An examination of the structure of take-overs in Nigeria

A Take-over as defined by the Investment & Securities Act (‘ISA’), 2007 is “the acquisition by one company of sufficient shares in another company to give the acquiring company control over that other company”. The Rules of the Securities and Exchange Commission Nigeria (‘the SEC Rules’) June 2013 provide that a Take-over occurs where person(s) or a group of persons acquire or wish to acquire a minimum of 30% shares in a public company quoted on the stock exchange, with the intention of taking over control of that company. A Take-over bid shall be made by such person(s) or group of persons or through their agent to the shareholders of the target company. R.445 (1)(a) of the Rules.
A Bid can refer to either an “Invitation” or an “Offer” to Take-over. However, for the purpose of this Article, it is presumed to be an Offer.
Note that an Invitation or an Offer simply means any statement, regardless of how it is expressed, which offers to acquire shares from a person who holds such shares. Thus, a Take-over Bid is a bid made for the purpose of a Take-over. S. 117 ISA.
The Take-over Process and Structure in Nigeria
Where a Take-over is intended, regardless of what any previous agreement dictates, the Commission must review and approve of any application for a Take-over, as this is mandatory under the Nigerian Law. S. 118 ISA. The Commission here is the SEC.
The offeror convenes a board meeting in order for the board to consider and approve a Take-over bid for the acquisition of the target company (offeree company). If approved, the directors’ resolution shall go along with the bid. The resolution should be signed by at least a director and the company secretary. Rule 445 of the SEC Rules. This is applicable where the Take-over bid is made by a corporate body.
A Take-over of a company hereby commences by the making of a Take-over bid which is an offer. A Take-over bid is deemed to be dated as of the date on which the bid is dispatched.
However if such bid is dispatched on more than one date, then the latest date of dispatch is assumed. S. 132 of the ISA.
Since a Take-over bid may be made by a person either by himself or through his agent or by two or more persons jointly or through their agent, similarly, a company can by itself or through its agent make a Take-over bid.
The persons making a take-over bid shall lodge with the Commission, a copy of the proposed bid for registration before it is dispatched. R. 448 the SEC Rules
A copy of the proposed bid shall contain the following information;

a) Two (2) draft copies of the takeover bid;
b) Consent letters of directors and other parties
to the transaction;
c) CAC form containing particulars of directors
of the offeror;
d) A copy of draft Financial Services
Agreement between the financial adviser and
the offeror, and any other agreement(s)
entered into in the course of the transaction;
e) Annual report and accounts of the offeror
for the preceding period of five (5) years or
the number of years the company has been
in existence;
f) Payment of N50,000 application fee and
relevant SEC fee based on the value of
shares to be taken over;
g) A draft newspaper publication of the
proposed takeover;
h) Evidence of source of funds;
i) Any other documents the Commission
may require from time to time.
In addition to the Take-over bid, the
following documents shall be filed with
the Commission:-
a) A letter of application;
b) Two copies of the information memorandum (where applicable);
c) A letter of “No objection” from relevant regulatory body (where applicable);
d) A copy of shareholders and board resolutions of the offeror certified by the company secretary approving the takeover (where applicable);
e) A copy of the certificate of incorporation certified by the company secretary;
f) Copies of the memorandum and article of association of the offeror certified by the Corporate Affairs Commission;
g) Copies of letters from the offeror appointing their financial adviser to the transaction.
No person or agent can lawfully make a Take-over bid unless the approval/authority of the SEC is sought and attained and such approval is in force at the date of the Take-over bid. An application should be made to the SEC by the person(s) intending to make the bid giving specific details of the applicant and the proposed bid and provide such other information as
may be prescribed by the SEC (R. 447 of the Rules).
For the purpose of deciding whether or not to grant an approval to proceed with a Take- over bid, the SEC will consider the likely effect of a successful bid on the economy of Nigeria
and any policy of the Federal Government with regard to manpower and development as well as the staff of the target company (R. 447(4)(B) of the Rules).
