CME-1 Takeovers & Tender Offers 1 — Questions and Answers
Question 1: Under CMA's Merger and Acquisition Regulations, a mandatory tender offer is triggered when a person acquires shares reaching or exceeding what percentage of voting rights in a listed company?
- 20%
- 25%
- 30% (Correct answer)
- 33%
Correct answer: 30%
CMA regulations require a mandatory offer when an acquirer reaches 30% or more of voting rights in a listed Saudi company.
Question 2: What is the minimum acceptance period that must be provided to target shareholders in a tender offer under CMA Merger and Acquisition Regulations?
- 14 calendar days
- 21 calendar days
- 28 calendar days (Correct answer)
- 35 calendar days
Correct answer: 28 calendar days
CMA Merger and Acquisition Regulations stipulate a minimum acceptance period of 28 calendar days to give shareholders adequate time to evaluate the offer.
Question 3: In a mandatory tender offer under Saudi CMA regulations, the offer price must be at least:
- The current market price on the announcement date
- The highest price paid by the offeror for shares in the preceding 12 months (Correct answer)
- The net asset value per share as certified by an auditor
- The weighted average trading price over the preceding 90 days
Correct answer: The highest price paid by the offeror for shares in the preceding 12 months
The mandatory offer price must not be lower than the highest price paid by the offeror for shares of the same class in the 12 months prior to the announcement, protecting minority shareholders.
Question 4: Which CMA regulation primarily governs tender offers and merger activity involving listed companies in Saudi Arabia?
- Capital Market Law (CML)
- Corporate Governance Regulations
- Merger and Acquisition Regulations (Correct answer)
- Rules on the Offer of Securities and Continuing Obligations
Correct answer: Merger and Acquisition Regulations
The CMA's Merger and Acquisition Regulations specifically govern tender offers, mandatory bids, and business combinations involving listed companies.
Question 5: Under CMA regulations, which party is responsible for preparing and distributing the offer document in a tender offer?
- The target company's board of directors
- The offeror (Correct answer)
- The CMA
- Tadawul (Saudi Exchange)
Correct answer: The offeror
The offeror is responsible for preparing the offer document and distributing it to target shareholders following CMA review and approval.
Question 6: A 'white knight' in a takeover context refers to:
- A regulatory body that intervenes to block hostile takeovers
- A friendly acquirer invited by target management to counter a hostile bid (Correct answer)
- A minority shareholder who supports the hostile bidder's offer
- A financial adviser appointed by CMA to oversee the offer
Correct answer: A friendly acquirer invited by target management to counter a hostile bid
A white knight is a friendly company that acquires or merges with a target at the target management's invitation to prevent a hostile takeover.
Question 7: Under CMA Merger and Acquisition Regulations, if the offeror acquires target shares at a price higher than the offer price during the offer period, what must happen?
- Such acquisitions are prohibited during the offer period
- The offer price must be revised upward to match the higher acquisition price (Correct answer)
- CMA must pre-approve each additional acquisition separately
- The offeror must disclose but no price adjustment is required
Correct answer: The offer price must be revised upward to match the higher acquisition price
If the offeror purchases shares during the offer period at a price exceeding the offer price, the offer price must be revised upward to match, ensuring equal treatment of all shareholders.
CME-1 Takeovers & Tender Offers 1
Under CMA's Merger and Acquisition Regulations, a mandatory tender offer is triggered when a person acquires shares reaching or exceeding what percentage of voting rights in a listed company?