also worth noting that under a typical indenture, if you repurchase notes and cancel them, you may lose capacity to re-incur the debt.
The repurchase program should not be for the entire series of the notes or a substantial percentage . Conduct the offers over a reasonable period of time and avoid coercive behaviour and pressure. Think private, individually negotiated transactions rather than “take it or leave it” behaviour. Ensure that your banks carefully manage the potential audience by only making calls to a limited number of institutions that they know are likely to be holding the bonds . The announcement of an acquisition program has been followed by a rapid accumulation of bonds. As the film moves to the seventh day, a creeping sense of catastrophe settles.
More from Merriam-Webster on creep
Until recently a person holding a 15% to 55% stake in a listed company could acquire additional shares or voting rights up to 5% per financial year without having to make a mandatory open offer. Any acquisition of further shares beyond 55% required the acquirer to make an open offer. When the target is a publicly-traded company, the acquiring company can buy shares of the business in the secondary market. In a friendly merger or acquisition, the acquirer makes an offer for all of the target’s outstanding shares. A friendly merger or acquisition will usually be funded through cash, debt, or new stock issuance of the combined entity. If MAR does not apply to you as an issuer, a reference to the repurchase program should generally be made to bondholders in the next interim or annual report.
In this regard, any buyback of outstanding bonds that, if made public, would have a significant effect on the price of such bonds, or on the price of related derivative financial instruments, would constitute inside information. This may arise either where knowledge of the proposed buyback program itself will constitute inside information, or where the transactions themselves will likely give rise to inside information, such as a reduction of liquidity in the bonds. Your investment bank should be consulted to ensure that the amount of the outstanding issue that you propose to repurchase would not be considered price-sensitive. You will also need to be comfortable that the buyback is not price-sensitive for other reasons, such as reducing the overall cash position of the issuer as a result of the buyback. In mergers and acquisitions (M&A) a Creeping Takeover, also known as Creeping Tender Offer, is the gradual purchase of the target company’s shares.
But this is also Indian territory, wherein lies the rub, for the region is now victim to a creeping China acquisitiveness, with Pakistan acquiescing as a willing accomplice. This publication is provided for your convenience and does not constitute legal advice. It is also worth remembering that any re-sale by an issuer must comply with an exemption from registration under the US Securities Act. Engaging one or two brokers who understand the above limitations and what you are trying to do will ensure things are coordinated. We need this to enable us to match you with other users from the same organisation. It is also part of the information that we share to our content providers (“Contributors”) who contribute Content for free for your use.
Usually, in these cases of mergers or acquisitions, shares will be combined under one symbol. This can be done by exchanging shares from the target’s shareholders to shares of the combined entity. European high yield bond indentures typically do not require notes acquired to be cancelled (they may be re-sold or held in treasury indefinitely). However, typically any notes held by the issuer or any of its affiliates are, under the terms of the notes, no longer considered outstanding for voting purposes . It is also very common in English law governed bond terms and conditions for open market purchases to be permitted without restriction.
Future Legal Leaders 2023
Creeping acquisition governed by Regulation 11 of the Takeover Code refers to the process through which the acquirer together with persons acting in concert increase their stake in the target company by buying up to 5% of the voting capital of the company in one financial year. Regulation 11 deals with consolidation of holdings in the Target, and is targeted at the following two situations. Under the significant https://1investing.in/ market power model, a new merger prohibition would apply to corporations with substantial market power. Those corporations would be prohibited from making an acquisition that would result in any lessening of competition . A creeping acquisition is when someone gradually buys more and more of a company’s stock over time. This is a way to take over a company without making a big offer to buy it all at once.
- This publication is provided for your convenience and does not constitute legal advice.
- It is also part of the information that we share to our content providers (“Contributors”) who contribute Content for free for your use.
- These examples are programmatically compiled from various online sources to illustrate current usage of the word ‘creeping.’ Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors.
- Instead, consideration needs to be given as to whether there is non-public price sensitive information already or if the buyback program itself could give rise to inside information.
