Public Mergers and Acquisitions in Argentina: Overview

A Q&A guide to public mergers and acquisitions law in Argentina.

The country-specific Q&A looks at current market activity; the regulation of recommended and hostile bids; pre-bid formalities, including due diligence, stakebuilding and agreements; procedures for announcing and making an offer (including documents and mandatory offers); consideration; post-bid considerations (including squeeze-out and de-listing procedures); defending hostile bids; tax issues; other regulatory requirements and restrictions; and any proposals for reform.

M&A Activity

1. What is the current status of the M&A market in your jurisdiction?

The current status of the M&A market in Argentina is modest. Since the Macri administration left office in 2019, foreign investment in Argentina has decreased because of a high level of state intervention in the economy coupled with a shortage of foreign exchange. In response the government has enacted multiple foreign exchange regulations restricting the outflow of dollars.

M&A transactions also have decreased in volume due to the slowdown in the Argentine economy and uncertainty regarding the economic and political environment.

However, there are certain factors that may positively impact the level of M&A activity in Argentina including:

• The low price of the country's assets compared with assets in similar countries in the region.
• The restructuring of the sovereign and sub-sovereign debt.
• The competitive advantages of certain local business sectors (for example, agribusiness, energy and natural resources, and technology).
  

The Argentine capital market is relatively small, lacks sufficient depth, has limited liquidity, and is subject to regulations that still need to be modernised to meet international standards. In addition, most public companies have a minority portion of their capital floating in the capital markets (between 10% and 30%). Therefore public M&A transactions are not frequent.

Most M&A activity is done through private deals. These may involve shares, assets, or a combination of both. Share deals are preferred to asset deals. Share deals are undertaken through stock purchase agreements that generally follow international standards for private transactions. These agreements can be subject to foreign law and jurisdiction, including foreign arbitration tribunals. This is generally the case in transactions for high-end Argentine companies. However, there are some aspects that will necessarily depend on, and be governed by, Argentine laws (for example, matters relating to the completion of transactions, certain matters covered by local securities regulations, labour laws, and regulatory requirements).

There is no database with generally available information regarding public M&A deals. The Argentine capital market is small (even when compared with neighbouring countries) and public M&A transactions are very limited. Information regarding public M&As is usually published in newspapers and media.

2. What have been the largest or most noteworthy sector-specific public M&A transactions in the past 12 months?
   

Public M&A activity has been extremely modest in Argentina during the past 12 months, both in terms of number of deals and deal volumes due to limited inbound foreign direct investment.

Energy

The most relevant transaction involving a public company in Argentina has been the recent sale by Pampa Energia of its 51% stake in the country's largest electricity supplier, Empresa Distribuidora y Comercializadora Norte (EDENOR), for USD95 million to Empresa de Energía del Cono Sur S.A. (EDELCOS). The consideration was:

• In kind through the transfer of 21,876,856 Class B shares of EDENOR.
• USD95 million cash.
• Through a contingent payment during the first year equal to 50% of the profits generated.

The deal was announced on 29 December 2020 and approved on 24 June 2021 by the local Electricity Regulatory Agency (ENRE). In accordance with regulations, EDELCOS will be required to launch a mandatory tender offer.

3. How were the largest or most noteworthy public M&A transactions financed?

Argentinian acquisition financing is very limited and costly. As a result, most foreign investors (for example private equity (PE) funds operating in Argentina) usually obtain their funding from foreign investors, including a broad variety of foreign institutional investors, pension funds, banks, hedge funds, multilateral institutions, and individuals. Some PE funds incorporated abroad but managed by Argentine managers obtain funding from local family offices, private individuals, and investment companies. Local banks, insurance companies, and government agencies do not normally invest in PE funds, and there are currently no regulations to promote or provide incentives for this.

Local portfolio VC companies are funded mainly through local capital contributions because of the existing foreign exchange regulations and difficulties in accessing the financial markets. Therefore, foreign sourced debt is not often used. Although local financing is available, it may not cover all the financial needs of the portfolio company.

Obtaining Control

4. What are the main means of obtaining control of a public company?

Tender Offer

The tender offer is the main means to acquire control over a public company in Argentina. A tender offer can be voluntary or mandatory. There are no substantial differences between the procedures for each. The main difference is the origin and percentage of shares that the bidder acquires in the target. A mandatory tender cannot be subject to any condition. A voluntary tender offer allows the parties to negotiate additional conditions.

Voluntary offer. The bidder can make:

• An offer to acquire all of the target's shares not already held by the bidder.
• An offer for 100% of the target's shares.
• A partial offer for a different percentage of the target's shares.

A tender offer can be made with or without the co-operation of a target's board and can be subject to a minimum level of acceptance.

Mandatory offer. If a company falls within the provisions of sections 87, 91 or 98 of the Capital Markets Law No. 26,831 (CML) a voluntary bid cannot be made, the bid must be mandatory. It will fall within those provisions if there is:

• A takeover.
• A quasi-total control situation.
• The company is withdrawn from the public offer regime.

