New regulations governing tender offers are scheduled to take effect in November, aimed at preventing a repeat of a botched deal proposed by a Japan-based firm to buy a stake in Taiwan's gaming software developer XPEC Entertainment Inc. (????), the Financial Supervisory Commission (FSC) said Thursday.
The failed deal caused massive losses for XPEC's investors.
Huang Tien-mu (???), acting chairman of the FSC, said that the new rules will require the board of directors of a company targeted by a potential suitor in a tender deal to tighten screening of the buyer's background and the acquisition.
A screening committee of the company targeted by the potential buyer will need to carry out the same prudent examination of any potential buyer in a bid to protect minority shareholders, Huang said.
The new rules will allow the board of directors and the screening committee of a company targeted by the potential buyer to come up with a response to the acquisition within 15 days of the deal being proposed, instead of the current 10 days, according to the FSC.
The company will then advise its shareholders as to whether they should accept such a tender offer deal.
The move to tighten the rules came after Japan-based Bai Chi Gan Tou Digital Entertainment Co. (????) announced Aug. 30 that it was withdrawing a tender offer that it proposed in late May to buy 38 million XPEC shares, or 25.17 percent of the company, at NT$128 (US$4.09) per share, an almost 22 percent premium over XPEC's share price at the time.
The decision by Bai Chi Gan Tou to walk away from the deal caught the market off-guard and led to a plunge in XPEC shares, which caused massive losses for many investors who had bought XPEC shares in a bid to participate in the tender offer later.
Even before the Japanese suitor decided to drop the tender offer, the company had repeatedly extended the deadline of the settlement of the transactions in mid-August, which also affected XPEC shares.
After the tender offer was announced, shares of XPEC topped NT$110 in early June. But the stock shed 10 percent, the maximum daily decline, to NT$15.80, on the local over-the-counter market on Thursday.
Wang Yung-hsin (???), director of the FSC's Securities and Futures Bureau, said that the board of directors and the screening committee of a company targeted by a potential buyer in a tender offer should carefully study information about the suitor's background and financial strength to have a better understanding of whether or not the conditions are fair.
Wang said that the examination of a tender offer should also include how a potential buyer will finance the acquisition.
Meanwhile, the FSC said in a report submitted to the Legislative Yuan that a company with paid-in capital of NT$2 billion or more should set up an auditing committee from 2017, while a company whose paid-in capital hits NT$5 billion or more should compile a corporate social responsibility report starting from 2019.
The FSC report also said that a company should ask its independent directors to take more responsibility for managing the company.
Theses changes are expected to improve corporate governance, the FSC said.
Source: Focus Taiwan News Channel