The Nairobi Securities Exchange. CMA suspended AccessKenya’s shares at the bourse following a takeover bid by Dimensions Data Group Plc. Photo/FILE
On May 6, 2013, AccessKenya informed the Capital Markets Authority (CMA) of the service of the Notice of Intention to make a takeover offer from Dimension Data Group Plc.
The company’s board of directors also requested the authority to suspend the shares from trading on the basis that the significant change in holding of the listed securities could possibly lead to erratic trading.
On the same day, the authority directed the NSE to suspend the company’s shares from trading until further notice.
This move was guided by Regulation 32 of the Capital Markets (Takeovers and Mergers) Regulations, 2002 which empowers the CMA to suspend trading of shares for the purpose of enabling the target company (AccessKenya) to disclose information on the takeover.
The principle behind the suspension from trading as highlighted under Regulation 32 of the Regulations is to prevent parties from creating a false market in the securities as well as ensuring that all shareholders trade the securities in the market with the benefit of full disclosure on the proposed takeover offer and its implications.
This is aligned to the core mandate of the authority of investor protection, which seeks to ensure that all shareholders make a decision based on information that is availed at the same time.
Full disclosure of the terms of the takeover offer is a process that is dictated by the statutory requirements and timelines provided within the regulations.
The requisite disclosure documents that require approval by the authority include; the Takeover Offer Document, Shareholders Circular and Independent Financial Adviser’s Circular to be issued by AccessKenya to assist the shareholders in decision-making.
The documents are expected to disclose information on various aspects of the transaction including the following.
Confirmation by a financial adviser that Dimensions Data has the financial capability to carry out the take-over offer in full, a statement that Dimensions Data and its financial advisers are satisfied that the take-over offer would not fail due to insufficient financial capability and that every shareholder who wishes to accept the take-over offer will be paid in full.
Other key areas of disclosure include documents relating to the transaction that will be made available for inspection to shareholders, Dimensions Data’s intentions regarding any major changes to be introduced in the business including plans to liquidate AccessKenya, sell its assets, or make any other major change in the structure of the AccessKenya.
The parties are also required to disclose Dimension Data’s long term commercial justification for the proposed take-over offer, the independent adviser’s circular will also include a statement on the reasonableness of the take-over offer, taking into account the reasonableness and accuracy of profit forecasts for the AccessKenya, if any, contained in the offer document.
Competitive
The independent adviser’s circular shall, in so far as is reasonable, contain comments on the 12-month outlook of the industry in which AccessKenya has its core or major business activities and prospects, as well comments on the financial performance and positioning in the industry including competitive advantage, threats, and opportunities for a 12- month period.
The Takeover Offer Document has been submitted to the authority for consideration and the outstanding issues have been communicated to Dimensions Data for their action.
AccessKenya is however yet to submit to the authority other disclosure documents namely the Shareholders Circular and the Independent Adviser’s Circular.
The statutory timelines provided in the regulations indicate that the Takeover Offer Document should be approved within 30 days from the date of submission if it is in compliance with the requirements.
Upon approval of the Takeover Offer Document by the authority it shall be served upon AccessKenya by Dimensions Data within five days and thereafter AccessKenya should ensure that the same is circulated to its shareholders together with the Shareholders’ Circular and the Independent Advisers Circular within 14 days of the date of service of the Takeover Offer Document by Dimensions Data.
Upon circulation of the above disclosure documents to the shareholders of AccessKenya, the shareholders will have the option to accept or reject the takeover offer.
The statutory period for acceptance of the offer is 30 days. The offer timetable would be contained in the Takeover Offer document.
To date, disclosures made to the public have been limited to a Cautionary Announcement published by AccessKenya in the print media on May 7, 2013, and a Public Announcement and Offeror Statement published by Dimensions Data on May 7 and May 18, 2013, respectively.
In view of the detailed disclosure required to enable the shareholders make an informed decision, it may not be possible for the shares to trade at the same time as the transaction is going on.
The suspension does not therefore deny the shareholders their rights but rather gives an opportunity for the transaction to proceed in an atmosphere where all shareholders make decisions based on information availed to all at the same time.
Mr Mwangi is the head of corporate communications at CMA. The CMA wrote this article in response to another one by a shareholder questioning the freeze in trading of AccessKenya shares.
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