CMS Expert Guide to Public Takeovers in Chile

Yes, Law No. 18,045 on the Securities Market and regulation issued by the Financial Market Commission (the “CMF” or “Chilean Securities Regulator”) govern tender offers for Chilean listed companies. Unlisted companies are not subject to takeover regulations. 

• Mandatory tender offers 
• Voluntary tender offers 
• Partial offers and acquisitions 

Parties to a takeover are not legally required to engage any specific advisers, however, in order to implement a successful takeover the offeror requires a stockbroker as arranger or manager of the tender offer process. It is also common practice to engage financial and legal advisers. 

Yes, under Chilean law, a mandatory offer must be made within 30 days of the relevant event if:  

• a person (alone or jointly with others)takes control of a listed company (meaning holding the majority of votes at a shareholders’ meeting and to appoint the majority of the directors);  
• as a result of one or more acquisitions of shares, a person/shareholder owns or controls two-thirds of the shares of a listed company;  
• a person takes over or acquires a company which in turn controls a listed company that represents 75% of more of its consolidated assets 

Takeover offers are most commonly implemented by means of a mandatory tender offer. The offer must be made for a specific percentage of the shares, allowing the offeror to acquire control of the target company in accordance with the requirements of Law No. 18,045 on the Securities Market. 

The information and form in which a tender offer needs to be undertaken is strictly regulated by the Chilean regulator. Given the structure of the Chilean securities market, in which the majority of listed companies have a clear controlling shareholder with more than 50% of the shares, commitments to tender between an offeror and the controlling shareholder of the target company are very common. The contents of such commitments vary widely from case to case, but they typically include an irrevocable obligation to launch an offer, on the one hand, and an obligation to tender on the other hand, subject to common conditions precedent. Therefore, in practice it is common to find that the offeror and the majority shareholders of the target company execute definitive agreements regulating the terms and conditions of the subsequent tender offer and securing the acquisition of a minimum stake pursuant to the subsequent tender offer. 

Takeover offers may also be implemented by the direct transfer of securities made by the listed company's controller, provided that those securities have market presence (as defined by the General Norm 327 issued by the CMF), the purchase price is payable in cash and is not substantially higher than the market price (substantially higher is currently understood as over 10%). 

It is possible to maintain confidentiality within a party’s own team (advisors, funders, directors, etc.). However, listed companies have the general obligation to disclose to the Securities Regulator and the market any information that an investor may consider important to assess its investment decision (hecho esencial). Regarding deals in which a listed company is the target, the disclosure obligation will be triggered to the extent the target is a party of the definitive binding documentation (which is not normally the case) and upon its execution. 

Further, in accordance with Article 54 of Law No. 18,045 on the Securities Market, any person interested in acquiring, directly or indirectly, control of a listed company, whatever the form of acquisition of the shares, including that which may be made through direct subscriptions or private transactions, must first inform the general public, the target, the CMF and any stock exchanges where the securities are traded by means of written notice and publication in two newspapers with national circulation, as well as on the target company’s website, if applicable. These notices must be made at least 10 business days prior to the execution of any events and agreements related to the takeover offer. 

In addition, once an offer is made, the target is obliged to provide the offeror with an updated list of its shareholders containing, at least the domicile and number of shares of each shareholder. 

The information required to be provided and the form in which a tender offer needs to be made is strictly regulated by the Chilean regulator. For example, in order to validly launch a tender offer for a listed company, the offeror must publish a notice informing of the commencement of the tender offer in at least two newspapers with national circulation, one day before the commencement of the offer period.  

Further, as previously mentioned (see Question 4), Chilean law requires in certain cases offerors to launch a mandatory tender offer to acquire securities of listed companies.  

In addition, Chilean Law establishes that upon a takeover, the security-holder that took control of a listed company may not acquire 3% or more of the securities in the listed company within 12 months following the takeover, without submitting a tender offer, in which, the price per share may not be less than the price paid in the takeover transaction. 