The 2008 discussion paper described creeping acquisitions as ‘conduct that comprises the accumulated effect of a number of small individual transactions which, when considered in isolation at the time that each transaction occurred, would not breach section 50’ of the TPA. The opportunity to acquire 5% is not available on an incremental basis every financial year, but is a one-shot opportunity to further consolidate a 5% stake in a company. Given the lack of liquidity in the market, the proposed amendments maybe seen as an opportunity for target companies to raise capital from its promoters. Further, promoters can also infuse funds through equity issuance and will be able to increase their shareholding in the target company without the formalities of making the open offer. An acquiring company may pursue an opportunistic takeover, where it believes the target is well priced.
Designated persons and their immediate relatives shall not trade in securities when the trading window is closed. The trading restriction period shall apply from the end of every quarter till 48 hours after the declaration of financial results. These examples are programmatically compiled from various online sources to illustrate current usage of the word ‘creep.’ Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors.
In October 2008, Porsche held a 43% stake in Volkswagen, with options to purchase another 32%. It was revealed that Porsche actually wanted to take control of Volkswagen.
Example of a Takeover
Another possibility that is raised in the discussion paper is that as part of the declaration process the Minister could set thresholds for the mandatory notification to the ACCC of acquisitions by corporations that are covered by any Ministerial declaration. At present, there is no legal obligation to notify acquisitions to the ACCC, unlike in several overseas jurisdictions such as the European Union. However, some sectors such as the grocery industry have voluntary Codes of Conduct that creeping acquisition meaning already require signatories to the Code to notify any acquisitions to the ACCC. ‘Substantial degree of power in a market’ would presumably have the same meaning as in the current misuse of market power provision in section 46 of the TPA. The discussion paper gives no indication of the intended meaning of ‘enhance’ and there is no useful judicial or legislative guidance on the meaning of the term. In a tender offer, all shareholders must be offered the same price for their shares.
Some practitioners in the market take the view that this ‘25%’ rule may not necessarily apply to repurchases of debt securities, because the context and potential effect of a debt repurchase versus an equity repurchase are different. We believe that it can be a reasonable rule of thumb to follow for the purposes of determining the ‘creeping tender offer’ question. A bond repurchase, or bond buyback, refers to the process whereby the issuer approaches the open market and repurchases its bonds from holders. If the bonds are trading at less than their par value, issuers can use this tool opportunistically to acquire debt, which will both reduce overall interest expense and result in a P&L debt on any gain if the bonds are cancelled.
Although the discussion paper states that the amended significant market power model is just ‘one option’ that the Government is considering, the discussion paper does not propose any alternative models. The only other approaches that it discusses are modified versions of this significant market power model. Under the aggregation model, an acquisition would be prohibited by the TPA if the combined effect of that acquisition and any other acquisitions by the corporation within a specified period would substantially lessen competition. This model would use the existing section 50 test of ‘substantially lessening competition’, but would amend it so that previous acquisitions within the specified period were also considered when determining the effect on competition. The amendment also specifies that the 5% increase in shareholding by the promoter beyond 55% will only be possible through open market purchases, which surprisingly, excludes bulk deals.
For English law governed bonds, there may be a requirement to promptly surrender bonds for cancellation rather than holding them for re-sale. Such a provision was historically included in large part owing to the fact that most English law terms and conditions of bonds are drafted as if the bonds are in definitive form, and that this assumes that if you acquire your own debt, you cannot owe it to yourself. However, it is now common in English law bond terms and conditions to permit issuers flexibility in this regard, since as a practical matter, such bonds are invariably in global form traded through international clearing systems. Unless there is a specific contractual requirement to cancel bonds that are acquired, in most cases an issuer should be free to acquire bonds, hold and then re-sell them. Accordingly, it will be particularly important for issuers to consider and document, on a case-by-case basis, whether the proposed buyback program is price-sensitive and if a disclosure obligation arises.
SEBI introduces ISD to boost stakeholder awareness
In some countries, however, there are regulations governing this process that require the bidder to offer a formal bid upon holding a certain amount of shares. This is because there is no defined ‘safe-harbour’ percentage that is relevant to debt securities. Instead, consideration needs to be given as to whether there is non-public price sensitive information already or if the buyback program itself could give rise to inside information. The ACCC appears to firmly support the ‘amended significant market power model’ and the Government has referred to reform on creeping acquisitions as being an election commitment. It therefore appears likely that some form of legislation addressing creeping acquisitions will be introduced in the near future.