This week we take a look at poison pills (mechanisms to block or complicate the hostile takeover of a company) in the Mexican context. Whilst poison pills are frequently adopted by companies in the US, they are not used to the same extent in Mexico. This is in good part because if a family owns more than 50% of the capital (and thus voting shares) of a listed company (as is often the case in Mexico) poison pills are not necessary. The family just votes against the take over offer, even if it’s a high premium to the stock price. The family control of most Mexican companies largely explains why, to the best of our knowledge, there has not been a single successful hostile takeover of a listed Mexican company, ever. (Back in the 1980s the then FEMSA was subject to a hostile takeover by a black sheep family member, and in the 1990s Banamex considered a hostile takeover for Bancomer, but neither materialized.)
However, an increasing number of Mexican companies are no longer controlled by a single family, and with stock values depressed, concerns of a hostile take-over have likely grown. What can a Mexican company to thwart a hostile takeover? And how legally robust are such mechanisms? And what are the costs? Will we see a hostile takeover any time soon?
- Pyramid share structure. One easy solution is to list separately Holding companies and operating companies, so that by owning 51% of the holding company, which owns 51% of the operating companies, you control the operating company with 25% of the equity. While there are multiple motivations for such a structure, Alfa controls its subsidiaries (Alpek, Newmak..) via such a structure, as does Grupo Mexico (Southern Copper..), FEMSA (KOF), ICH (Simec), among others. Overall, while this works well in maintaining control, the problem is that the Holding companies typically trade at a big discount to its fair value and corporate flexibility is limited. Also, its only really viable, if have operating companies in different businesses.
- Different share classes and voting right per share (Televisa, FEMSA, America Movil etc.). This is fairly common in the USA (ie, Google, Facebook). In Mexico such structures are common in companies that set up share classes that predate the latest Securities law, (such as those companies mentioned), but the new law makes it difficult if not impossible to set up new share classes going forward.
- Corporate by-laws that go beyond the securities law and require board approval to acquire more than a certain threshold (5% or 10%) of the company, or set a minimum valuation level. If board approval not just disclosure is required to acquire the threshold stake, as long as the family controls the board, then its difficult to take control of the company.
The problem is when such by-laws contradict the Securities law. (Mexico’s securities law generally mandates that all shareholders are treated equally in a tender offer, and bidder who seeks to acquire 30% or more of a public company’s capital stock must do so through a tender offer for 100% of the stock, and board members have fiduciary duties to all shareholders). One high-profile example of a case in Mexico was in 2015 when Grupo México breached Grupo Aeroportuario del Pacífico’s poison pills by buying over 30% of the company without getting board approval as stipulated by the by-laws. Grupo Mexico argued the poison pill violated the Securities law. The case went all the way to the Mexican Supreme Court, which ruled in favor of GAP and Grupo Mexico was forced to divest its shares. This was the first time the validity of a poison pill in a Mexican publicly traded company was subject to judicial scrutiny. (Nevertheless, the jurisprudence of the Grupo Mexico / GAP case remains unclear, as there are certain special circumstances in that situation (different share classes, royalty payments to control group, no formal tender etc).
Many companies in Mexico whose “controlling” families own less than 50% of the companies (ie, Cemex, where family probably have 5% of the company) have board approval by-laws to this effect. While the Grupo Mexico example suggests the courts will uphold the legality of poison pills, many other factors can come into play, legal and political. For example, if a hostile buyer makes a tender offer for a company far above the market price, it may be difficult for the board to reject such an offer without violating its fiduciary obligations to all shareholders, especially if the board is properly independent. (This threat probably explains why many companies in Mexico are reluctant to make their board truly independent).
In the end, the outcome of a hostile takeover in such a situation will depend on a trade-off between the size of the premium, the legal strength of the poison pills, the cohesion and independence of the board, relationships between management and large minority shareholders, and even the government’s position. So far, the fear of protracted multi-year lawsuits in Mexico’s notoriously opaque courts has kept hostile bidders away. When its relatively easy to take control of a company in the USA, why bother in Mexico?