Any party who has individually or jointly acquired a controlling interest in a public company, even in the event of a merger or any other reorganisation procedure, is required by the (CML) and the rules issued by the Argentine National Securities Commission (Comisión Nacional de Valores) (CNV) (CNV Rules) to launch a tender offer.

A controlling interest is defined by the CML as a party's direct or indirect acquisition of either:

• At least 50% of the voting rights of the target company.
• Less than 50% of the voting rights, but the party is still in a position to control the company.

The term controlling interest should not be confused with significant interest which refers to the percentage of participation that defines whether a mandatory tender offer should be made for 50 or 100% of the target company.

For further information on the mandatory tender offer regime see Question 18.

DUVA procedure. When a shareholder has acquired 95% or more of the outstanding shares of any type in a company it can either:

• Launch a simplified tender offer to acquire the remaining shares.
• Execute a declaration of unilateral acquisition procedure (declaración unilateral de voluntad de adquisición) (DUVA), a special unilateral deed. For further details on the DUVA procedure, see Question 22.

Mergers

When a public company is dissolved by a merger with a company that is not listed it must exchange the relevant securities for the merger prior to de-listing.

However, where a new company is created, or the name of the public company is changed, the new company must carry out a public offering transfer procedure so that the shares of the company that ceased to exist are listed under the name of the new company.

Trends in Deal Structure

The majority of tender offers in Argentina are de-listings. Most of the public listed companies in Argentina have opted for either the simplified tender offer or the DUVA procedure, especially in de-listings, as the traditional tender offer carried out by the issuer is harder and more time-consuming.

Hostile Bids

5. Are hostile bids allowed? If so, are they common?

Hostile bids are legal. They are not common because most public companies have a minority proportion of their capital floating on the capital markets (between 10 and 30%) and the balance is controlled by one shareholder.

Regulation and Regulatory Bodies

6. How are public takeovers and mergers regulated, and by whom?

The main regulations applicable to public takeovers and mergers are:

• The Capital Markets Law No. 26.831 (CML).
• Decree No. 1023/13 which supplements the CML, providing additional regulations and clarifications.
• The Productive Financing Law No. 27,440.
• The CNV Rules Title III, Chapter II.
• CNV General Resolution No. 779/2018 which regulates the tender offer procedure.
• The Companies Law No. 19,550.
• The Buenos Aires Stock Exchange Listing Rules.

Public takeovers and mergers are regulated by the CNV. Approval by additional governmental entities (for example, the Argentine Central Bank (BCRA) and the Antitrust Authority) may also be necessary, depending on the circumstances and business conducted by the company (see Question 27).

Pre-Bid

Due Diligence

7. What due diligence enquiries does a bidder generally make before making a recommended bid and a hostile bid? What information is in the public domain?

Recommended Bid

The information that is usually required in a recommended bid is similar to that required when undertaking due diligence for the acquisition of a private company, including:

• The company's economic background including annual and quarterly financial statements, loans and general debt pending, and tax payments.
• The company's adherence to the laws and rules governing its activities, which can be checked by for example, verifying published information, and researching any ongoing governmental agency procedures.
• Any current material contracts.
• The company's main corporate documents (for example its by-laws, shareholders' and board of directors' meeting minutes, and shareholders' registry).

The legal audit should be completed at the same time as the due diligence carried out by other professionals, for example accounting/financial advisors.

The parties usually sign confidentiality agreements, since the information exchanged is price-sensitive and can affect the trading of the listed company's shares.

Hostile Bid

There are no significant differences in the information usually required to perform due diligence in a hostile bid to that required in a recommended bid. Public companies have a very broad and comprehensive informative regime, see below, Public Domain.

Public Domain

The CNV Rules regulate the main disclosure obligations of public companies. All information is published on the CNV and Buenos Aires Stock Exchange (BASE) websites, and is publicly accessible. The CNV has introduced the Financial Information Highway (Autopista de Información Financiera) (AIF), a convenient tool to search public companies' information online.

Public companies must disclose, among other things:

• Updated by-laws.
• Significant transactions and contracts with related parties.
• Annual and quarterly financial statements.
• Board of directors' and shareholders' meetings minutes.
• Information on any outstanding notes.
• Where the company has issued notes, the documents involved in the deal (for example, the prospectus, pricing supplement, and offering memorandum).
• Any material fact that could affect their share price.

However, the parties can apply to the CNV to be exempt from the requirement to disclose material information for a limited period of time (not specified by law), provided that the disclosure of this information may affect the company's interests.

These disclosure requirements can vary for foreign companies whose shares are listed in Argentina. In most cases foreign companies publicly offered on an Argentine stock exchange are governed by the laws of their country of incorporation, provided that they are also listed in that country. Their disclosure obligations in Argentina are the same as those in their country of incorporation.