In accordance with Chilean Law, tender offers for listed entities are binding and firm, but objective conditions may be included. Typical tender offer conditions are: 

• the tender of a minimum number of shares (typically assuming that the controlling shareholder will tender its shares under a prearranged agreement with the offeror, under the same terms as other shareholders under the tender offer); 
• the receipt of applicable regulatory approvals or expiration of applicable regulatory waiting periods; 
• there being no law or governmental order prohibiting the consummation of the offer; 
• the target company not having suffered a material adverse effect; 
• there not having occurred significant disruptions or declines in securities or currency markets (a so-called "market out" condition). 

The receipt of sufficient financing is not an accepted condition for a tender offer, nor is the absence of a competing takeover offer. 

The bidder must declare the exercise of a revocation cause or condition at the latest three days following the last day of the tender period. 

There are no legal requirements as to the financing of an offer, however, the offeror must include in the notices published as well as in the prospectus (which is required in all cases), information on the way in which it will finance the consideration payable for the shares. In the event that any loans or capital contributions have been committed to the offeror, the necessary background information must be provided to evidence that the offeror has sufficient funds to satisfy the consideration payable on full acceptance of the offer. If the consideration offered consists of securities, the manner in which the offeror has acquired or will acquire the securities to be exchanged must be explained. 

There are generally no rules regarding the maximum/minimum price which must be offered. However, there are limits in 3 situations:  

• If within the period between 30 days prior to the effective date of the offer and up to 90 days after the date of publication of the notice of acceptance of an offer (see Question 18) , the offeror, directly or indirectly, has acquired or acquires shares  subject of  the offer for more beneficial price than those under the offer, the shareholders who sold their shares before or under the offer shall be entitled to demand from offeror the difference in price to their favour. 
• The shareholder who has taken control of a listed company may not, within the following twelve months from the date of execution of a tender offer transaction of the transaction, acquire shares constituting 3% or more of the target company shares, without making a tender offer for the remaining shares, and the price per share may not be less than that paid in the takeover offer. However, if the acquisition is made on the stock exchange and pro rata amongst the rest of the target company’s shareholders, a higher percentage of shares may be acquired, in accordance with the stock exchange regulations approved by the CMF. 
• If a mandatory tender offer is made, due to the fact that a controlling shareholder has acquired two-thirds of the shares of a listed company, the price offered for the acquisition of the remaining shares shall not be less than the price that the target company’s shareholders would be entitled to if a right of withdrawal or appraisal rights exists under the Chilean Law on Corporation. 

Regarding the type of consideration which must be offered, Law No. 18,045 on the Securities Market allows for consideration in cash and in other publicly offered securities. 

No, shareholders may not be offered different deals. However, different conditions may be offered to different classes or series of securities issued by a listed company subject to certain restrictions. 

As a general rule, listed companies are required to disclose certain information to the market, but they have no duties to disclose information to a particular offeror nor may an offeror may force the target company to provide due diligence information. Listed companies are allowed to provide non-public information for due diligence purposes, provided that the board approves such disclosure and the CMF is informed of such decision, which could be done on a confidential basis if some conditions are met.

Target companies are generally prohibited from agreeing any deal protection measures with an offeror, as the shareholders are the persons entitled to decide on an offer for shares. 

On the other hand, the offeror may enter into an agreement with the controlling shareholders of the target company, in order to secure their acceptance to the offer. Agreements with shareholders are the most efficient protective measure an offeror may implement as companies in Chile mainly have concentrated ownership and controlling shareholders. 

Likewise, the Securities Market Law provides protection to offerors, through restrictions to which both the shareholders and the target company are subject during the tender offer. The restrictions include the following restrictions on the target company:

• acquiring its own shares;  
• incorporating subsidiary companies;  
• selling assets that represent more than 5% of the total value of the target company; and 
• acquiring new debt that surpasses by more than 10% the company's current indebtedness. 

Regarding a public tender offer, each director of the target company has a duty to issue a non-binding recommendation to the target company shareholders on whether to accept or reject an offeror’s offer. In this recommendation, each director must provide details of their relationship with the controlling shareholder of the target company and any interest they may have in the business combination. 

