The Mechanism of Acquisition

 

An acquisition is conducted by acquiring shares that have been issued and/or will be issued by the company, either through the BoD of the company or directly by the shareholders. The acquisition results in a transfer of control over the company. Moreover, an acquisition can be undertaken by a legal entity or an individual. In the case of an acquisition conducted by a legal entity, specifically a company, the BoD must adhere to a resolution passed by the GMS with the requisite quorum for attendance and satisfying requirements for adoption of a resolution of the GMS before proceeding with the acquisition.

 

If an acquisition is conducted through the BoD, the acquiring company shall notify its intention to conduct an acquisition to the BoD of the company to be acquired. The BoD of the acquired company and the company that plans to acquire shall prepare a draft plan of acquisition upon obtaining consent of the respective BoC, which must contain:

​

• the names and domicile of the company that is to acquire and the company that is to be acquired;

• the reasons as well as explanations of the BoD of the company that is to acquire and of the BoD of the company that is to be acquired;

• the financial statement of the latest accounting year of the company that is to acquire and the company that is to be acquired;

• the methods of assessment and conversion of shares of the companies that are to be acquired into its destination shares if the payment of the acquisition is conducted through shares;

• the amounts of shares that are to be acquired;

• the readiness of funding;

• the pro forma consolidated balance sheet of the company that is to acquire after acquisition that is prepared under the accounting principle of general applicability in Indonesia;

• the manner of settlement on the rights of the shareholders who do not approve the acquisition;

• the manner of settlement on the status, rights and obligations of the members of the BoD, the BoC, and employees of the companies that are to be acquired;

• the estimated period of the conduct of acquisition, including the period of the granting of power of transferring shares from the shareholders to the BoD of the company; and

• the draft amendments to the AoA of the acquiring company after acquisition, if any.

 

In this regard, the BoD of a company which is about to conduct an acquisition must publish the draft plan in at least 1 (one) newspaper and announce it in writing to employees of the company within a maximum period of 30 (thirty) days prior to the GMS summon. The announcement shall also contain a notice that concerned parties may obtain the draft plan at the office of the company from the date of the announcement to the date the GMS is held. Alternatively, if the acquisition is conducted directly with the shareholders, such aforementioned notification and the preparation of the acquisition plan are not required.

 

Furthermore, if the acquisition of a company involves amending the AoA which requires approval from the MoL, the acquisition shall take effect from the date of approval of the amendment of AoA by the MoL. In cases where the AoA is amended but does not require the MoL’s approval, the acquisition shall take effect from the date of registration of the deed of acquisition in the company register. Conversely, if the acquisition of the company does not result in an amendment of AoA, then the acquisition will take effect from the date the acquisition deed is signed. In addition, the BoD of the acquired company must publish the result of the acquisition in 1 (one) or more newspapers no later than 30 (thirty) days after the effective date of the acquisition.

​

Merger, Consolidation, and Acquisition of Public Companies

​

Merger and Consolidation of Public Companies

​

Merger or consolidation of public companies can only be carried out if they align with prevailing laws and regulations, and the provisions in Law No. 40/2007 relating to business mergers or consolidations still apply to public companies, as long as they are not explicitly regulated in OJK Reg. 74/2016.  Broadly outlined, the following describes the procedure for the merger or consolidation of public companies.

​

• Preparation and Announcement of Merger/Consolidation Plan

​​

​The BoD of each company that will carry out a merger/consolidation is collectively required to prepare a merger/consolidation plan, which must then be approved by the BoC of each respective company.  The merger/consolidation plan must have at least the following information: 

• name, domicile, business activities, capital and shareholders structures, as well as the management and supervision of each company who will organize the merger/consolidation;

• name and domicile of the company resulting from the merger/consolidation;

• composition of the BoD and BoC of the company resulting from the merger/consolidation;

• schedule of the merger/consolidation plan;