International Comparison
Analysis of Russell 3000 companies shows that almost half of the poison pills adopted since February 15, 2020 were due to publicly disclosed threats, with only just over a third of these cases citing the pandemic as a contributing factor. Of the remaining half, almost all were due to market volatility and depressed share prices, but also took company specific circumstances into account.
Netflix – adopted a poison pill to deter from a hostile takeover by Icahn in 2012. This poison pill terminated a year later when Icahn halved his stake in the Company.
Anheuser-Busch – did not renew their poison pill in 2004, allowing for In-Bev to acquire the Company in 2008.
Cadbury – poison pills are not allowed in the UK, which aided Kraft’s acquisition of the British confectioner in 2010.
Gain Capital Holdings – adopted a 3-year poison pill in 2013 to prevent a hostile takeover by FXCM Inc. They have since extended the poison pill for two further 3-year terms.
Mexico Tender Offer rules (from https://practiceguides.chambers.com/practice-guides/corporate-ma-2020/mexico)
Shareholding disclosure and general filing obligations are applicable to public companies in Mexico. Regarding shareholding disclosure, the following requirements must be met:
any person or group of persons who acquire shares in a publicly traded company, resulting in them holding an equity interest equal to or greater than 10% but lower than 30%, must inform the general investing public on the next working day;
related persons, as per the Mexican Securities Market Law definition, of a publicly traded company who increase or decrease their equity interest in the company by 5% must inform the general investing public on the next working day; and
any person or group of persons who holds 10% or more of the shares representing the capital stock of a publicly traded company must inform the CNBV of any acquisitions or sales of shares during any calendar quarter within five working days from the end of the relevant quarter.
This final point applies when the total trading amount performed by the person(s) in the applicable quarter is equal to or exceeds the equivalent in Mexican pesos of 1 million Investment Units (Unidades de Inversión). In addition, the person or group of persons shall inform the CNBV about the acquisitions and sales carried out within five working days, when the total amount traded in such term is equal to or exceeds the equivalent in Mexican Pesos of 1 million Investment Units, on the next working day after the day the amount is reached, calculating the value of the Investment Unit on the day of the last trade.
As to other filing obligations of publicly traded companies, they must generally and continuously disclose quarterly and yearly reports regarding the overall status of the company, as well as relevant events and material acts that are relevant to the issuer in its different areas and which might influence the stock value.
It is essential to note that the above-described reporting thresholds do not obviate the need to file an antitrust clearance petition if the underlying amounts paid or to-be-paid meet or exceed the thresholds mentioned in 2.4 Antitrust Regulations. This is especially relevant given the intrinsically confidential nature of an accumulation build-up before a securities filing needs to be made because it may bring undesired attention. Hence, special focus needs to be put into ascertaining that the COFECE clearance is processed and obtained in the strictest of confidence.
Finally, as of the end of 2018, under the General Law of Commercial Companies (Ley General de Sociedades Mercantiles, or LGSM), private corporations must confidentially inform certain governmental authorities of their shareholders and of any stock transfers. This requirement was implemented to monitor and prevent money laundering and other fraudulent schemes from being implemented through the incorporation of companies.
Esta semana analizamos los poison pills (mecanismos para bloquear o complicar las adquisiciones hostiles de las empresas) en el contexto mexicano. Aunque es una práctica comúnmente adoptada por empresas en los EE. UU., no se usan en la misma medida en México. Esto es en gran parte porque si una familia posee más del 50% del capital de una empresa (y, por lo tanto, las acciones con derecho a voto) de una compañía que cotiza en bolsa (como suele ser en el caso de México), las poison pills no son necesarias. La familia simplemente vota en contra de la oferta de adquisición, incluso si hay un valor más alto que el precio de las acciones. El control familiar de la mayoría de las empresas mexicanas explica en gran medida por qué, hasta donde sabemos, no ha habido una sola adquisición hostil exitosa de una compañía mexicana registrada, nunca. (En la década de 1980, el entonces FEMSA fue objeto de una adquisición hostil por parte de un miembro de la familia, y en la década de 1990 Banamex consideró una adquisición hostil de Bancomer, pero ninguno se materializó.)