Secrecy

8. Are there any rules on maintaining secrecy until the bid is made?

The following individuals are required to maintain secrecy (on the price, time, and other conditions of the bid) until the bid is disclosed:

• The target's directors, managers, controlling shareholders, and professionals, for example, the target's auditors.
• The bidder's board, any staff or shareholders with knowledge of the bid, and any other person involved in a bid to purchase or swap the target's securities.
• The specialised appraisers involved in the transaction (see Question 11).
• CNV employees.
• Any individual who can access material non-public information that may affect the parties' negotiations or the offer because of their coincidental or temporary connection with the transaction, the company, or its directors.

(CML, Section 102 and CNV Rules Title XII, Chapter II, Sections I and II.)

Agreements with Shareholders

9. Is it common to obtain a memorandum of understanding or undertaking from key shareholders to sell their shares? If so, are there any disclosure requirements or other restrictions on the nature or terms of the agreement?

Before making a tender offer, it is common (although not mandatory) to obtain various agreements from the target's key shareholders (for example, management agreements which define how the management functions will be performed after the change of control of the target company). The terms of these agreements must comply with the target company's by-laws and applicable regulations. There are no specific requirements or restrictions on approaches to shareholders or other restrictions on the nature and terms of the agreement. However, if an agreement is made, it must be disclosed to the CNV.

The parties must disclose the main terms of these agreements to the CNV immediately after they are concluded (CML, Article 99(h) and CNV Rules Title XII, Chapter I, Article 3).

Stakebuilding

10. If the bidder decides to build a stake in the target (either through a direct shareholding or by using derivatives) before announcing the bid, what disclosure requirements, restrictions or timetables apply?

There are no specific stakebuilding disclosure requirements or restrictions other than the ones mentioned in Question 4, Question 18 and Question 22. However, general disclosure requirements may apply, including:

• Informing the CNV of every transaction involving:
  • more than 5% of the company's votes. This includes direct or indirect holdings through other individuals or legal entities or any group acting in concert; or
  • any change in the company's control structure.
• Filing monthly reports with the CNV on any changes in the shareholdings above the 5% threshold.

(CNV Rules Title XII, Chapter VI, Section XII.)

Agreements in Recommended Bids

11. If the board of the target company recommends a bid, is it common to have a formal agreement between the bidder and target? If so, what are the main issues that are likely to be covered in the agreement? To what extent can a target board agree not to solicit or recommend other offers?

When a bidder makes a takeover offer, the target's board of directors must issue a report on the tender offer including the following information:

• An outline of the board's views in favour or against the bid (especially on whether the proposed price is fair (see Question 20)). The board can expressly give an opinion against the bid.
• The opinions of two independent specialised appraisers appointed by the bidder on the bid to assess on the fairness of the price. The target does not appoint its own appraisers.
• Technical recommendations to shareholders about accepting or rejecting the offer.
• For directors and/or managers who are also shareholders, an announcement of their decision to accept or reject the proposed offer.
• An express statement on whether there is any agreement between the target and the bidder, or between the bidder and the board.

The target board's report must be disclosed at the same time as the relevant notice of the launch of the voluntary tender offer is published and within 15 days after the target is notified of the offer by the bidder (CNV Rules Title III, Section II, Chapter VI, Article 22.)

It is possible for the bidder and the target to enter into a formal agreement in recommended bids, although it is not usual. The CNV Rules expressly state that, if a formal agreement exists, the target's board of directors must expressly disclose its existence in their mandatory report (CNV Rules Title III, Chapter II, Article 2).

Argentine regulations do not directly address the actions that a target board can take to solicit or recommend other offers.

Break Fees

12. Is it common on a recommended bid for the target, or the bidder, to agree to pay a break fee if the bid is not successful?

It is not usual for the target or the bidder to agree to pay a break fee in any type of bid. The parties can agree the reimbursement of expenses and include it in the transaction documents.

Committed Funding

13. Is committed funding required before announcing an offer?

A bidder must guarantee its offer (for example, with cash, securities, or a financial entity's guarantee) and provide evidence to the CNV of this guarantee's existence and adequacy. Law does not specify the form of evidence to be provided.

In a DUVA (see Question 22), after obtaining CNV's approval, the controlling shareholder making the unilateral statement must deposit all the funds necessary to acquire the remaining shares at a fair price in a special account at a local financial institution. This may be more than the proposed price. The proposed price is not necessarily the final one as shareholders can challenge its fairness and reasonableness.

Announcing and Making the Offer

Making the Bid Public

14. How (and when) is a bid made public? Is the timetable altered if there is a competing bid?

In both recommended and hostile tender offers, the bidder is required to:

• Immediately notify the target company and the CNV of its intention and attach the tender offer announcement.
• Announce the tender offer by publishing an announcement through the CNV, which must include:
  • the public offering's material conditions, including the minimum and maximum quantities to be acquired, the mechanisms to settle disputes in case of offerings below or above the minimum (if a minimum is set), and priorities among the offerings to be made;
  • the bidder's identity and registered office;
  • information on any interest in the target company's shares held by the bidder (or any concert party), or shares in respect of which these persons have a purchase option or an irrevocable sale commitment, and the conditions for exercising any of these rights;
  • a declaration by the bidder's management that it has available economic means to maintain and comply with the offer; and
  • a standard declaration saying that an application for authorisation of the offer will be filed with the CNV within ten days following publication of the announcement, and that the information included in the announcement is therefore subject to changes and cannot be considered final.
• File the public offer application with the CNV within ten days from the publication of the announcement. This application must include certain additional information (for example, details on guarantees or other regulator's authorisations to be obtained) and a public offer prospectus.