• reasons as well as explanations for the merger/consolidation from each company who will organize the merger/consolidation;

• procedure for the conversion of shares of each company that will organize the merger/consolidation to the shares of the company resulting from the merger/consolidation;

• plan on the amendment to the AoA of the company resulting from the merger (if any) or plan of the new company’s deed of establishment resulting from the consolidation;

• overview of important financial data originated from the financial statements which have been audited by a public accountant from each company who will organize merger/consolidation, under the following provisions:

  1. in the event that the companies that will organize merger/consolidation are public companies, it shall cover the last 2 (two) years; or

  2. in the event that the companies that will organize merger/consolidation are not public companies, it shall cover the last 3 (three) years.

  3. in the event that there is an interim period financial data, the disclosure shall be presented in comparison with the same interim period of the previous fiscal year (not required to be audited), except for the statements of financial position;

• pro forma financial information of the company resulting from the merger/consolidation which shall be examined by a public accountant;

• summary of appraiser’s report on the appraisal of the capital of each company who will organize the merger/consolidation which shall at least contain:

  1. identity of the parties;

  2. object of the appraisal;

  3. objective of the appraisal;

  4. assumptions and conditions of the limitation;

  5. appraisal approach and appraisal method; and

  6. appraisal’s conclusion;

• summary of the appraiser’s report on the opinion regarding the fairness of the merger/consolidation;

• result of experts’ appraisal regarding certain aspects of the merger/consolidation (if needed);

• opinion from the legal consultant on the legal aspect of the merger/consolidation;

• method for the settlement of the status of the employees of companies that will organize the merger/consolidation;

• methods for the settlement of the rights and obligations of companies that will organize the merger/consolidation to third parties;

• methods for the settlement of shareholders who do not agree with the merger/consolidation; dan

• explanation regarding the benefits, and potential risks that may incur due to the merger/consolidation as well as the mitigation for such risks, and future business plan.

​

Under specific conditions, certain information mentioned above may not be necessary to include, or additional information might be required in the merger/consolidation plan. For instance, if the merger/consolidation leads to the occurrence of a new controller, the merger/consolidation plan must also include (i) information about the prospective controller; and (ii) brief information about the management analysis and discussion regarding the companies involved in the merger/consolidation. 

​

Following the BoC’s approval of the merger/consolidation plan, the public company that carries out the merger/consolidation must announce a summary of the draft of merger/consolidation to the public in no later than the end of the 2nd (second) working day after obtaining approval from the BoC and 30 (thirty) days prior to the GMS summon.

​

• Submission and Effectiveness of Registration Statement​

​​

Submission of applications for corporate actions to the OJK must be carried out electronically through the OJK’s licensing system, which includes (i) a merger statement and (ii) a consolidation statement.  The public company shall submit a merger statement or consolidation statement containing the merger or consolidation plan along with its supporting documents to the OJK.  In this regard, submission of the merger statement or consolidation statement shall be conducted in no later than at the end of the 2nd (second) business day after approval from the BoC is obtained.

 

In submitting the registration statement, the supporting documents must also be provided, which shall at least contain the following:

​

• Financial statement audited by the public accountant from each company who organize merger/consolidation, under the following conditions:

  • in the event that the companies undertaking merger/consolidation are public companies, the audited financial statements shall cover the last 2 (two) fiscal years, provided that:

    1. the period between the date of the last annual financial statement and the effective date of the merger statement or consolidation statement shall not be more than 6 (six) months; and

    2. in the event that the period above is exceeding 6 (six) months, the financial statement must be supplemented with interim financial statement audited by a public accountant, with the period between the date of such interim financial statements and the effective date of the merger or consolidation statement being no more than 6 (six) months;

  • in the event that the companies that organize merger/consolidation are not public companies, it shall cover the last 3 (three) years;

• opinion regarding the legal aspect of the merger/consolidation;

• pro forma financial information of the company resulting from the merger/consolidation which shall be examined by a public accountant;

• appraisal report on the valuation of shares;

• fairness opinion report on the merger/consolidation;

• statement letter from the BoD of the public company declaring that the merger or consolidation has been carried out with due consideration of the interests of the company, the public, and fair business competition, and that there is an assurance of the continued fulfillment of shareholders’ and employees’ rights;

• approval from the BoC of each company regarding the merger/consolidation plan;

• plan on the amendment of the AoA of the company resulting from the merger (if any) or plan of the new company’s deed of establishment resulting from the consolidation; and

• expert assessment report (if any).

