Capital Markets

Client Alert
June 2011

Bapepam-LK Issues a New Rule on Takeover of Public Companies

On 31 May 2011, the Indonesian Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) amended Bapepam-LK Rule No. IX.H.1 on the Takeover of Public Companies, as attached to Decision of the Chairman of Bapepam-LK No. Kep-259/BL/2008, dated 30 June 2008 (Previous Rule) by issuing new rule No. IX.H.1 on Takeover of Public Company, as attached to Decision of the Chairman of Bapepam-LK No. Kep264/BL/2011, dated 31 May 2011 (New Rule). The New Rule amended key provisions in the Previous Rule.

Whats New?
The New Rule is more comprehensive. The New Rule clearly provides that the tender offer meant in this New Rule is a Mandatory Tender Offer (MTO) which is to be differentiated from a voluntary tender offer as provided in Bapepam Rule IX.F.1. Consequently, the New Rule elaborates on the process of a tender offer applied in the MTO framework. Therefore, it is easier for the reader to understand the MTO process because the reader does not have to conduct cross reference with other regulations regarding the MTO process like with the Previous Rule. The new controlling party who shall undertake an MTO does not require an effective letter from Bapepam-LK anymore but it requires a Bapepam-LK statement letter stating that the new controlling party can announce the disclosure of information on the MTO in the newspaper. The New Rule clarifies that the acquired company and the acquirer that is a Public Company are not obliged to obtain shareholders approval for the takeover in a General Meeting of Shareholders, unless the approval is required under the laws/regulations which specifically govern their business activities. The New Rule regulates all processes of the MTO. Consequently, Rule No. IX.F.1 is no longer applicable for the MTO. Under the New Rule, the MTO period is fixed at 30 days. A shorter period of MTO as in the Previous Rule is not allowed anymore. Bapepam-LK may extend the period of the implementation of the mandatory sell-down to the public shareholders subject to certain conditions.

Key Provisions
The key provisions of the amendments are stated below. But it should be noted that generally the takeover process requires a tender offer to be made to all shareholders of the public company (unless exempted) and the requirements on divestment have not changed. 1. As in the Previous Rule, the MTO is mandatory if there is a change of control as a result of a Party (i) holding more than 50% of all issued and paid up shares of the Company, or (ii) having ability to determine, directly or indirectly in whatever manner, the management and/or policy of the Public Company. 2. New Definition of MTO. Pursuant to the New Rule, MTO is defined as an offer to purchase the remaining shares of the Public Company (unless exempted) which shall be conducted by the new controller. 3. Announcement of Negotiation Process. Both the Previous Rule and the New Rule state that the potential new controller may announce the negotiation process of takeover. In relation to the announcement, the potential new controller has two options: (a) the potential new controller may announce the proposed takeover during the negotiation process. If the potential new controller chooses this option, all information of the negotiation including the development, the postponement and/or the cancellation of the Takeover plan, shall be published in at least 1 Indonesian daily newspaper with nationwide circulation, and shall be disseminated to the company that will be acquired, Bapepam-LK, as well as the Stock Exchange where the shares of the company to be acquired are listed. The publication and the delivery of the information shall be conducted no later than 2 business days after the negotiation development occurs; or (b) the potential new controller must announce the proposed takeover no later than 1 business day after the takeover is conducted. 4. Detailed provisions of MTO Process. Similar with the Previous Rule, the new controlling party must undertake an MTO. In the New Rule, the MTO process starts no later than 2 business days after the publication of the takeover (no later than 3 business days after the transfer of the shares (crossing) of the acquired company from the previous controlling party to the new controller). We set out below the MTO process under the New Rule (a) Submission of Disclosure of Information on MTO In the implementation of the MTO, the new controller shall submit the text of the publication of disclosure of information on MTO including the supporting documents (e.g. letter of sufficiency of funds) to Bapepam-LK and the company to be acquired, no later than 2 business days after the announcement in at least one daily newspaper in respect of the Takeover.