(CNV Rules Title III, Chapter II, Article 5.)

The CNV has 15 business days after the filing of the public offer application and the prospectus to consider the application, which can be extended if additional information is required. The authorisation is automatically granted if the CNV does not raise objections or ask for further information during this term.

The public offer must be open to investors for 10 to 20 days from the date of the CNV's authorisation (CNV Rules Title III, Chapter II, Section II, Article 13). An additional term of five to ten days from the closing date of the public offer can be granted to shareholders who have not accepted the offer during the public period of acceptance. The same conditions as those in the initial term apply.

Competing Bids

A competing bid must comply with certain requirements. For example, it must:

• Be filed with the CNV for its consideration within 15 days of authorisation of the original bid.
• Target the same number of shares as the original bid.
• Improve the previous offer by increasing the value of the consideration offered by at least 10%.

(CNV Rules Title III, Chapter II, Section X, Article 35.)

If a competing bid is launched within five days of the CNV's authorisation:

• The initial bidder has seven business days to confirm or improve its offer.
• If the CNV authorises the initial bidder's new offer, the new terms and conditions of the offer must be published for at least one er business day in the official gazettes of the stock exchanges where the shares are listed, and for three days in a widely read newspaper.

The initial bidder can also withdraw its offer, but if the offer is not withdrawn, the original offer's term of acceptance is extended until the competing offer's term of acceptance expires.

Offer Conditions

15. What conditions are usually attached to a takeover offer? Can an offer be made subject to the satisfaction of pre-conditions (and, if so, are there any restrictions on the content of these pre-conditions)?

A takeover offer announcement usually includes the following conditions:

• Main terms and conditions of the offer.
• Maximum and minimum participating interest or shares the bidder undertakes to acquire.
• Bidder's identity and registered office.
• Means of payment and its terms.
• Period of time during which the offer will be binding, and how to accept the offer.
• Guarantees, if any, that will secure payment of the shares.

A bidder can make the offer conditional to the acquisition of a minimum number of shares (CNV Rules Title III, Chapter II, Annex V). There is no regulatory requirement that a certain percentage of the target's shares must be offered/bid. No other pre-conditions are permitted and the takeover offer must contain an irrevocable purchase agreement (CNV Rules Title III, Chapter II, Section I, Article 8). However, the price offered cannot be irrevocable as it can be challenged during the authorisation process.

Bid Documents

16. What documents do the target's shareholders receive on a recommended and hostile bid?

The target's shareholders usually receive a copy of the relevant offer documents, including:

• Prospectus (bidder).
• Tender offer announcement (bidder) (see Question 14).
• Guarantee documents, prior to the filing of the prospectus (bidder).
• Financial statements (bidder).
• Any documents filed with the CNV for example, information regarding the consideration offered and the statement of the target's board (bidder and target) (see Question 14).

Employee Consultation

17. Are there any requirements for a target's board to inform or consult its employees about the offer?

There are no requirements for a target's board to inform or consult its employees about the offer.

Mandatory Offers

18. Is there a requirement to make a mandatory offer?

All public companies authorised by the CNV are subject to the mandatory tender offer regulations, even when they expressly opt-out of it in their by-laws (CML, Article 90).

Under this regime, any party seeking to obtain direct or indirect control of a public company by acquiring a significant interest (see below) in the voting shares, pre-emptive rights, options, convertible notes, or any similar securities that give the right to own or buy, or can be turned into, shares must file a public offering or a securities exchange addressed to the holders of these securities. The regime applies whether a party seeks to obtain control:

• Individually or by previous agreement with other investors.
• Through a unique transaction or a number of successive purchases within a 90-day period.

(CNV Rules Title III, Chapter II, Section I, Article 3.)

The regime also applies when the acquisition takes place because of an internal reorganisation, merger, or demerger (CML, Articles 87 and 88).

A significant interest is acquired and the mandatory tender offer regime applies as follows:

• If a bidder (whether or not a shareholder) obtains an interest equal to or higher than 35%, it must launch an offer to acquire at least 50% of the target's shares. This provision does not apply if the significant interest acquired does not grant actual control of the company.
• If a bidder (whether or not a shareholder) intends to obtain an interest higher than 50%, it must make an offer to acquire 100% of the target's shares.

(CNV Rules Title III, Chapter II, Articles 9 to 12.)

For indirect mergers or acquisition of a company whose shares are admitted to trading, the following provisions apply:

• If the company incorporated or acquired is a holding company or its main assets are the shares of the target, the tender offer is triggered only if the indirect merger or acquisition involves the acquisition of a significant interest (35% or 50% as above).
• In any other case, the tender offer will be mandatory only if the indirect merger or acquisition involves the acquisition of 51% or more of the shares of the target company. The bid must be made for 100% of the target's shares in case of merger, or 75% in case of acquisition.

