The Capital Markets Board’s (“CMB“) new Communiqué No. II-27.3 on Squeeze-Out and Sell-Out Rights (“Communiqué“) entered into force upon its publication on the Official Gazette No. 31351 and dated December 31, 2020.
What Does the Communiqué Say?
As discussed previously in our Legal Alert on November 30, 2020, the CMB previously published a draft version (“Draft Communiqué“) of the Communiqué on October 28, 2020. The Draft Communiqué’s most significant changes were the decrease of the squeeze-out threshold from 98% to 95%, and the alignment of squeeze-out and sell-out prices.
• Squeeze-Out Threshold Remains 98%: Unlike the Draft Communiqué, the Communiqué retained the squeeze-out threshold as 98%.
On the other hand, the Communiqué incorporates the new exceptions brought under the board decisions of the CMB and sets forth that the acquisition of new shares by current shareholders as a result of a non-preemptive bonus or pre-emptive rights issue, or cases such as inheritance of shares, share repurchases and freezing of voting rights will not trigger the squeeze-out and sell-out rights. In addition, the Communiqué provides that no mandatory tender offer will be triggered if the management control of the public company is acquired simultaneously with the squeeze-out and sell-out rights being triggered.
• Calculation of Squeeze-Out and Sell-Out Prices: The Communiqué provides that the prices applicable to squeeze-out and sell-out rights will be calculated according to the same formula, unlike the old Communiqué No. II-27.2 it abolishes.
The squeeze-out and sell-out price will be calculated according to the market in which its shares are being traded. Accordingly, the price will be the highest of the following:
- For companies listed on the Yıldız Market: the average of the daily corrected average price for the last month prior to the disclosure of the triggering of the squeeze-out and sell-out rights to the public, and the value determined in the valuation report to be commissioned by the company.
- For companies listed on other markets: the average of the daily corrected average price for the last six months prior to the disclosure of the triggering of the squeeze-out and sell-out rights to the public and the value determined in the valuation report to be commissioned by the company (for non-listed public companies, the value determined in the valuation report).
- The mandatory tender offer price will be determined in accordance with the mandatory tender offer regulations if the acquisition of the controlling shareholder status simultaneously leads to a change in management control (also applicable for non-listed public companies).
- Acting in Concert: The following persons will be deemed to be acting in concert when determining the acquisition of share that may trigger the squeeze-out and sell-out rights:
- The companies whose management control belongs to the natural person or legal entity shareholder of a public company.
- The persons who has the management control of a legal entity shareholder of a public company and the companies whose management control belongs to these persons.
• Transition Period: If it was disclosed that a person has become a controlling shareholder, or acquired additional shares while already being a controlling shareholder, prior to the entry into force of the Communiqué (i.e., December 31, 2020), the squeeze-out and sell-out prices will be calculated according to the old Communiqué No. II-27.2 on Squeeze-Out and Sell-Out Rights.
Unlike the Draft Communiqué, the Communiqué retained the squeeze-out threshold. Accordingly, it seems that the most significant change brought by the Communiqué is the alignment of the calculation of the squeeze-out and sell-out prices.