Bermuda Insights: Corporate 2022

• Published date: 21 October 2022
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Shareholders
• Law Firm: Walkers
• Author: Mr Jonathan Betts and Nicholas Davies

Take Privates

The last few years have been standout years for take private transactions globally - representing the most active years since 2007 - with Bermudaincorporated listed companies involved in a number of the largest deals, including the matters below in the blue boxes.¹

What is driving the rush to the listco exit ramp? A convergence in the valuations of public companies - particularly in sectors adversely affected by COVID-19 - with their private company counterparts, record levels of private equity dry powder, relative ease (and affordability) of fundraising, increasing activism of minority public company shareholders, geopolitics and regulatory push factors have all played their part.

Much of the focus of take private activity, particularly involving businesses operating in Asia, has been on US-listed companies in the mid- and small-cap space. With Chinese businesses arguably the principal targets of the US Holding Foreign Companies Accountable Act passed in late 2020, this trend appears likely to continue. However, we also see increased take private activity in Hong Kong and elsewhere.

A number of factors will be relevant to structuring a take private, including: local law and listing requirements; the nature of the proposed acquisition; the proportion of the shares controlled by the bidder group; and anticipated public and independent shareholder take-up. In broad terms, it is more common to see mergers used in the North American markets, whereas a scheme remains de rigueur in Hong Kong.

So how do you take a Bermuda listed company private?

Bermuda's Companies Act provides three mechanisms:

Most take private proposals have the company's founders to the fore - even if it is private equity underpinning the bid - and they nearly always involve cashing-out the public shareholders, with founders and/or senior management rolling over their shares into the bidding company. In weighing up a take private proposal, it is crucial for the board to ensure that its fiduciary duties are discharged appropriately...