From now on, anyone who takes control of 30 per cent or more of a real estate investment trust (Reit) will have to make a mandatory general offer to the rest of the unit-holders.
The Securities Industry Council (SIC) announced yesterday that it has decided to extend the Singapore Code on Takeovers and Mergers - which currently governs only listed companies and those with more than 50 shareholders and net tangible assets of $5 million or more - to property trusts structured as collective investment schemes.
The local securities industry watchdog said its decision was in line with existing rules in Britain and Australia where property trusts are subject to takeover provisions.
‘The application of the code to Reits would not only protect the interests of minority investors but also that of the incumbent controlling unit-holders,’ the SIC said in a statement yesterday.
It further explained that in the absence of a proper framework governing takeover and merger transactions of Reits, a party would be able to accumulate effective control of a property trust without having to make a general offer.
‘Under such circumstances, incumbent controlling unit-holders might not be able to extract a control premium from such party. A proper framework that ensures the fair and equal treatment of all unit-holders would enhance the reputation of the Reit market in Singapore and add to its growth,’ it added.
It also pointed out that concerns relating to proper governance and accountability are equally applicable to Reits. ‘In the opinion of SIC, there is no strong basis for not extending the code to Reits,’ it noted.
The Monetary Authority of Singapore, on the advice of the SIC, will introduce the appropriate changes to the Securities & Futures Act and the code.
Until then, the SIC has advised parties engaged in takeovers or mergers involving Reits to comply with the code. This relates particularly to parties intending to acquire 30 per cent or more of a Reit; or those already holding not less than 30 per cent but not more than 50 per cent and acquiring more than one per cent of a Reit in any six-month period. The main rationale for the takeover laws is that if there is a change in management, the minority shareholders must be given a chance to opt out.
The securities market here is regulated on the basis that all shareholders must be treated equal; there must be sufficient information to shareholders to enable them to decide on the merits of a takeover or merger; there must be a fair market at all material time; and the offeree company must not take action that will frustrate the offer.
Singapore’s Reit market - the third-largest in the Asia-Pacific after Australia and Japan - has grown to more than US$18 billion, boosted by about 20 trusts containing assets ranging from Indonesian hospitals to Chinese shopping malls.
Source : Business Times - 9 Jun 2007
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