Capital Markets June 2011

The New Rule describes the contents which shall be stated in the disclosure including: the background of the takeover; information regarding the shares, the new controller, and the acquired company; the conditions and requirements of the MTO; list of names and the addresses of institutions and/or capital market supporting professionals that are involved in the MTO; and other important information (e.g. a description of any lawsuit in relation to the takeover and additional information that is needed so that the disclosure of the information in order to conduct the MTO is not misleading). (b) Period to Respond to Bapepam-LK Request on Disclosure of Information of MTO The new controller shall submit the amendment and/or additional information of the disclosure of information on MTO with the other supporting documents no later than 5 business days after the receipt of Bapepam-LK request/comments. However, the New Rule does not regulate the period within when Bapepam-LK will make a request or comment on the disclosure of information on MTO. (c) Announcement of Disclosure of Information on MTO The new controller shall publish the disclosure of information on MTO in 1 Indonesian daily newspaper with nationwide circulation no later than 2 business days after the receipt of the statement letter from Bapepam-LK which stating that the new controller can publish the disclosure of information on MTO. (d) MTO Period The MTO period shall be 30 days starting 1 day after the announcement of the Disclosure of Information on MTO as mentioned in point c above. (e) Settlement Period The new controller must accomplish the MTO settlement process by the transfer of money, at the latest 12 days after the end of MTO Period. The period to settle the MTO settlement process under this New Rule is similar with the Previous Rule. (e) MTO Report The new controller shall report the result of the MTO to Bapepam-LK no later than 5 business days after the settlement is completed. 5. Extension Period for Mandatory Sell Down Requirement. Both the Previous Rule and the New Rule provide provisions on mandatory sell-down that state: (i) If the MTO results in the ownership of the acquired company by the new controller being more than 80% of the paid up capital of the acquired company, the new controller has an obligation to conduct a mandatory sell down of the shares to the public so that the shares that are owned by the public are at least 20% of the paid up capital of the acquired company and are owned by at least 300 Parties, within 2 years of the completion of the MTO;

Capital Markets June 2011

(ii) If the takeover results in the new controller owning more than 80% of the paid up capital of the acquired company, then the new controller must sell-down to the public at least the percentage of shares that were obtained at the time of the implementation of MTO and these shares shall be owned by at least 300 Parties within 2 years. Now, under the New Rule, Bapepam-LK may extend the implementation period of mandatory sell-down as mentioned above, if the following conditions occur: (i) the Indonesia Stock Exchange Composite (IDX Composite/IHSG) decreases by more than 10% on 3 consecutive trading days; (ii) the Stock Exchange where the shares of the acquired company are listed and traded is closed; (iii) the trade of the acquired companys shares on the Stock Exchange is suspended; (iv) there is a natural disaster, war, riot, fire, and/or strike, which significantly affects the continuity of business activities of the acquired company; (v) the price of the share that are subject to the mandatory sell-down is never equal or higher than the MTO price; and/or (vi) the new controller has made an effort to sell-down the shares, but the obligations to sell-down (article 5 point a and b of the New Rule) have not been fulfilled. However, the New Rule does not provide further explanation on how to prove that the new controller has made an effort to sell-down the shares. Bapepam-LK can grant the postponement of mandatory sell-down as above under the following procedure: (i) The new controller submits the request letter of suspension for the mandatory sell-down to Bapepam-LK accompanied by data and information on share prices which prove that the stock price at the time of the mandatory sell-down was never equal to or higher than the price of the MTO. (ii) The request letter of suspension also shall be accompanied by the an explanation on efforts that have been made in relation to the implementation of the mandatory sell-down as well as difficulties experienced in implementing the obligations of the mandatory selldown. Postponement of the mandatory sell-down is granted for a period of 6 months after the issuance date of the letter of approval of postponement of the mandatory sell-down by Bapepam-LK. If by the end of the extension period, the mandatory sell-down could not be implemented or could not be completed, the new controller can submit another application letter for suspension to Bapepam-LK, and Bapepam-LK may grant another extension or may decide on another action (within its authority). The new controller shall report the progress of fulfillment of obligations for the mandatory sell-down every 3 months (March, June, September and December) at the latest on the 10th business day of the following month.

Capital Markets June 2011

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Implementation
The New Rule is effective as of 31 May 2011. This client alert is prepared by Tuti Hadiputranto and Ahmad Zakaria

Hadiputranto, Hadinoto & Partners The Indonesia Stock Exchange Building, Tower II, 21st Floor Sudirman Central Business District Jl. Jenderal Sudirman Kav. 52-53 Jakarta 12190, Indonesia Tel: +62 21 515 5090/91/92/93 Fax: +62 21 515 4840/45/50/55

For further information on this subject please contact: Tuti Hadiputranto, Partner Tel +62 21 515 4904 or tuti.hadiputranto@bakernet.com Rambun Tjajo, Partner Tel +62 21 515 4858 rambun.tjajo@bakernet.com Indah Respati, Partner Tel +62 21 515 4967 indah.n.respati@bakernet.com Iqbal Darmawan, Senior Associate Tel +62 21 515 4907 iqbal.darmawan@bakernet.com Imran Muntaz, Senior Associate Tel +62 21 515 4938 imran.muntaz@bakernet.com Rieke Savitri, Senior Associate Tel +62 21 515 4911 rieke.savitri@bakernet.com Ahmad Zakaria, Associate Tel +62 21 515 4854 ahmad.zakaria@bakernet.com

This publication is intended to provide clients with information on recent legal developments and issues of significant interest. It should not be regarded as legal advice or opinion. 2011 Hadiputranto, Hadinoto & Partners. All rights reserved. Hadiputranto, Hadinoto & Partners is a member of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a partner means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an office means an office of any such law firm. This may qualify as Attorney Advertising requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

Capital Markets June 2011