Sin embargo, cada vez hay menos empresas mejicanas que están controladas por una sola familia, y con los valores de acciones deprimidos, es probable que haya más preocupaciones de adquisiciones hostiles. ¿Qué puede hacer una empresa mexicana para protegerse en contra de una adquisición hostil? ¿Y que tan funcionales son tales mecanismos legales? ¿Cuáles son los costos? ¿Habrá adquisiciones hostiles en el corto plazo?
- Tener una estructura piramidal de acciones. Una solución fácil es listar por separado la sociedad tenedora y las operativa, de modo que al poseer el 51% de la sociedad tenedora, que posee el 51% de la sociedad operativa, controla la sociedad operativa con el 25% del capital. Existen muchas motivaciones para tal estructura, Alfa controla sus subsidiarias (Alpek, Newmak…) a través de dicha estructura, al igual que Grupo México (Southern Copper…) FEMSA (KOF), ICH (Simec), entre otros. En general, esto funciona bien para mantener el control, el problema es que las sociedades tenedoras suelen negociar a precios con grandes descuentos a su valor razonable y la flexibilidad corporativa es limitada. Además, solo es realmente viable si tienen empresas operativas en diferentes negocios.
- Diferentes clases de acciones y derechos de voto por acción (Televisa, FEMSA, América Móvil, etc.). Esto es bastante común en los Estados Unidos (es decir, Google, Facebook). En México, tales estructuras son comunes en las compañías que establecen clases de acciones anteriores a la última ley de valores (como las empresas mencionadas), pero la nueva ley lo hace difícil, si no imposible, establecer nuevas clases de acciones en el futuro.
- Los estatutos corporativos que van más allá de la ley de valores y requieren la aprobación del consejo administrativo para adquirir más de un cierto número de acciones (5% o 10% de la empresa, o establecer un nivel mínimo de valoración. Si se requiere la aprobación del consejo administrativo, no solo se requiere divulgación para adquirir la participación en el cierto número de acciones, siempre que la familia tenga el control del consejo de administración, es difícil tomar el control de la empresa.
El problema es cuando tales estatutos contradicen la Ley de Valores. (La Ley de Valores de México generalmente exige que todos los accionistas reciban el mismo trato en una oferta pública, y que cualquier postor que busque adquirir el 30% o más del capital social de una empresa pública debe hacerlo a través de una oferta pública por el 100% de las acciones, y el consejo directivo tienen deberes fiduciarios para todos los accionistas). Un ejemplo de alto perfil de un caso en México fue en 2015 cuando Grupo México violó las poison pills de Grupo Aeroportuario del Pacífico al comprar más del 30% de la empresa sin obtener la aprobación del consejo administrativo según lo estipulado por los estatutos. Grupo México argumentó que el poison pill violó la Ley de Valores. El caso llegó hasta la Suprema Corte de Justicia de México que resultó en favor de GAP y Grupo México se vio obligado a deshacerse de sus acciones. Esta fue la primera vez que la validez de un poison pill en una empresa mexicana que cotiza en bolsa estaba sujeta a escrutinio judicial. (Sin embargo, la jurisprudencia del caso Grupo México/GAP sigue sin estar clara, ya que hay ciertas circunstancias especiales en esta situación (diferentes clases de acciones, pagos de regalías al grupo controlador, la falta de una oferta formal, etc.).
Muchas empresas en México cuyas familias “controladoras” poseen menos del 50% de las compañías (es decir, Cemex, donde la familia probablemente tiene el 5% de la empresa) tienen estatutos de aprobación del consejo para este efecto. Si bien el ejemplo de Grupo México sugiere que los tribunales defenderán la legalidad de los poison pills, pueden entrar en juego muchos otros factores, legales y políticos. Por ejemplo, si un comprador hostil hace una oferta pública por una empresa muy por encima del precio de mercado, puede ser difícil para el consejo rechazar dicha oferta sin violar sus obligaciones fiduciarias con todos los accionistas, especialmente si el consejo es propiamente independiente. (Esta amenaza probablemente explica por qué muchas empresas en México son reacias a hacer que su consejo sea realmente independiente).