If the parties do not meet the CNV's requirements for launching a tender offer, the CNV may:

• Declare the transaction as administratively ineffective.
• Order the sale of the relevant securities through a public auction.
• Impose the applicable sanctions, including warnings, fines, disqualification of the parties' management, or prohibition from making or being subject to a public offer.

(CML, Article 89.)

There are certain exceptions to the mandatory tender offer regime that allow control of a public company to be acquired, including:

• The acquisition does not give control of the company (that is, the power to make any decision at the company's ordinary shareholders' meetings or to appoint a majority of the company's directors).
• The change of control is the result of a corporate reorganisation or a mere redistribution of shares among the companies of the same group, without alteration of the decision or control unity.
• The acquisition is made by financial trusts or similar investment entities under the BCRA's or the Argentine National Insurance Superintendence's decision.
• The acquisition is made under an expropriation or any other public authority prerogative.
• All shareholders of the target company agree to sell 100% of the company's shares.
• The acquisition is the result of a restructuring of a specific economic sector, decided by the national government.
• There is an indirect merger or acquisition, or the purchaser is a financial entity, and it plans to sell shares to reduce its participation below the applicable significant interest threshold.

(CNV Rules Title III, Chapter II, Section VIII, Article 32.)

Consideration

19. What form of consideration is commonly offered on a public takeover?

Consideration can be cash, securities, or a banking guarantee. Cash payment through bank deposits or wire transfer is the most common form of consideration. However, securities or a combination of cash and securities are also frequently offered.

The CNV Rules include certain requirements and restrictions related to each form of consideration. For example, if the consideration includes shares of the bidder, the bidder must call a shareholders' meeting to approve the capital increase (CNV Rules Title III, Chapter II, Section III, Articles 16 and 17).

20. Are there any regulations that provide for a minimum level of consideration?

The price offered for the shares must be fair and can be determined based on the shares' value or a discounted cash-flow analysis.

The CML establishes specific criteria for the determination of a fair/equitable price in a mandatory tender offer.

In takeover bids, the price should be the higher of:

• The highest price paid or agreed by the bidder for the same class of securities within the past 12 months (except for insignificant purchases).
• The average trading price of the securities subject to the tender offer during the past six months.

(CNV Rules Title III, Chapter II, Section III, Articles 16 and 17.)

The CNV may challenge the price offered if it considers it is not fair. In addition, any minority shareholder has the right to challenge the price either in judicial or arbitration courts. To assess the fairness of the price, the CNV examines the decision-making process that determined the offer price. In particular, the CNV examines all bidder's key considerations including the independent appraisal firm's fairness opinion and the bidder's surveillance and audit committees' favourable opinions.

In any other tender offer, the price should be the higher of:

• The highest price paid or agreed by the bidder for the same class of securities within the past 12 months (except for insignificant purchases).
• The average trading price of the securities subject to the tender offer during the past six months.
• The equity value of the shares.
• The company's value determined by an independent valuer.
• Liquidation value.

(CNV Rules Title III, Chapter III, Section III.)

The bidder and the shareholders can also agree on a specific price.

In any case, the fairness of the price can be challenged by both the target's shareholders and the CNV. Although the CNV can challenge or accept the price, it is not allowed to recommend a specific fair price to the bidder. Acceptance of the price by the CNV does not prevent minority shareholders from challenging the price.

21. Are there additional restrictions or requirements on the consideration that a foreign bidder can offer to shareholders?

Any transactions involving shares must be paid:

• In pesos, through one of the various means of payment available by deposit or transfer into custody or third-party accounts.
• In a foreign currency, through an electronic wire transfer of funds to and from demand accounts in local financial entities.

Therefore, shares cannot be paid in a foreign currency in cash, or through deposit in custody accounts or third-party accounts.

Foreign funds are in many cases subject to settlement in the foreign exchange market in accordance with BCRA regulations. The BCRA also provides for exceptions to the settlement obligation if certain requirements are met. All foreign exchange regulations are essentially mutable, and therefore the provisions of the BCRA currently in force may be subject to amendments and/or clarifications, and it is reasonable to expect that new regulations will be issued in the near future.

Post-Bid

Compulsory Purchase of Minority Shareholdings

22. Can a bidder compulsorily purchase the shares of remaining minority shareholders?

When a controlling shareholder has acquired 95% or more of all the outstanding shares of a public listed company (quasi-total control status), it has the right to buy all the remaining shares. Conversely, non-controlling shareholders can offer their shares to the controlling shareholders.

Where the controlling shareholder is in quasi-total control, they have the right to either:

• Launch a simplified tender offer to acquire the remaining shares with an offer term of no less than five and no more than ten days from the CNV's authorisation.
• Execute a declaration of unilateral acquisition procedure (declaración unilateral de voluntad de adquisición) (DUVA), a special unilateral deed.