Further, directors are generally not entitled to take any action that could frustrate the takeover offer, as most actions that could frustrate the offer are reserved for the decision of shareholders. Consequently, in the majority of cases, shareholders are the persons solely entitled to decide on the offer, and as companies in Chile mainly have concentrated ownership and controlling shareholders, defensive measures are uncommon. 

Any acquisition of shares by the offeror during 30 days prior to the launch of a tender offer, or 90 days after a tender offer is announced as successful, at a price or terms more beneficial to the offeror than those under the offer, will allow any shareholder who sold in such period prior to the launch of the tender offer, or after the offer, to claim the price differential or forgone benefits, as applicable, which is an added deterrence for stakebuilding. 

Likewise, upon a takeover, the security-holder that took control of a listed company may not acquire 3% or more of the securities in the listed company within 12 months following the takeover, without submitting a tender offer for the remaining shares at a price per share not less than the price paid in the takeover offer. 

Further, during the period of effectiveness of the offer, the offeror may not acquire shares that are subject of the offer through private transactions or on a national or foreign stock exchange. 

Finally, in the event that a tender offer fails due to the non-fulfilment of the conditions, the offeror may not make new offers for the same shares until at least 20 days after the failure of the initial offer. 

Shareholders can give commitments or issue statements of their intention to accept an offer once made, however, target company shareholders are not allowed to sell their shares to the offeror outside the offer process during the term of the offer. After a tender offer term has expired, target shareholders may sell their shares to the offeror, subject to certain restrictions as indicated above.

Article 12 of Law No. 18,045 on the Securities Market, establishes the general principal that any person who, directly or indirectly, holds 10% or more of the share capital of a listed company, must inform the CMF and each stock exchange in the country in which the company has securities registered for trading, of any acquisition or disposal of those shares. The notification must be sent no later than the day after the transaction, by the means indicated by the CMF. In addition, in the case of majority shareholders the abovementioned notification must state whether the acquisitions have been made with the intention of acquiring control of the company or, if such acquisition is only for the purpose of financial investment. 

As previously mentioned, in accordance with Article 54 of Law No. 18,045 on the Securities Market, any person interested in acquiring, directly or indirectly, control of a listed company, whatever the form of acquisition of the shares, must firstly inform the general public, the target company, the CMF and any stock exchanges where the securities are traded by means of written notice and publication in two newspapers with national circulation, as well as on the target company’s website, if applicable. These notices must be made at least 10 business days prior to the execution of any events and agreements that allow for the takeover offer. 

Further, once a takeover offer is made, the target company is obliged to provide the offeror with an updated list of its shareholders, indicating the domicile and number of shares of each shareholder.  

Finally, listed companies have a general obligation to disclose to the Securities Regulator and the market any information that an investor may consider important to assess its investment decision (hecho esencial). The disclosure obligation will be triggered to the extent the target company is a party of the definitive binding documentation (which is not normally the case) and upon its execution. 

Where the offer is implemented by way of a tender offer: 

T-10 (or as soon as negotiations for a takeover are formalised or as soon as restricted information or documents on the target company are disclosed to the offeror): Communication to the target, target’s controlling shareholder, companies controlled by the target, CMF and stock exchanges, and publication in a national newspaper of the intention to make a takeover offer. 

D: Publication of the formal offer document and prospectus that contains all the terms and conditions of the offer. 

D+5: directors of the target company must issue a letter of recommendation regarding the offer.  

D + 20: first possible closing date for acceptances (extendable by offeror). 

D + 30: last possible closing date for acceptances (extendable by offeror for 5-15 additional days). 

D +33: Offeror must publish an announcement indicating the results of the offer, number of acceptances, number of shares that will be acquired, and percentage of control reached. If the offeror does not publish the results of the tender offer, the target company shareholders can withdraw their acceptance. 

D+33: Offeror must inform the CMF and any relevant stock exchanges of the results of the offer.  

T: Execution of agreements that enable the takeover. 

