[Last updated: 1 January 2025, unless otherwise noted]

There are two main forms of takeover bids in the Philippines:

• a voluntary takeover bid, in which a bidder voluntarily makes an offer for securities which do not meet the thresholds under the SRC IRR (see 4.1 below); and
• a mandatory takeover bid (see 4.2 below).

A bidder that intends to launch a takeover bid must include in its notification to the SEC and PSE an Initial Tender Offer Report, as well as proof of certain funds or a cash confirmation letter.

4.1 Voluntary public takeover bid

The bidder is free to make the takeover bid subject to merger control clearance if the merger breaches the thresholds under the PCA. Specifically, under the PCA, parties to an acquisition involving any trade, industry or commerce within the Philippines, or even without, to the extent such transaction has a direct, substantial and reasonably foreseeable effect in the trade, industry or commerce within the Philippines) are required to notify the Philippine Competition Commission of such transaction within 30 days from the execution of definitive agreements relating thereto where: (a) the aggregate annual gross revenues in, into or from the Philippines, or the value of the assets in the Philippines of the ultimate parent entity of at least one of the acquiring or acquired entities, including that of all entities that the ultimate parent entity controls, directly or indirectly, exceeds PHP 7.8 billion (Size of Party); and the value of the transaction exceeds PHP 3.2 billion (Size of Transaction). Furthermore, SEC approval is required in cases of merger or consolidation.

The bidder is in principle free to determine the price and the form of consideration offered to the target shareholders (absent any pre-existing controlling interest in the target):

• The offered price may be paid in cash, securities or a combination of both.
• There is no minimum price for a voluntary takeover bid, but price is generally based on a valuation report issued by an independent appraiser for the shares to be acquired.

4.2 Mandatory public takeover bid

A mandatory takeover bid is triggered as soon as a person or group of persons acting in concert (or persons acting for their account) as a result of an acquisition of voting securities, holds (a) at least 15% of equity securities in a public company in one or more transactions within a period of 12 months; or (b) at least 35% of the outstanding voting shares, or such outstanding voting shares that are sufficient to gain control of the board of directors of a public company, in one or more transactions within a period of 12 months; or (c) at least 35% of the outstanding voting shares, or such outstanding voting shares that are sufficient to gain control of the board of directors of a public company, directly from one or more stockholders; or (d) such amount of the outstanding equity securities of a public company that will result in the acquiring party owning more than 50% of the total outstanding equity securities thereof.

Under the SRC IRR, unless the acquisition of equity securities is intended to circumvent or defeat the objectives of the Tender Offer Rules, the mandatory tender offer requirement shall not apply to the situations where:

• any purchase of securities from the unissued capital stock; Provided, the acquisition will not result to a fifty percent (50%) or more ownership of securities by the purchaser or such percentage that is sufficient to gain control of the board;
• any purchase of securities from an increase in authorized capital stock;
• purchase in connection with foreclosure proceedings involving a duly constituted pledge or security arrangement where the acquisition is made by the debtor or creditor;
• purchases in connection with a privatization undertaken by the government of the Philippines;
• purchases in connection with corporate rehabilitation under court supervision;
• purchases in the open market at the prevailing market price; and
• merger or consolidation.

In terms of the price offered and the form of the consideration, the Tender Offer Rules require that the price must be supported by a fairness opinion provided by an independent financial advisor or equivalent third party.

4.3 Follow-on squeeze-out and sell-out right

1. Follow-on squeeze-out: There are no regulations under Philippine law which allow for a "squeeze out" such that a bidder will be able to compel minority shareholders to sell their shares.
2. Sell-out right if the bidder is not itself launching a squeeze-out: There are likewise no regulations under Philippine law allowing minority shareholders to sell-out their shares to a bidder following a take-over. In lieu of a squeeze out, the delisting rules of the PSE ("Delisting Rules") requires an applicant seeking to delist to show the PSE that following the acquisition of the tendered shares, such persons have obtained a total of at least 95% of the issued and outstanding listed securities of the applicant company. Furthermore, a reverse stock split which is also commonly implemented whereby a company will increase the par value of its shares resulting in a "fractionalization" of the shares held by the shareholders under the previous par value, that is, the reduction of a shareholders' shareholding into less than one share in the company.