(CML, Article 91.)

To carry out a DUVA the controlling shareholder:

• Files the directors' board meeting minutes approving the DUVA, the valuation report and the fair price application with the CNV and publishes a notice on the CNV website disclosing its interest in acquiring all the remaining shares at a fair price (see Question 20).
• Executes a public unilateral deed, following the CNV's approval.
• Deposits all the funds needed to acquire the shares at the fair price in a special account at a local financial institution. The fair price can be challenged by minority shareholders.

(CML, Article 94.)

The DUVA process is only applicable within six months after the quasi-total control has been acquired (CML, Article 91).

If the controlling party decides to issue a DUVA, approved by the CNV, the minority shareholders must sell their shares at the fixed price approved by the CNV, which is decided under the rules for the determination of the fair price in de-listing offers (CNV Rules Title III, Chapter II, Articles 25-35). However, certain courts have held that minority shareholders cannot be forced to sell their shares. For example, in the Tenaris case, the courts held that the compulsory acquisition of shares is contrary to the Constitution (Rodríguez, Álvaro y otros c/ Tenaris SA s/ amparo", La Ley, t. 2004-D, p. 418, y t. 2004-E, p. 310, AR/JUR/5713/2003).

The controlling party has 60 days to launch a public tender offer or execute a DUVA (CML, Article 93). If the controlling party fails to do so, any minority shareholder can require the competent court or arbitral tribunal to:

• Declare that its shares have been acquired by the controlling party.
• Fix the fair price for its shares.
• Order the controlling party to pay this price in cash.}

Restrictions on New Offers

23. If a bidder fails to obtain control of the target, are there any restrictions on it launching a new offer or buying shares in the target?

If the tender offer fails, the bidder cannot make another offer for 180 days from the publication of the outcome of the offer. In addition, they cannot buy target company shares that would trigger a mandatory tender offer (CNV Rules Title III, Chapter II, Article 76) (see Question 18). This also applies to any company from the bidder's group, and the bidder's board of directors and senior management.

De-Listing

24. What action is required to de-list a company?

A listed company can voluntarily apply for deregistration from the public offer regime.

First, the resolution to do so must be approved by the shareholders' meeting. According to BASE regulations, the shareholders' meeting that approves the de-listing requires a quorum of at least 75% of all the outstanding shares (BASE Listing Rules Article 49). The de-listing can be approved by the majority of the shares attending the meeting but the process can be blocked if more than 10% of the outstanding capital stock votes against it. The meeting will also have to expressly approve the share price.

Second, it must launch a mandatory tender offer for all its shares. The mandatory tender offer is subject to the following conditions:

• The company must offer to acquire 100% of the company's shares and votes (including voting shares, pre-emptive rights, options, convertible notes, or any similar securities which can provide the right to own or buy, or can be turned into, shares).
• It is not necessary to extend the offer to the shareholders that voted for the de-listing. These shareholders must keep their securities immobilised until the acceptance term expires.
• The prospectus must state that the company is proposing to de-list and identify the shares that are immobilised.
• The offered price must be fair.
• The consideration must be in currency.
• The company must provide evidence that the payment will not affect its solvency.

(CNV Rules Title III, Chapter I.)

The CML has established specific criteria for the determination of the fair price, which should be the higher of:

• The highest price paid or agreed by the bidder within the previous 12 months (without considering acquisitions of no significant value).
• The average price of the securities subject to the tender offer during the six months prior to the date of the tender offer announcement.
  

(CML, Article 88 and CNV Rules Title III, Chapter II, Section III.)

The CNV can challenge the fairness of the price, taking into account the process followed by the company to fix the price offered, the opinions of the company's two independent specialised appraisers, and any favourable opinion of its board.

The de-listing process requires filings with the CNV and BASE, and the approval by those regulators must be obtained to successfully de-list.

Target's Response

25. What actions can a target's board take to defend a hostile bid (pre- and post-bid)?

In a hostile bid, the target's board must:

• Maintain its neutrality and avoid performing any activity outside the ordinary course of business.
• Issue an opinion on the fairness of the offered price, and a recommendation to accept or reject the offer.
• Provide the shareholders with any relevant information about the company that can affect their decision on the offer.

(CNV Rules Title III, Chapter II, Section VI, Articles 22 to 26.)

The CNV Rules expressly prohibit the target company from:

• Issuing shares or other securities, unless expressly approved by the shareholders before the tender offer is notified.
• Implementing stock transactions with the securities included in the offer.
• Disposing of or pledging its assets, if this can affect the tender offer.

(CNV Rules Title III, Chapter II, Section VI, Articles 25 and 26.)

Argentine regulations do not directly address the defensive actions that a target can take to defend a hostile bid. The main mechanism used is to challenge the offered price to delay the takeover authorisation process and gain time to negotiate privately with the bidder.

Tax

26. Are any transfer duties payable on the sale of shares in a company that is incorporated and/or listed in the jurisdiction? Can payment of transfer duties be avoided?