The authority to proceed with a proposed take-over bid shall be given;
(a) in writing signed by or on behalf of the
Commission;
(b) dated and give sufficient particulars of the proposed take-over bid to enable it to be identified. S. 134(7) ISA
This authority to proceed with a Take-over bid has the life span of 3 months from the date the authority was granted. However its life span can be extended provided an application is made to the SEC within fourteen days (14) prior to the expiration of same authority. A further 3 months is then granted R. 447(2) of the SEC Rules
Upon the approval of the Commission, the bid should be dispatched to the shareholders of the target company concurrently i.e. at approximately the same time and for any of the following reasons;
a) To acquire more than 1/3 issued shares of any class in an offeree company or
b) To acquire sufficient shares in the offeree company to make it the persons subsidiary
c) To acquire enough shares in the offeree company to enable that person to control the exercise of not less than 1/3 of the voting power at any general meeting of the offeree. S. 133(1) of the ISA.
The Rules provide that a Take-over bid shall for the purpose of information, be advertised in at least two (2) national daily newspapers. R. 445(4) of SEC
Note that a Take-over bid cannot be made where;
a) said bid is dispatched to less than 20 shareholders of the target company in order to
purchase shares via separate agreements
b) a company has less than 20 shareholders
c) shares to be acquired are those of a
private company or
d) the bid is dispatched for purposes specified in R. 445 of the Rules and S. 133(3).
Subsequently, the Commission may elect to either register a Take-over bid or not register it.
It will register same on the basis that it is satisfied that the offeror has complied with the provisions of the ISA and the SEC rules. If it is not satisfied thus and fails to register the bid, a notice shall be given accordingly to the applicant (R. 448 of the Rules).
Under a Take-over, the bid must be dispatched concurrently to each director of the offeree company, each shareholder of same company and to the SEC. After such bid has been dispatched to each director, the directors will then send a directors’ circular to each shareholder of the offeree company and to the SEC at least 7 working days prior to the effective commencement date of the Take-over bid.
Within 7 working days of the conclusion of the offer, the offeror shall file the following with the Commission; R. 448(6) of the SEC Rules
a) A schedule of the target company’s shareholders who accepted the offer containing the volume and value of the respective shares; b) Evidence of settlement of consideration (R.448 of the SEC Rules).
The shareholders have the option of accepting or rejecting the offer made to them in respect of their individual shares. However, where a Take-over bid has been made in respect of all the shares of a class (asides those held by the offeror) and acceptance is given for about 90% of those shares, the offeror may then give notice to the dissenting offerees, to the following effect;
a) that the Take-over has been accepted up to 90% in number of the shares subject to acquisition;
b) that the offeror is bound to take up and make payment for the shares of the offerees who have accepted the Take-over bid or has already done so; and
c) that the dissenting offeree is free to elect to either transfer his shares to the offeror on the same terms as the other offerees or to demand payment for a fair value.
If a dissenting offeree to whom such notice has been given does not make any election as required above, he is deemed to have elected to transfer his shares. A dissenting offeree must within 20 days after receipt of the notice, send his share certificates of the class of shares to which the take-over bid relates to the offeree company. S. 146(5) ISA
An offeror must make payments or other consideration within 20 days after he sends notice to the dissenting offeree. The offeror must send to the offeree company a copy of every notice sent to a dissenting offeree and notify the offeree company of the election made by a dissenting offeree. The offeror must also send to the SEC, a copy of every notice sent to a dissenting offeree not later than one month after the date on which it is sent.
An offeror may apply to the Court within 20days after payment has been made to fix a fair value for the shares of the dissenting offeree(s). If he fails to do this, the dissenting offeree can also apply. The Court assumes jurisdiction where a dissenting offeree elects that a fair price be made for his shares. The Court can evaluate, assess and make an order to that effect. Where an application is made to the Court by the dissenting offeree, all the other dissenting offerees who made an election too must be joined as parties and are bound by the decision of the Court (S.147 ISA).
The offeror must notify each dissenting offeree of the place, date and time of the application and of his right to appear there to be heard in person or by counsel (S. 147 ISA).
The Court may, in its discretion, appoint one or more independent valuers to assist the court in fixing a fair value for the shares of a dissenting offeree (S. 148 ISA). This precedes the Court’s final order. The final Order of the Court shall be made against the offeror in favour of each dissenting offeree who made an election and for the amount for his/her/its shares as fixed by the Court.
Where a Take-over bid has been duly approved and successfully registered, a post-takeover inspection shall be carried out by the SEC not less than three (3) months after registration of the bid. R. 448 of the SEC Rules
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