ABC Corp. is a company which shares are listed in the Philippine Stock Exchange. In 2015, 25% of ABC Corp.’s shareholdings were acquired by XYZ, Inc., while 40% of the same were acquired by RST, Inc., both of which are non-listed private corporations. Meanwhile, the remaining 35% of ABC Corp.’s shareholdings are held by the public.
In 2018, or three years (3) after it acquired its 25% stake in ABC Corp., XYZ, Inc. sought to obtain an additional 12% shareholding in ABC Corp. by purchasing some of the shares owned by RST, Inc. therein. The new acquisition will not, however, result in XYZ, Inc. gaining majority control of ABC Corp.’s Board.
Is XYZ, Inc. required to conduct a tender offer? Explain. (3%)
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No, XYZ, Inc. is not required to conduct a tender offer. Under Section 19 of the Securities Regulation Code and SRC Rule 19.2, a mandatory tender offer is required if a person or group intends to acquire at least 35% of
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Quick check
Under Section 19 of the Securities Regulation Code (R.A. No. 8799), what is the primary purpose of a mandatory tender offer?
A mandatory tender offer protects minority shareholders by offering them an equal opportunity to sell their shares during control shifts.
What percentage of voting shares acquired within a 12-month period triggers a mandatory tender offer under SRC Rule 19.2?
Acquiring at least 35% of voting shares within 12 months triggers a mandatory tender offer under SRC Rule 19.2.
Under SRC Rule 19.2, what total equity acquisition percentage triggers a mandatory tender offer regardless of timeframe?
Acquiring over 50% total equity in a public company triggers a mandatory tender offer regardless of the timeframe.
Why is XYZ, Inc. NOT required to make a tender offer when acquiring an additional 12% stake three years after its initial 25% purchase?
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Which statute and implementing rules govern tender offer requirements and securities regulation in the Philippines?
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Learn more about these topics
1. Mandatory Tender Offer
Under Section 19 of the Securities Regulation Code (Republic Act Number 8799) and SRC Rule 19.2, a mandatory tender offer is a statutory mechanism requiring an acquirer to make a public offer to minority shareholders when gaining significant control of a public company. The rule protects minority investors from being locked in or forced out without an equitable opportunity to sell their voting shares at a fair market price. A mandatory tender offer is triggered when an individual or group intends to acquire thirty-five percent or more of the outstanding voting shares of a public entity within twelve months.
2. Statutory Acquisition Thresholds
Under SRC Rule 19.2, mandatory tender offer rules set specific quantitative threshold triggers to safeguard public investors. An acquirer must conduct a tender offer if acquiring at least thirty-five percent of voting equity in a single transaction or over twelve months. Alternatively, acquiring over fifty percent of total equity, regardless of timeframe, triggers a mandatory tender offer. When an entity previously acquired twenty-five percent and subsequently purchases an additional twelve percent three years later, resulting in thirty-seven percent aggregate equity without gaining majority board control, the twelve-month statutory accumulation threshold is not breached.
3. Minority Shareholder Protection
The mandatory tender offer rule serves as a crucial regulatory safeguard for minority investors in publicly listed corporations. By forcing major stock acquirers to extend a uniform purchase offer to all shareholders, the Securities Regulation Code prevents discriminatory private block purchases that exclude public equity holders from sharing in control premiums. However, where share acquisitions occur in separate, spread-out commercial transactions across multiple years and do not transfer effective majority control of the corporate board, minority investors are not subjected to sudden shifts in control, leaving mandatory tender offer obligations un-triggered.