The sale of shares of a company incorporated in Argentina is subject to income tax and stamp duty.

Income Tax

Income tax applies as follows:

• If the seller is an Argentine legal entity or an enterprise, it is taxed on income from the transfer of shares in a company incorporated in Argentina. The applicable rate ranges from 25% to 35% (depending on the net taxable profit obtained by the entity in the fiscal year).
• If the seller is an Argentine resident individual or an undivided estate, the applicable rate is 15% on the net profit (that is, the transfer price minus the acquisition cost).
• If the seller is a non-resident, the tax rate is 15%. However, here the taxpayer has two alternatives to assess the taxable income. Either they:
  • deduct the acquisition cost and expenses incurred in Argentina from the transfer price of the shares; or
  • apply a legal presumption in section 104, second paragraph of the Income Tax Law under which the tax result (gain) is equivalent to the 90% of the transfer price of the shares (resulting in an effective rate of 13.5% on the transfer price).
• These rates may be reduced by an applicable double taxation treaty.
  They may be increased to 35% if the seller is resident in a non-cooperative jurisdiction for fiscal transparency purposes or where the funds invested came from a non-cooperative jurisdiction.
• The sale of Argentine publicly quoted shares through a market authorised by the CNV is exempt from income tax if the seller is:
  • an individual or an undivided estate resident in Argentina;
  • a non-resident from a co-operative jurisdiction for fiscal transparency purposes; or
  • where the funds invested do not come from a non-cooperative jurisdiction.

Stamp Duty

Stamp duty applies to agreements for the sale of shares (that is, any agreement or document that transfers ownership of shares). The rates vary depending on the jurisdiction, and normally range from 1% to 1.5% of the value of the agreement. However, this tax is not applicable if the parties entered into the agreement through an offer letter (that is, a proposal accepted tacitly or expressly, as opposed to an agreement signed by both parties).

In addition, the sale of shares duly authorised for public offering by the CNV is exempt from stamp duty in certain jurisdictions (for example, the province of Buenos Aires and the city of Buenos Aires) provided that either or both of the following apply:

• Within a period of 90 calendar days the entity requests authorisation for the public offering of these marketable securities before the CNV.
• The placement of the stock is carried out within 180 calendar days from the date the requested authorisation is granted.

Other Regulatory Restrictions

27. Are any other regulatory approvals required, such as in relation to merger control, foreign ownership or specific industries? If so, what is the effect of obtaining these approvals on the public offer timetable?

Merger Control

Under the Argentine Competition Act (ACA), certain transactions must be filed for merger control and are subject to the approval of the Argentine Antitrust Commission (AAC). The obligation to submit a transaction to merger control depends both on whether:

• There is a change of control in a company or part of a company with activities or assets in Argentina.
• Certain thresholds are met.

Both of the following thresholds must be met:

• The aggregate Argentine turnover of the acquiring group and the target, including controlled companies, during the previous fiscal year is equal to or higher than 100 million Mobile Units.
• The price of the transaction and the value of the Argentine assets acquired are equal to or higher than 20 million Mobile Units or the acquirer has participated in transactions in the same market:
  • during the last 12 months which altogether exceed 20 million Mobile Units; or
  • during the last 36 months which altogether exceed 60 million Mobile Units.

The value of a Mobile Unit is updated regularly. Each Mobile Unit is about ARS55. Substantial and regular exports into Argentina count as Argentine turnover.

The transaction may be exempt from merger control if one of the exemptions in the ACA applies. Even if the threshold for business volume is exceeded, the transaction may not be subject to the report obligation in one of the following scenarios:

• The buyer previously owned more than 50% of the stock in the company they are acquiring and the acquisition will not lead to a change of control in that company.
• The acquisition is one of bonds, debentures, non-voting shares or other debt instruments.
• A single foreign company is acquiring a single Argentine company and the buyer did not previously own any assets or stock in other companies in Argentina (excluding those with residential purposes) and the buyers' exports to Argentina have not been significant, regular, and frequent during the past 36 months.
• The buyer is acquiring companies that have not carried out business in Argentina during the last year, unless the buyer and target's business activities are the same.

As a general rule, a transaction can be filed before closing or up until one week after. In certain circumstances, the CNV may require the bidder to notify the AAC of the offer for its prior approval. This notification must be done within seven days of submitting the application for authorisation to the CNV. If the AAC does not approve the transaction before the expiration of the tender offer, the CNV will require the bidder to withdraw the offer.

In general, a simple transaction can be approved in three months to a year. For more complex transactions the approval may take upwards of 18 months.

Regulated Industries

The BCRA expressly regulates the acquisition of shares in local financial entities. Under BCRA regulations, any transfer of shares or capital contribution in a financial entity which may lead to a direct or indirect change in the shareholding structure must be notified to the Superintendence of Financial Entities within the ten days after the first of the following acts occurs:

• Signing of the agreement (or preliminary agreement).
• Delivery of the shares.
• Payment in advance of the price or the capital contribution (which cannot exceed 20% of the agreed price or capital contribution).