​

​OJK may request changes to and/or additional information for review or disclosure to the public purpose.  Further, if the merger is organized between public companies, the submission of the merger statement to the OJK shall be conducted by the public company who accepts the merger (surviving company).  If the consolidation is organized between public companies, the submission of the consolidation statement to the OJK shall be conducted by one of the public companies who performs the consolidation. 

​

Moreover, merger statement or consolidation statement shall be effective by taking into consideration the following: 

​

• by the passage of time, namely 20 (twenty) days from the date on which the merger or consolidation statement is completely received by the OJK; or 20 (twenty) days from the date on which the latest revision submitted by public companies, or as requested by the OJK, has been fulfilled; or

• based on an effective statement issued by OJK confirming that further changes to and/or additional information are no longer required.

​

• GMS and Post-Merger/Consolidation

​

Merger/consolidation must be approved by the GMS of the public company, which shall be held after the merger or consolidation statement becomes effective. The planning and organization of the GMS of the public company in relation to the merger/
consolidation shall comply with the provisions of OJK’s regulation.

 

The public company may announce the GMS in relation to the merger/consolidation concurrently with the announcement of the summary of the merger/consolidation plan. In the event of a conflict of interest in the merger/consolidation, the GMS shall be held in accordance with the provisions governing GMS procedures for transactions involving a conflict of interest as stipulated under the applicable capital market laws and regulations. Furthermore, if the GMS does not approve the merger/consolidation plan, a new merger or consolidation statement may be resubmitted to the OJK no earlier than 12 (twelve) months after the holding of such GMS.

 

In addition to the above, company resulting from the merger/consolidation must submit a report to OJK regarding the result of merger/consolidation in no later than 5 (five) business days from the date the merger/consolidation is deemed effective.

​

Acquisition of Public Company

​

Referring to Article 1 (5) OJK Reg. 9/2018, an acquisition is any action, either directly or indirectly, which leads to the change of controller. In this regard, the controller is any party who either directly or indirectly (i) has over 50% (fifty percent) of public company’s shares with voting rights which has been fully paid-up; or (ii) has the ability to determine, either directly or indirectly in any way, the management and/or policy of the public company. Furthermore, the control over a public company is based upon the ability to determine, either directly or indirectly in any way, the management and/or policy of public company may be proven by documents and/or information indicating a party’s control over the public company.

 

Specifically, the procedure for carrying out an acquisition of a public company is described as follows.

​

• Announcement of Acquisition

​

​Article 4 (1) OJK Reg No. 9/2018 stipulates that any prospective new controller who is undertaking negotiation that may lead to an acquisition may announce the negotiation on the acquisition plan. In case the prospective new controller decides to announce the negotiation on the acquisition, then said announcement shall at a minimum be undertaken through (i) 1 (one) Indonesian language daily newspaper which is circulated nationally or (ii) the website of the stock exchange.  The information which should be contained in the announcement must at least encompass: 

​

1. the name of the public company to be acquired,

2. the estimated number of shares to be acquired,

3. the identity of the prospective new controller, which encompasses the name of the prospective new controller, address, phone number, electronic mail, as well as business activities, if the prospective new controller is a business entity;

4. the amount of stock already owned by the prospective new controller, in case of already possessing the securities of the public company to be acquired;

5. purpose of control;

6. the plan, deal or decision to cooperate between parties within an organized group under the framework of controlling a public company, if the acquisition is undertaken by an organized group and there is a plan, deal or decision made by parties within the said organized group;

7. the method and process for acquisition negotiation; and

8. the substance of acquisition negotiation.
    