T +2: Communication to the target company, target’s controlling shareholder, companies controlled by the target company, CMF and any relevant stock exchanges, and publication in a national newspaper, informing of the takeover offer. 

Deficiencies in the information provided or failure to comply with the requirements set forth in Law No. 18,045 on the Securities Market entitle the CMF to suspend the commencement or continuation of the offer for up to 15 days. This suspension may be extended once for the same period. If upon expiration of the extension, the causes that founded it still exist, the CMF shall annul the offer. 

Voluntary tender offers are subject to the same regulations and procedure as mandatory tender offers.  

• The Offer Document which includes the following: 

1. Complete identification of the persons making the offer. 
2. Shares or securities to which the offer relates and the number of shares or percentage of the issued shares whose minimum acquisition is a requirement for the success of the offer. 
3. Price and terms for payment (consideration may be cash or other publicly offered securities). 
4. Validity of the offer and procedure to accept it. 
5. If the offeror is a shareholder of the target company, the offeror must identify the manner in which shares have been previously acquired and disclose any existing relationship with target company’s majority shareholders, if any. 
6. Information on the way in which it will finance the consideration for the shares. 
7. Amount and form of the guarantee constituted by the offeror, if any. 
8. Conditions or events that may lead to the revocation of the offer. 

• Offeror prospectus (which must contain the same information as the offer indicated above). 
• Target company directors’ recommendations letter.  
• Offer acceptances/results publication in a national newspaper. 

Yes, in accordance with article 206 of Law No. 18,045 on the Securities Market, during the term of an offer, other offers may be submitted with respect to the same shares. These offers shall be governed by the rules on mandatory tender offers and shall only be valid when their respective notices of commencement are published at least 10 days prior to the expiration of the term of the initial offer. The notices of commencement of competing offers shall be published in the same manner as the initial tender offer (i.e., in at least two newspapers of national circulation). Competing offerors may freely determine the term of the offer, however, competing offers may only be extended for a term that coincides with the expiration of the extension of the first offer, so that all of them end on the same date. 

When an offer has been made through a stock exchange, competing offers must be made under the same procedure and have the same expiration date. 

Competing offerors may not participate in any competing offer in any capacity. 

Tender offers cannot be withdrawn once they are in force. However, offers may be partially modified, exclusively in the following manners: 

1. By extending the term of the offer (by 5-15 additional days), 
2. By reducing the minimum number of shares for the offer to be successful to the number of acceptances effectively received by the end of the offer. 
3. By incrementing the price offered. 
4. By incrementing the number of shares offered.  

Squeeze-out rights are available for offerors where the following conditions are met:  

1. that the offeror reaches 95% of the target shares through a tender offer;
2. that the offeror has acquired at least the 15% of those shares, from non-related parties; 
3. the listed company’s bylaws provide squeeze-out rights to shareholders; 
4. the controlling shareholder may compulsorily require the remaining shareholders to sell it their shares, as longs as those shares were acquired after the squeeze out provision came into force; and 
5. the price for the shares that the offeror acquires due to the squeeze-out right, will be the price set for at the tender offer. 

If a potential offeror launches its offer but the offer lapses, it will normally be prohibited from launching a new offer for a period of 20 days after failure of the original offer.  

For a company to be de-listed, a [shareholder’s/de-listing] agreement must be entered into with the approval of two-thirds of the shares with voting rights. Dissenting shareholders shall have the right to withdraw form the company, if a de-listing agreement is reached.  

Further, for a company to de-list is must not meet the requirements established for mandatory listing for a period of at least 6 months (i.e., (i) have 500 or more shareholders, or (ii) at least 10% of their shares is owned by at least 100 shareholders, excluding those that individually or through other individuals or legal entities, exceed such percentage. New regulation (effected to come in force in the following months) replaces these requirements and establishes that companies must be listed when they have more than 2000 registered shareholders for a consecutive period of 12 months.)  

For the de-listing to be effective, companies shall request the CMF to be delisted, which will approve it if all the requirements have been met.