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

3.1 Consultation with the CMA

Given that there has been only limited practical experience of takeovers in Saudi Arabia, it would be prudent for any prospective bidder to consult with the CMA on all the steps before proceeding with such transactions.

Aside from this, we note that the MARs specifically require that the CMA be consulted on certain key aspects of the proposed offer, including where a party wishes to contact any shareholder with a view to seeking an irrevocable commitment to accept or refrain from accepting an offer or potential offer.

3.2 Pre-bid considerations under the MARs

With only limited practical experience of conducting takeovers in Saudi Arabia, it is difficult to meaningfully comment on what the pre-bid considerations for a bidder in Saudi Arabia might be and how the provisions of the MARs might impact on the bidder's preparations in practice.

That being said, it is perhaps useful to consider some of the key steps that bidders in other jurisdictions would be likely to undertake in advance of launching a formal offer (whether on a mandatory or voluntary basis) and consider how these are treated or addressed under the MARs:

1. Maintaining secrecy during the pre-bid phase – The MARs impose obligations on persons involved in a takeover to "eliminate the chances of a leak of information". Accordingly, we would expect bidders in Saudi Arabia to monitor the target's share price and press speculation as evidence of any leak and have a "leaks" announcement pre-drafted and ready for release to correct any rumor or speculation (as the MARs require).
2. Due diligence – Obligations around conducting due diligence are not directly addressed in the MARs. However, the bidder and the target are required to appoint independent financial and legal advisers who would likely perform a role in the due diligence.
3. Confirming availability of financing on a "certain funds" basis – In cases where the offer is in cash or includes a cash element, the MARs require that the offer document must confirm that the bidder has obtained a bank guarantee from a local bank guaranteeing its ability to fully fund the cash component of the offer.
4. Plan for dealing with any share options – The MARs require that offers are also to be made for options.
5. Seeking support for the offer both from the target directors and from large shareholders. The CMA takes the view that the MARs do not allow a bidder to selectively share information with only some of the shareholders of the target that is not made available to remaining shareholders on the basis that this goes against the principle of "equality of information" between shareholders. Having said that, wall-crossing can take place provided certain requirements are met.

3.3 Shareholding rights and powers

The table below provides an overview of the different rights and powers that are attached to different levels of shareholding within a Saudi Arabian listed company. The shareholding percentages listed below may vary depending based on the specifics of a company’s bylaws, as in many instances, it is permissible for companies to adopt higher or lower voting thresholds than those stipulated in the relevant laws and regulations.

3.4 Acting in concert

The MARs contain provisions requiring persons who "act in concert" to be treated as one person. Persons are treated as acting in concert if they actively co-operate, pursuant to an agreement or an understanding (even if it is non-binding or informal), to control a company through the acquisition by any of them of voting shares in that company. In certain cases, persons are presumed to be acting in concert with each other where they have a certain relationship(s) with one another, e.g., such as companies that are members of the same group.

3.5 Announcement of a public takeover obligation

The MARs clarify that an announcement of a firm intention to make an offer should only be made where the bidder has "every reason" to believe that it can and will continue to be able to implement its offer. Where an announcement of a firm intention is made, the bidder must, unless it is exempted by the CMA, proceed with the offer except where the offer is subject to a specific condition which has been made public and which has not been met.

The MARs stipulate a number of other circumstances where an announcement must be made by either the bidder or the target in the context of a potential offer, including:

• when a firm intention to make an offer is notified to the board of the target, irrespective of the target's attitude to the offer;
• upon an acquisition of shares by a person which gives rise to an obligation to make a mandatory offer (see 4.2);
• when a person (or persons acting in concert) become(s) the owner of 40% of the target's voting shares;
• when, before a bid approach has been made, the target is the subject of rumors and speculation or where there is an untoward price movement in the target's shares of 10% or more within a single day and there are reasonable grounds for concluding that this is a result of the potential bidder's actions;
• when, following a bid approach, the target is the subject of offer-related rumors and speculation, or where there is an untoward price movement in the target's shares of 20% or more from the lowest share price since the time of the approach or a price movement of 10% or more in a single day; and
• when negotiations or discussions are extended to include more than a very restricted number of people, i.e., outside those who need to know in the companies concerned and their immediate advisors, regarding (i) an acquisition of 30% or more of the voting shares of the target or (ii) the board of the target seeking one or more potential bidders.

3.6 Insider dealing

The general rules regarding insider dealing are set out in the Market Conduct Regulations. They will continue to apply both during and after the offer. The MARs also include provisions which prohibit improper disclosure of confidential information, including, in particular, price sensitive information.

3.7 Disclosure of certain dealings

The MARs require various specific disclosures concerning dealings during the offer period, including dealings by a bidder or a target for their own account.

3.8 Statutory Merger Creditor Objection Period

Pursuant to the Companies Law, once a merger has been agreed between the bidder and target, both parties are required to announce the merger at least 30 days prior to the date set for deciding and voting on the merger proposal. The target’s announcement will trigger the start of the creditor objection period, whereby any creditor of the target may object to the merger within 15 days from the date of the announcement. In the event that a creditor objection is received, the target will be required to pay the relevant debt if it is payable prior to or during the creditor objection period, or provide sufficient guarantee or collateral to the creditor for the settlement of the relevant debt, if it is payable after the end of the creditor objection period. If the target fails to do so, the creditor can petition the competent judicial authority at least 10 days before the merger decision. The judicial authority can order the payment of the debt or provision of a guarantee and may suspend or postpone the merger if it finds that the merger could cause serious damage to the creditor.

3.9 Statutory Merger Effectiveness and Transfer of Rights and Liabilities

A statutory merger is deemed effective as of the date of registering the target’s information in the bidder’s register with the Commercial Register. Upon the effectiveness of the statutory merger, all rights, liabilities, assets and contracts of the target shall be deemed transferred to the bidder.