Al final, el resultado de una adquisición hostil en tal situación dependerá de un intercambio entre el tamaño de la prima que se está pagando, la fuerza legal de los poison pills, la cohesión e independencia del consejo, las relaciones entre la administración y los grandes accionistas minoritarios, e incluso la posición del gobierno. Hasta ahora, el temor a demandas judiciales prolongadas de varios años en los tribunales notoriamente opacos de México ha mantenido alejados a los postores hostiles. Cuando es relativamente fácil tomar el control de una empresa en los Estados Unidos, ¿Por qué molestarse en México?
Comparación Internacional
El análisis de las compañías del Russell 3000 muestra que casi la mitad de las poison pills adoptadas desde el 15 de febrero de 2020 se debieron a amenazas divulgadas públicamente, con solo un poco más de un tercio de estos casos citando como la pandemia un factor contribuyente. De la mitad restante, casi todos se debieron a la volatilidad del mercado y la caída de precios de las acciones, pero también tuvieron en cuenta las circunstancias específicas de la compañía.
Netflix – adoptó un poison pill para disuadir una adquisición hostil por parte de Icahn en 2012. Este poison pill se terminó un año después cuando Icahn redujo su participación en la empresa a la mitad.
Anheuser-Busch – no renovó su poison pill en 2004, lo cual permitió a In-Bev adquirirla en 2008.
Cadbury – Los poison pills no son permitidos en el Reino Unido, lo que ayudó a la adquisición del pastelero británico por parte de Kraft en 2010.
Gain Capital Holdings – adoptó un poison pill de 3 años en 2013 para evitar la adquisición hostil por parte de FXCM Inc. Desde entonces han extendido el mismo por otros dos términos de 3 años.
Reglas de ofertas públicas de adquisición en México: (de: https://practiceguides.chambers.com/practice-guides/corporate-ma-2020/mexico)
Shareholding disclosure and general filing obligations are applicable to public companies in Mexico. Regarding shareholding disclosure, the following requirements must be met:
any person or group of persons who acquire shares in a publicly traded company, resulting in them holding an equity interest equal to or greater than 10% but lower than 30%, must inform the general investing public on the next working day;
related persons, as per the Mexican Securities Market Law definition, of a publicly traded company who increase or decrease their equity interest in the company by 5% must inform the general investing public on the next working day; and
any person or group of persons who holds 10% or more of the shares representing the capital stock of a publicly traded company must inform the CNBV of any acquisitions or sales of shares during any calendar quarter within five working days from the end of the relevant quarter.
This final point applies when the total trading amount performed by the person(s) in the applicable quarter is equal to or exceeds the equivalent in Mexican pesos of 1 million Investment Units (Unidades de Inversión). In addition, the person or group of persons shall inform the CNBV about the acquisitions and sales carried out within five working days, when the total amount traded in such term is equal to or exceeds the equivalent in Mexican Pesos of 1 million Investment Units, on the next working day after the day the amount is reached, calculating the value of the Investment Unit on the day of the last trade.
As to other filing obligations of publicly traded companies, they must generally and continuously disclose quarterly and yearly reports regarding the overall status of the company, as well as relevant events and material acts that are relevant to the issuer in its different areas and which might influence the stock value.
It is essential to note that the above-described reporting thresholds do not obviate the need to file an antitrust clearance petition if the underlying amounts paid or to-be-paid meet or exceed the thresholds mentioned in 2.4 Antitrust Regulations. This is especially relevant given the intrinsically confidential nature of an accumulation build-up before a securities filing needs to be made because it may bring undesired attention. Hence, special focus needs to be put into ascertaining that the COFECE clearance is processed and obtained in the strictest of confidence.
Finally, as of the end of 2018, under the General Law of Commercial Companies (Ley General de Sociedades Mercantiles, or LGSM), private corporations must confidentially inform certain governmental authorities of their shareholders and of any stock transfers. This requirement was implemented to monitor and prevent money laundering and other fraudulent schemes from being implemented through the incorporation of companies.
