On 12 November 2014, the Capital Market Board (CMB) issued a new
Communiqué on Squeeze-out and Sell-out Rights Serial No.
II-27.2 (Squeeze-out Communiqué) and replaced the previous
squeeze-out regime introduced on July 2014. The new piece of
legislation seems like an effort from the CMB to respond to
criticism by the investors on squeeze-out prices. The CMB also
seems willing to prevent more entities getting delisted by
squeeze-out in an effort to preserve the Borsa Istanbul
A.Ş.'s (BIST) value, ahead of its anticipated public
offering. Since July 2014, squeeze-out procedures have been
initiated for at least four entities listed on the BIST (e.g.
PTOFS, TEBNK, ALNTF, MUTLU).
The most important change is the gradual increase in the
required shareholding for triggering the squeeze-out right for
controlling shareholders and the sell-out right for minority
shareholders; 95% until the end of 2014, 97% until the end of 2017
and 98% from 1 January 2018 and onwards. Note that the lowest
possible threshold of 95% may no longer be enjoyed as of 1 January
However, the 95% ownership threshold remains applicable for the
delisting via tender offer process regulated under the CMB's
material transactions legislation. The CMB should be expected to
align that legislation with the new thresholds in the coming
Once the shareholding threshold is reached, both squeeze-out
right and sell-out rights become exercisable by the controlling
shareholder and the minority shareholders, respectively. However,
for squeeze-out, the controlling shareholder shall first wait a
three months' period, during which minority shareholders may
exercise their sell-out rights. At the end of this period,
controlling shareholder can exercise its squeeze-out right for any
remaining shares of the minority shareholders.
Mandatory valuation report
The Communiqué sets out that upon receiving the sell-out
request of a minority shareholder, the listed entity shall have a
valuation report prepared to determine the price of its shares.
Such report shall be prepared within one month of the first
sell-out request received by the listed entity.
Prices differ for squeeze-out and sell-out**
Previously the squeeze-out and the sell-out prices were subject
to the same formula for listed entities: the 30-day weighted
average of the stock price, such 30-days ending on the day
preceeding the date, on which the disclosure of triggering the
shareholding threshold was made by the controlling shareholder
Now, the Squeeze-out Communiqué keeps the above formula
for squeeze-out prices of listed entities but introduces a
different price formula for sell-out rights. Accordingly, the
sell-out price shall be the higher of:
(i) the price determined under the mandatory valuation
(ii) the price applied for a mandatory tender offer which was
conducted within the one year period preceding the Triggering
(iii) the squeeze-out price;
(iv) the six months' weighted average of the stock price,
such six months ending on the Triggering Date;
(v) the one year weighted average of the stock price, such one
year ending on the Triggering Date; and,
(vi) the five years' weighted average of the stock price,
such five years ending on the Triggering Date.
** For unlisted public enitities the sell-out price shall be
the higher of (i) the price determined under the mandatory
valuation report; and (ii) the price applied for a mandatory tender
offer which was conducted within the one year period preceding the
Triggering Date. The squeeze out fee shall be determined under the
mandatory valuation report.
What it means?
For minority shareholders: The new Squeeze-out
Communiqué will serve to protect the interests of the
minority shareholders. There is a possibility that the sell-out
price may turn out higher than the squeeze-out price. In order to
kick-off the sell-out price determination, a minority shareholder
is required to exercise its sell-out right.
For listed entities & controlling shareholders: The
increased threshold may well prove to be an obstacle for entities,
which are considering delisting from the BIST. Further, it may have
a negative impact on potential IPOs, since the way out of the
capital markets and the BIST seems to have narrowed down.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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