(BCRA Rules, Creation, Operation and Expansion of Financial Institutions, Section V.)

No further actions can be taken without the BCRA's approval.

Therefore, any transfer of shares or capital contribution must be agreed ad referendum.

For offers made in stock exchanges in Argentina or abroad, the financial entity must inform the Superintendence of Financial Entities of the main terms of the deal prior to the offer. In addition, if as a result of the offer tender, any individual stakes exceed 2% of the total shares, the financial entity must file information on the subscribers or acquirers (including their identity, nationality and registered office) within ten days of the offer.

When the tender offer could cause a change in the entity's rating or a change in the structure of the groups of stakeholders, the offer prospectus must inform the potential investors of the requirement to obtain prior approval by the BCRA. Approval can take several months and delay the process.

Foreign Ownership

Foreign entities are subject to the same general requirements as local entities. In addition, to become a shareholder of an Argentine company, foreign companies must:

• Register with the competent Public Registry of Commerce.
• Must provide evidence:
  • that they perform their main activity outside Argentina;
  • that they hold sufficient assets outside Argentina;
  • that their board of directors has decided to register the company in Argentina; and
  • of their shareholders' details.

If a foreign company develops habitual business in Argentina it must either:

• Register a branch in Argentina.
• Set up a local subsidiary, by registering its shareholders with the competent Public Registry of Commerce.

(Companies Law Article 118.)

Blocked Transactions

There are no known cases of public M&A transactions that were blocked by a regulator.

Cleared Subject to Remedies, Conditions, or Restrictions

There are no known cases of acquisitions that have been cleared subject to remedies, conditions or restrictions.

28. Are there any restrictions on repatriation of profits or exchange control rules for foreign companies?

Repatriation of Profits and Dividends

The BCRA applies certain restrictions to the repatriation of profit and dividends.

As a general rule, the foreign exchange market can be accessed to transfer foreign currency abroad as profits and dividends to non-resident shareholders without BCRA prior approval, if the following conditions are met:

• Profits and dividends correspond to closed and audited balance sheets (that is, advance payment of dividends is not allowed).
• The total amount paid to non-resident shareholders, including the particular payment requested does not exceed the corresponding amount in local currency of the total distribution determined by the shareholders' meeting. The resident company's legal representative, or a proxy with sufficient powers to assume this commitment on behalf of the company, must sign an affidavit attesting this.
• The total amount of these types of transfers, including the particular payment requested, passing through the foreign exchange market since 17 January 2020, does not exceed 30% of new foreign direct investment contributions in resident companies entered into and settled through the foreign exchange market from the same date. The receiving entity must hold certification issued by the remitting entity that it has not issued certifications in relation to this point for an amount higher than 30% of the settled amount. The 30% rule applies to each individual Argentine company.
  In this case access to the foreign exchange market is not allowed less than 30 calendar days from the settlement of the last contribution.
• A document guaranteeing the definitive capitalisation of the contribution is filed with the BCRA. If it is not available, proof must be provided to the BCRA that the registration process of the decision to definitively capitalise the contributions, calculated in accordance with the corresponding legal requirements, has begun through an initial filing without the backup proof. The document proving the definitive capitalisation of the contribution must be filed within 365 calendar days from the beginning of the process. It should be a corporate document, for example minutes or agreements.

(BCRA Rules, Foreign Exchange, Section 3, Specific provisions for foreign exchange market outflows.)

General Conditions

The payee must also comply with the general conditions applicable every time the foreign exchange market is accessed to make payments offshore (BCRA Foreign Exchange Regulations, Section 3, Specific provisions for foreign exchange market outflows).

If the above requirements are not satisfied, the BCRA's prior approval must be obtained to access to foreign exchange market to transfer foreign currency; except for either:

• Repatriation of non-residents' direct investments in companies that are not controllers of local financial entities. These investments must have been entered into and settled by the official exchange market on or after 2 October 2020, and the repatriation must take place at least two years after their settlement.
• Closed financial statements for the payments made since 14 June 2021.

The BCRA introduced certain additional special regimes in addition to the general regime (BCRA Foreign Exchange Regulations, Section 3, Specific provisions for foreign exchange market outflows). All foreign exchange regulations are essentially mutable, and therefore the provisions of the BCRA currently in force may be subject to amendments and/or clarifications, and it is reasonable to expect that new regulations will be issued in the near future.

29. Following the announcement of the offer, are there any restrictions or disclosure requirements imposed on persons (whether or not parties to the bid or their associates) who deal in securities of the parties to the bid?

There are no restrictions or disclosure requirements imposed on persons who deal in the securities of the parties to the bid. However, the rules on maintaining secrecy may apply (see Question 8).

Future Developments

30. What do you think will be the main factors affecting the public M&A market over the next 12 months, and how do you expect the market to develop?

The current trend of de-listing public companies from local stock exchanges is likely to continue during the next 12 months.

Reform

31. Are there any proposals for the reform of takeover regulation in your jurisdiction?

The CNV currently has no formal proposals to reform takeover regulation in Argentina.