GARCIA, Maria Francheska M.

2016
SEC and the Securities Regulations Code

C Corp. is the direct holder of 10% of the shareholdings in U Corp., a nonlisted (not public)
firm, which in turn owns 62% of the shareholdings in H Corp., a publicly listed company. The
other principal stockholder in H Corp. is C Corp. which owns 18% of its shares. Meanwhile,
the majority stocks in U Corp. are owned by B Corp. and V Corp. at 22% and 30%,
respectively. B Corp. and V Corp. later sold their respective shares in U Corp. to C Corp.,
thereby resulting in the increase of C Corp.'s interest in U Corp., whether direct or indirect, to
more than 50%.

[a] Explain the Tender Offer Rule under the Securities Regulation Code. (2.5%)

[b] Does the Tender Offer Rule apply in this case where there has been an indirect
acquisition of the shareholdings in H Corp. by C Corp.? Discuss. (2.5%)

OWN SUGGESTED ANSWER

(a) A tender offer means a publicly announced intention by a person acting alone or in
concert with other persons (hereinafter referred to as “person”) to acquire
outstanding equity securities of a public company as defined in SRC Rule 3, or
outstanding equity securities of an associate or related company of such public
company which controls the said public company.
(b) YES. In Cemco Holdings vs. National Life Insurance Company of the Philippines Inc
(G.R. No. 171815, August 17, 2011), the Supreme Court ruled that the Tender Offer
Rule applies to indirect acquisitions “What is decisive is the determination of the
power of control. The legislative intent behind the tender offer rule makes clear that
the type of activity intended to be regulated is the acquisition of control of the listed
company through the purchase of shares. Control may [be] effected through a
direct and indirect acquisition of stock, and when this takes place, irrespective
of the means, a tender offer must occur. The bottomline of the law is to give the
shareholder of the listed company the opportunity to decide whether or not to sell in
connection with a transfer of control. x x x”