Kamal Habachi and Salima Bakouchi of Bakouchi & Habachi-HB Law Firm assess the regulatory landscape for mergers and acquisitions in Morocco
1. REGULATORY FRAMEWORK
1.1 What legislation and regulatory bodies govern public M&A activity in your jurisdiction?
The main legal texts that govern M&A transactions are: Law 26-03 governing public takeover bids on the stock market (as amended and supplemented by Law 46-06); and, Law 17-95 on joint stock companies as amended and supplemented. The primary regulatory bodies are the Council for the Code of Ethics in Securities (Conseil Déontologique des Valeurs Mobilières – CDVM); and, the Moroccan Competition Council (Conseil de la Concurrence) and the chief of the government.
1.2 How, by whom, and by what measures, are takeover regulations (or equivalent) enforced?
The takeover regulations are enforced by different entities. The CDVM is the supervisory authority for takeover bids, reviewing filings and enforcing takeover regulations.
2. STRUCTURAL CONSIDERATIONS
2.1 What are the basic structures for friendly and hostile acquisitions?
The basic structure for friendly and hostile acquisitions are tender offers that can be paid either in cash or shares for 100% of the target's share capital.
If the acquisition is paid in shares, it is often structured as a merger approved by the extraordinary general meeting of both the absorbed and the absorbing companies by a two-thirds majority of the shares or voting rights.
2.2 What determines the choice of structure, including in the case of a cross-border deal?
If the acquisition is a cash deal, it is often preceded by an acquisition of share blocks. If the acquisition is a share deal, the acquirer may structure its acquisition as a merger. The acquisition is preceded by a takeover bid to squeeze out minority shareholders, and then the company can implement the merger. If the case is a cross-border deal, it is necessary to consider the exchange office regulations.
2.3 How quickly can a bidder complete an acquisition? How long is the deal open to competing bids?
Acquisitions do not take a very long time. Moroccan law has given all the authorities and administrations a short deadline varying from five days to 60 days in order to speed up the process.
Regarding competing bids, the competitor must, from the date of the opening of a public offering, and no later than five trading days before its closing date, file the bid before the CDVM.
2.4 Are there restrictions on the price offered or its form (cash or shares)?
There are two types of acquisition: a takeover bid; and, a takeover bid for shares. The acquisition may also be a combination of both. The first one offers cash and the second one offers securities.
Takeover bids for cash involve a natural or legal person, acting alone or in concert, publicly disclosing that they intend to acquire the securities of a listed company against cash compensation.
Takeover bids for shares involve a natural or legal person, acting alone or in concert, making public that they intend to acquire, through a share exchange, the securities of a listed company.
2.5 What level of acceptance/ownership and other conditions determine whether the acquisition proceeds and can satisfactorily squeeze out or otherwise eliminate minority shareholders?
The Moroccan legislation does not provide for squeeze-outs. The minority shareholders have the right to withdraw from the capital of the company through the public repurchase offer or the mandatory public tender offer.
2.6 Do minority shareholders enjoy protections against the payment of control premiums, other preferential pricing for selected shareholders, and partial acquisitions, for example by mandatory offer requirements, ownership disclosure obligations and a best price/all holders rule?
The principle is that all shareholders of the same class of an offeree company must be treated similarly by an offeror. The minority shareholders do not have any specific protection against the payment of control premiums or any other preferences and rights regarding the price.
However, any person, alone or in concert (even unintentionally) exceeding the 40% threshold of the equity securities or voting rights in the target, must file an offer for 100% of the target's share capital and equity-linked securities.
Also, any person, alone or in concert (even unintentionally) exceeding the 95% threshold of the equity securities or voting rights in the target, must file a public repurchase offer.
2.7 To what extent can buyers make conditional offers, for example subject to financing, absence of material adverse changes or truth of representations? Are bank guarantees or certain funding of the purchase price required?
There are no provisions in Moroccan law that allow buyers the possibility of making conditional offers.
3. TAX CONSIDERATIONS
3.1 What are the basic tax considerations and trade-offs?
Basic tax is for stamp duty and registration, supported by the purchaser (about four percent) in the transaction. The seller is committed to pay tax in the case of added value.
3.2 Are there special considerations in cross-border deals?
For cross-border deals, some taxes may be added for service providers (such as those related to the withholding tax and the exchange office regulation) in order to repatriate the investment.
4. ANTI-TAKEOVER DEFENCES
4.1 What are the most important forms of antitakeover defences and are there any restrictions on their use?
In Morocco, there has never been a hostile takeover bid. Therefore, we have so far never seen examples of anti-takeover defences used by companies in Morocco.
There are different forms of anti-takeover defences that a company can use to resist a hostile takeover bid. For instance, a company can separate the power of the company from its share capital so that the power of the company can be concentrated in the hands of the reference shareholders, while the other shares are deprived from their voting right. Also, the company can make a statutory ceiling of participations (for instance, the maximum threshold that a company can hold is 10%).
4.2 How do targets use anti-takeover defences?
The target company can use anti-takeover defences to thwart a transaction, to negotiate a higher price or even to postpone an acquisition.
4.3 Is a target required to provide due diligence information to a potential bidder?
There is no provision in the law that obliges the target to give due diligence information to a potential bidder. If the target accepts the offer, it must establish an information document that can be prepared jointly with the bidder. The content of this document is set by and endorsed by the CDVM.
4.4 How do bidders overcome anti-takeover defences?
Bidders can overcome anti-takeover defences by offering a high price to make their offer more attractive.
