Mandatory Tender Offer In Türkiye – A Practical Guide

Although the concept of mandatory tender offer ("MTO") is well-known and frequently discussed topic under Turkish capital markets law, it is useful to periodically refresh our understanding of its framework and implications. The MTO mechanism plays a critical role in mergers and acquisitions involving publicly held companies, as it serves to protect minority shareholders and ensure fairness in control transactions.

In this article, we will revisit the MTO process in a practical Q&A format, focusing on the legal basis, procedural requirements, and recent developments under Turkish legislation. The Capital Markets Board of Türkiye ("CMB") is the competent authority overseeing MTO processes, which are primarily regulated under the Capital Markets Law numbered 6332¹, and the Communique on Takeover Bids (II-26.1) issued by the CMB ("Communique")².

When Does It Happen?

If a person or company takes control of a listed company – meaning acquisition of more than 50% of the voting rights, or the ability to elect the majority of the board regardless of the shareholding percentage – they must make a tender offer to all other shareholders. This tender offer requirement protects minority investors, gives them the opportunity to re-evaluate their investment decisions and allows them to sell their shares at a fair price when the control of the company changes.

What is "Control Change"?

A "control change" takes place when someone gains the ability to run the company. This is not only about the number of shares, but also about the voting power and board control. For example:

• Owning more than 50% of the voting rights (directly or indirectly),
• Having the power to elect the majority of the board through privileged shares, and
• Acting together with others (concerted action – like voting agreements).

Step-by-Step Process

Below is the summary of the process, as required by the CMB and regulated under the Communique.

1. Change of control is publicly announced: The new controlling shareholder must immediately disclose the change to the stock exchange in accordance with the Communique on Material Events Disclosure³.
2. Application to the CMB: Within 6 business days from the control change, the new controlling shareholder (with its investment bank/broker) applies to the CMB to start the tender offer process.
3. Approval and start of the offer: Once the CMB approves the application and the "information form" the tender offer must start within 6 business days. The offer period lasts between 10 to 20 business days.
4. Deadline: The tender offer must begin within 2 months after the control change. If it starts later, the offer price is increased by an extra interest (based on TLREF + 50%).

Who Can Sell Their Shares?

Only those who already owned shares at the time the control change was publicly announced. The Central Securities Depository provides the official list of these shareholders.

Price of the Offer

The CMB sets rules on how the price is calculated, usually based on average trading prices and recent purchase prices. If there is a delay, extra interest (TLREF + 50%) is added to the price. If payment is made with securities instead of cash, those securities must be publicly traded. The tender offer can only be made in Turkish Lira. In share acquisitions that give rise to the mandatory takeover bid obligation, any ancillary actions that can be directly included in the price paid, or any premiums and similar matters that would be paid if certain conditions accrued after the share transfer date, are taken into account in calculating the takeover bid price. If deemed necessary by the CMB, a valuation report may be prepared based on the share transfer date to determine the takeover bid price.

Consequences of Incompliance

If the purchaser does not make the tender offer on time, the CMB can impose fines and also freeze the voting rights of the controlling shareholder until the tender offer is made. Additionally, the CMB may impose an administrative fine on both individuals and legal entities responsible for violating MTO requirements. The amount may reach millions of Turkish Lira for corporate violators depending on the severity and nature of the breach. Also, although not specifically regulated, theoretically, shareholders wishing to exercise their right to withdraw may also file a specific performance lawsuit against the entity that has failed to fulfill the MTO obligation.

Exemptions

If any of the following cases exist, the obligation to make MTO does not arise:

1. Control is obtained via a voluntary tender offer made to all shareholders for all their shares,
2. No shares are bought, but control is gained by private written agreements between shareholders, provided that those agreements are approved by the general assembly meeting of shareholders, and those shareholders who vote against and record their dissenting opinion are granted a right of exit.
3. A controlling shareholder's share ratio drops below 50% and before control passes to a third party, that same shareholder buys shares again and regains 50% of voting rights.
4. When the transfer of control takes place between persons or entities who are already considered to be "acting together",
5. If the existing controlling shareholders transfer some of their shares to someone else and, as a result, the new person has 50% or less of the voting rights and control of the company is shared under a written agreement,
6. If taking control of the company also triggers special exit or squeeze-out rights under the law,
7. If the company makes a capital increase with rights for all shareholders to participate, and some shareholders use their rights and end up gaining control as a result,
8. If someone gains control because of changes inside the company, such as when other shareholders' voting rights are suspended, the company reduces capital by cancelling shares, changing or removing voting privileges in the articles of association, or repurchasing its own shares.

Special Cases

The CMB has discretion to exempt the new controlling shareholder from actually making the MTO if certain reasonable and justifiable conditions exist:

• Financial-distress recapitalizations – If the acquisition of shares/votes happens as part of a capital structure change that is necessary to strengthen a financially distressed public company.
• Immediate sell-down/commitment to sell – If the portion of the shares that triggers the obligation is disposed of and the acquirer does not use those shares at the general assembly of shareholders' meeting or change the board in the meantime.
• Parent-level change without a target control purpose – If the control changes at the parent company and is not aimed at taking control of the listed subsidiary.
• Privatization transactions – Sales of state owned shares.
• SPAC⁴ - type mergers (before listing) with redemption of dissenters. Where a SPAC acquires control provided that shares of those who vote against the merger in the pre-merger general assembly of shareholders' meeting are bought back in accordance with the prospectus rules.
• When control is obtained by a bank or financial institution solely for the purpose of securing or collecting a receivable.
• Transfer of shares in order to fulfill a legislative provision determining the nature of shareholding.
• Involuntary acquisitions by operation of law. - If control is obtained involuntarily, for example by inheritance, court order, or similar legal reasons.

In such cases, the new controller can apply to the CMB for an exemption within 6 business days following the triggering of an MTO.

Key Updates in Recent Years

• Who benefits clarified → only shareholders who had shares on the day of public announcement.
• Interest rule updated → delay interest now based on TLREF + 50%, replacing the old TRLIBOR system.
• Exemptions expanded → more situations where companies do not have to make an offer (inheritance, capital increases, technical control changes).
• Offer payments → if paying in securities, those must be publicly traded.
• Deadline rules tightened → CMB clarified timing and responsibilities for both the controlling shareholder and the investment institution.

The MTO process remains one of the most significant mechanisms in ensuring transparency, fairness, and investor protection in Turkish capital markets. Especially in M&A transactions involving publicly held companies, understanding the timing, exemptions and procedural obligations under the related legislation is crucial for both controlling shareholders and investors. Given its complexity and the potential regulatory and financial consequences of non-compliance, market participants are well advised to closely monitor CMB interpretations and periodically review their transaction structures in light of current regulations and practice.

Footnotes

1. Published in the Official Gazette dated 30 December 2012 and numbered 28513.

2. Published in the Official Gazette dated 23 January 2014 and numbered 28891.

3. Published in the Official Gazette dated 23 January 2014 and numbered 28891.

4. A special purpose acquisition company is a type of SPV created specifically to raise capital through an IPO in order to acquire an existing private company.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.