While takeover bids have not traditionally featured prominently in the Maltese capital markets, recent years have seen growing awareness of and interest in such transactions. As Malta’s capital markets continue to mature, takeover activity is increasingly viewed as a legitimate mechanism for corporate restructuring, consolidation, and the transfer of control in listed companies. Against this backdrop, Chapter 11 of the Capital Markets Rules, issued by the Malta Financial Services Authority (MFSA), sets out the regulatory framework governing both mandatory and voluntary takeover bids involving companies whose securities are admitted to trading on a regulated market in Malta.
The distinction drawn under Chapter 11 between mandatory and voluntary takeover bids reflects a carefully calibrated regulatory approach. On the one hand, it seeks to safeguard minority shareholders through robust investor protection measures, whilst on the other hand, it allows market participants flexibility to pursue acquisitions of control in an orderly and transparent manner.
Definition of a Takeover Bid and the Concept of ‘Control’
Under the Maltese Capital Markets Rules, a takeover bid is defined as a public offer made to holders of securities of a target company to acquire all or some of those securities, whether mandatory or voluntary, with the objective of acquiring control of the target company. The concept of ‘control’ (or ‘controlling interest’) under the Capital Markets Rules is central to the takeover regime and arises where a person, either alone or acting in concert with others, directly or indirectly holds 50% plus one of the target company’s voting rights.
‘Control’ (or ‘controlling interest’) is the pivotal concept determining applicability of Chapter 11. Takeover bids that do not have the acquisition of control of the target company as their objective do not fall under the scope of Chapter 11 of the Capital Markets Rules. Moreover, it is the attainment of ‘control’ (or ‘controlling interest’) that determines whether an offeror is required to launch a mandatory takeover bid or may proceed by way of a voluntary takeover bid.
In this sense, the control threshold acts as a regulatory safeguard: it ensures that minority shareholders are afforded an equitable exit opportunity once control is acquired, while allowing offerors to pursue control through a transparent process before the threshold is reached.
The Mandatory Takeover Bid
A mandatory takeover bid is triggered once an offeror acquires a controlling interest in the target company. Upon crossing the control threshold, the offeror is obliged to launch a mandatory takeover addressed to the remaining holders of securities of the target company, offering them the opportunity to dispose of their holdings on equal terms.
A defining feature of the mandatory takeover is the requirement to offer an equitable price. The equitable price to be paid for such securities is the highest price determined in accordance with predefined criteria set out in the Capital Markets Rules. As a result, the offeror does not enjoy discretion in setting the price.
In addition, as part of the takeover process, an independent expert must be appointed to draw up a report on the consideration offered. In the context of a mandatory takeover bid, the independent expert is specifically required to confirm whether the price offered satisfies the ‘equitable price’ requirement, thereby reinforcing the protection afforded to minority shareholders.
The Voluntary Takeover Bid
By contrast, a voluntary takeover bid may be launched where the offeror does not hold a controlling interest in the target company. A voluntary bid must be made to all holders of securities. Unlike mandatory takeover bids, a voluntary bid is initiated by the offeror, and the offer price is not subject to the ‘equitable price’ requirement and the consideration may be freely determined by the offeror. Nevertheless, the bid remains subject to scrutiny through the appointment of an independent expert, whose role is to assess whether the offer is ‘reasonable’.
In practice, an offer is generally regarded as ‘fair’ and ‘reasonable’, where the expert’s assessment concludes that the consideration offered is equal to or exceeds the value of the securities being acquired. While this affords greater commercial flexibility to the offeror, it preserves transparency and ensures that security holders are adequately informed when deciding whether to accept the offer.
Striking the Balance between Investor Protection and Market Flexibility
The distinction between mandatory and voluntary takeover bids under Chapter 11 of the Capital Markets Rules exemplifies the delicate balance underpinning Malta’s takeover regime. The mandatory takeover bid mechanism, coupled with the equitable price requirement, serves as a crucial investor protection tool. It prevents the gradual or ‘creeping’ acquisition of control and ensures that minority shareholders are not left disadvantaged once control has passed.
Conversely, the voluntary takeover bid provides market participants with a structured and transparent avenue to pursue control of a target company before the mandatory takeover bid obligation is triggered. It allows offerors greater flexibility in determining both the timing of the offer and the pricing of the securities, while maintaining equal treatment of holders and regulatory oversight through expert review.
Collectively, these mechanisms ensure that fairness for investors and flexibility for market participants are not mutually exclusive. Instead, they operate in tandem to safeguard confidence in the Maltese capital markets, support their continued development, and promote an orderly framework for the acquisition of control in companies with listed securities.
By: Emma Blake