4.5 Are there many examples of successful hostile acquisitions?
To the best of our knowledge, there are no cases of successful hostile acquisitions.
5. DEAL PROTECTIONS
5.1 What are the main ways for a friendly bidder and target to protect a friendly deal from a hostile interloper?
It is impossible to prevent an interloper from filing a competing offer. Anyone, if they fulfil the conditions provided by law, has the right to file a competing offer.
5.2 To what extent are deal protections prevented, for example by restrictions on impediments to competing bidders, break fees or lock-up agreements?
Any competitor has the right to make a public offer as long as the time period is open. Break fees are not provided in Moroccan law, and as such, they are not prohibited. However, the provision for break fees should take into consideration both: (i) the corporate interest of the company that agrees to it; and, (ii) the fact that the Moroccan judge is entitled to increase or decrease break fees if they are deemed excessively high or excessively low.
6. ANTITRUST/REGULATORY REVIEW
6.1 What are the anti-trust notification thresholds in your jurisdiction?
The notification of the competition council is mandatory one of the following conditions is met:
6.2 When will transactions falling below those thresholds be investigated?
Transactions that are below the thresholds described in 6.1 cannot be investigated by the CDVM.
6.3 Is an antitrust notification filing mandatory or voluntary?
The anti-trust notification filing is mandatory when the transactions falls within the thresholds as described in 6.1.
6.4 What are the deadlines for filing, and what are the penalties for not filing?
The filing must be done starting from the date when the party or the parties are able to present an offer that is sufficiently complete to enable the competition council to examine the file.
If the parties involved fail to file the notification, the competition council can, subject to a fine, order the concerned parties to notify the concentration project, unless they return to the previous state.
In addition, the competition council can pronounce penalties against the concerned parties that are, for legal entities up to five percent of their pre-tax turnover during the last closed financial year, and for natural persons Dh5 million.
6.5 How long are the antitrust review periods?
The competition council makes its decision in a period of 60 days starting from the day of receipt of the complete notification.
6.6 At what level does your antitrust authority have jurisdiction to review and impose penalties for failure to notify deals that do not have local competition effect?
To the extent of our knowledge, our antitrust authority does not have authority to review and impose penalties for failure to notify deals that do not have local competition effect.
6.7 What other regulatory or related obstacles do bidders face, including national security or protected industry review, foreign ownership restrictions, employment regulation and other governmental regulation?
Like any other corporation established in the Moroccan territory, it must comply with Moroccan law.
Regarding the Labour Law, the change in control of a company does not have any effect on the employees: the labour contracts must remain between the employees and the new employer without any change.
Also, in general, there are not any foreign ownership restrictions, except in some very limited fields.
7. ANTI-CORRUPTION REGIMES
7.1 What is the applicable anti-corruption legislation in your jurisdiction?
Anti-corruption in the private sector is defined in article 249 of the Criminal Code. It considers as guilty of corruption any employee, clerk, agent, employed or paid in any form, who either directly or through an intermediary has, without the knowledge and the consent of the owner, either requested or authorised offers or promises, either asked or received donations, gifts, commissions, discounts or premiums to do or refrain from doing any act of employment, or an act which, while out of their personal attributions, is or could be facilitated by its use.
The Moroccan government is taking different actions in order to fight against corruption. In this regard, the Central Authority for the Prevention of Corruption (ICPC), was established under Decree 02-05-1228 of March 13 2007.
The constitution of July 11 2011 has created a sense of national integrity. In 2011, it undertook a mission to coordinate, supervise and monitor the implementation of policies to prevent and fight against corruption.
The government has approved new law to create a national body to ensure integrity by fighting and preventing bribery.
7.2 What are the potential sanctions and how stringently have they been enforced?
The sanctions that are provided by law are imprisonment from one to three years and a fine from Dh5,000 to Dh50,000.
8. OTHER MATTERS
8.1 Are there any other material issues in your jurisdiction that might affect a public M&A transaction?
Unless involving an M&A with a public company of which the majority of shares belongs to the government, or when enforcing exchange legislation, there are no material issues that might affect a public M&A transaction other than as detailed above.
8.2 What are the key recent M&A developments in your jurisdiction?
There are no key recent M&A developments in our jurisdiction.
However, there have been some important private M&A transactions. For instance, in the gas and oil sector, the Saudi group Zahid acquired 30% of the shares of the French group Total. Also, in the telecommunication sector, the French Group Vivendi sold 53% of its shares in Maroc Telecom, the historical operator to UAE Etisalat, one of the biggest telecom operators in the Middle East region, after a long process of negotiations.
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Bakouchi & Habachi-HB Law Firm
About the author
Kamal Habachi is a corporate partner at HB Law Firm. He has significant experience in M&A, commercial contracts and restructuring, and specialises in corporate, financial, contract, and securities law. He received his PhD from a French University, and is admitted to the Casablanca Bar Association.
Habachi speaks Arabic, French, English and Spanish.
Bakouchi & Habachi-HB Law Firm
About the author
Salima Bakouchi is a partner at HB Law Firm. She was admitted to the Casablanca Bar Association in 1995, and worked in one of the leading law firms in Morocco, where she gained valuable experience as a legal advisor in different sectors.
Bakouchi has handled a wide range of transactions in various sectors and conducted numerous seminars in copyright, and consumer and competition law both in Morocco and abroad. She specialises in IP, banking and finance, and corporate, administrative, labour, commercial and competition law, and alternative dispute resolution.
Bakouchi speaks Arabic, French and English.