News & publications

Mergers and Acquisition transactions according to the Egyptian laws.

Mergers and Acquisition transactions according to the Egyptian laws.

18-01-2020

The private as well as public Merger and acquisition (M&A) projects has a significant role in revitalizing the financial market, also it plays an important rule in reducing the effect of the monopolization, as well as protecting the competition in the market.  The following is a brief outline the M&A rules according to the Egyptian laws and regulations;

Governing laws & regulations: 

Public M&A transactions in Egypt are regulated basically by the capital market law No.95 of 1992 ,companies law No.159 of 1981 for their executive regulations as amended ,as well as the Egyptian exchange listing rules.

Public M&A transactions:

The structure of the public M&A transactions determine by some elements as the amount of the shares that are offered on the transaction, whether the company's shares are offered to the public or not, and the tax consideration.

According to the executive regulations of the capital market law;

1- If the investor is willing to acquire more than 1/3 of the capital of the target company listed or not listed, that shares are offered to the public, then the investor must submit a mandatory tender offer addressed to all shareholders of the target company for the acquisition of up to 100% of the share capital of Target Company;
2- If the investor is willing to acquire less than 1/3 of the capital of the target company that shares are offered to the public, then it could be done by either the open market transactions or the tender offer.

 Exemption cases from conducting the mandatory tender offer:

According to the executive regulation the investor may be exempt from submitting mandatory offer after getting the Financial Supervisory Authority (FSA) approval in some cases, such as the capital restricting among the related parties as stipulated in the executive regulation, the transfer of the pledged securities ownership to the bank according to the central Egyptian bank rules, the approval of all the shareholders of the target company, or the cases of reduction the capital by the retirement of treasury stocks. 

  Restrictions  ;

1- The price of the offer cannot be less than the maximum price paid by the bidder and/or related parties in a tender offer made during the preceding twelve months of the current offer;
2- In the case of the mandatory tender offer the price of the offer must be cash, and cannot be less than the maximum price paid by the bidder and/or related parties in a tender offer made during the preceding twelve months of the current offer;
3- The offeror cannot withdrawal his offer during its validity period, unless the intrinsic event took place and the prior approval of FSA is a must;
4- The offeror is prohibited from submitting another tender offer for a period of six months from the date of submitting the last mandatory offer unless he got the approval of the FSA.

Private M&A transactions:

Private M&A transactions have an essential role of the Egyptian financial market and having its great impact as a pricing adjustment mechanism.

The applicable law;

It's common in the practice to involve a foreign applicable law to be applied to the private M&A transactions; however it's always advisable to not include any provisions which are violating the mandatory rules applicable to the target company to guarantee a smooth running of the transaction.

The conditions of the private M&A transactions;

The conditions that applied to the private M&A transactions are left to be determined on each transaction depends on the amount of the potential acquired shares, the governmental approvals as well as the licensees, non-competition restrictions, employments contracts, tax rate, among others .


 

Related Posts
Top