In case the prospective new controller makes the announcement through Indonesian language daily newspaper, then the prospective new controller is required to submit the announcement to: (i) the public company to be acquired; (ii) OJK; and (iii) IDX, on the same day as the announcement. Alternatively, if the prospective new controller makes the announcement through the IDX’ website, then the announcement must be submitted to: (i) the public company to be acquired; and (ii) OJK, on the same day as the announcement. In addition, Article 6 OJK Reg. 9/2018 stipulates that if the prospective new controller decides not to announce the negotiation, both the prospective new controller and the parties involved in the negotiation are required to keep the confidentiality of information of such negotiation.

​

• Implementation of Mandatory Tender Offer

​​

​Referring to Article 1 (6) OJK Reg No. 9/2018, a Mandatory Tender Offer (“MTO”) is the offering to purchase the remaining shares of a public company which must be undertaken by the new controller. After the occurrence of acquisition, the controller is required to: 

​

1. announce in at a minimum of 1 (one) Indonesian language daily newspaper which is circulated nationally or the website of the web stock exchange and report to the OJK as regards the occurrence of the acquisition by no later than 1 (one) business day after the occurrence of the acquisition; and

2. undertake the MTO, except for the following shares:

   • shares owned by shareholders who already undertake acquisition transaction with new the controller;

   • the shares owned by other parties that already secured an offer having the same requirements and conditions from the new controller;

   • the shares owned by other parties which at the same time also undertake the MTO or voluntary tender offering over the shares of the same public company;

   • the shares owned by majority shareholders; and

   • the shares owned by the other controller of the said public company.

​

Nevertheless, the above obligations shall not apply in the following circumstances:

1. an acquisition which occurs due to marriage or inheritance;

2. an acquisition which occurs due to the purchase or acquisition of a public company’s shares within a period of every 12 (twelve) months in a maximum amount of 10% (ten percent) of the number of circulating shares with valid voting rights, by parties who previously did not own shares in the public company;

3. an acquisition which occurs due to the implementation of duties and authorities of government or state agencies or institutions in accordance with the law;

4. an acquisition which occurs due to the direct purchase of shares owned and/or controlled by government or state agencies or institutions as an implementation of the provision as referred to in number (3);

5. an acquisition which occurs due to a court ruling or decision that already has binding legal force;

6. an acquisition which occurs due to the merger, spin-off, or the implementation of liquidation of shareholders;

7. an acquisition that occurs due to the existence of a grant, in which the transfer of ownership is carried out without any agreement or compensation;

8. an acquisition that occurs due to the existence of certain debt guarantee, either under a loan agreement or under a framework for the restructuring of a public company established by the government or state agencies or institutions in accordance with the law;

9. an acquisition that occurs due to the securing of shares by shareholders exercising their rights in accordance with their share ownership portion as stipulated under OJK regulation on the addition of public company’s capital by providing pre-emptive rights;

10. an acquisition that occurs due to the securing of shares by parties in the implementation of a capital increase to correct financial position as stipulated under OJK regulation on the addition of public company’s capital without pre-emptive rights;

11. an acquisition which occurs due to the implementation of policies of government or state agencies or institutions;

12. the implementation of MTO shall be contradictory to laws and regulations;

13. an acquisition which occurs due to the implementation of voluntary tender offering as stipulated under OJK regulation on voluntary tender offering; or

14. an acquisition that has been disclosed in a prospectus for a public offering of equity securities, provided that such disclosure complies with the provisions stipulated under OJK regulation concerning the form and content of prospectuses and summary prospectuses for public offerings of equity securities, which are implemented no later than 1 (one) year after the effective date of the registration statement.