Compared to 12 months ago, the M&A market is relatively dynamic and stable. There have been some major deals, such as the acquisition of Guinness Cameroon (Diageo) by the Castel Group for EUR460 million and the ongoing acquisition of electricity provider ENEO Cameroon by the State of Cameroon.

The top M&A trends in Cameroon in the last 12 months have been acquisitions through purchases of majority stakes and mergers.

The key industries that have seen significant M&A activity are banking, insurance, food and beverages, and electricity.

Companies are mainly acquired through purchases of majority stakes, mergers, share capital increase subscriptions, business sales and partial contributions of assets.

With regards to competition and antitrust concerns, the main regulators are the Economic and Monetary Community of Central Africa (CEMAC) Commission and its Competition Council at the CEMAC level, and the National Competition Commission (NCC) at the national level. Other sectoral regulators may also be involved, such as the CEMAC Banking Commission or the CIMA Regional Insurance Control Commission.

Commercial activities are generally unrestricted, subject to sectoral rules.

However, foreign investors are subject to the following.

• Declaration of foreign direct investment – under CEMAC Regulation No 02/18/CEMAC/UMAC/CM of 21 December 2018 (the “Foreign Exchange Regulation”), all foreign direct investments must be declared to the Bank of Central African States (BEAC) and the Ministry of Finance 30 days prior to the transfer of funds. Where M&A deals are concerned, foreign direct investments are:
1. acquisitions of stakes or subscriptions of shares in existing companies for at least 10% of the share capital
2. the incorporation of new companies with ownership of a stake of at least 10% of the share capital; or
3. investments in a company controlled or indirectly influenced by the investment company, investments in companies affiliated to the investment company, and debts owed by affiliated companies (except debts owed between banks).

• Declaration of liquidation of foreign investment – under the CEMAC Foreign Exchange Regulation and Section 5 of CEMAC Instruction No 003/GR/2020 of 5 October 2020 on operations relating to foreign direct and portfolio investments (the “Instruction on Foreign Investments”), the liquidation of a foreign investment (including sale) must be declared to the BEAC and the Ministry of Finance 30 days prior to completion of the liquidation.
• Declaration of transfer of the proceeds from the liquidation of the foreign investment – under the Foreign Exchange Regulation and Section 5 of the Instruction on Foreign Investments, the transfer/remittance of the proceeds of the liquidation of a foreign investment must be declared to the BEAC and the Ministry of Finance 30 days before such transfer/remittance takes place.
• Declaration of portfolio investments – under the Foreign Exchange Regulation and Section 17 of the Instruction on Foreign Investments, portfolio investments are notably acquisitions of stakes or subscriptions of shares for less than 10% of the share capital of existing companies or newly created companies. Transfers/remittance relating to portfolio investments are free, unless they exceed a XAF100 million value, in which case they must be declared to the BEAC and the Ministry of Finance 30 days before the transfer/remittance takes place.
• Prior approval to carry out a commercial activity for a foreign national – under Law No 2015-18 of 21 December 2015, foreign individuals and corporations must obtain prior approval from the Minister of Commerce to carry out commercial activities. A company is deemed foreign when 50% or more of its share capital is owned, directly or indirectly, by foreign natural or legal persons. The application for the approval is subject to a XAF1 million fee.
• Local content and share capital ownership requirements – certain sectors (eg, upstream oil and gas, mining) have local content requirements in terms of labour, skills transfer, use of local goods and services and compulsory ownership of stakes in companies by nationals or the State.
• Approval by sectoral regulatory agencies – in certain sectors, regulatory agencies may have the power to approve or reject M&A operations (eg, the banking and insurance sectors).

The applicable antitrust regulations are as follows.

• CEMAC level: CEMAC Regulation No 06/19-UEAC-639-CM of 7 April 2019 on competition (the “Competition Regulation”). Application is mandatory when combining businesses have a turnover of more than XAF10 billion or control more than 30% of the common market, or if the combination is likely to have effects in at least two CEMAC States.
• National level: Law No 98/013 of 14 July 1998 on competition is applicable in all other cases.

Both pieces of legislation prohibit and punish antitrust and anti-competition practices, and subject mergers to the prior approval of the CEMAC Commission or the NCC.

Under Section 42 of the Cameroon Labour Code, if an employer’s legal status changes as a result of an acquisition, existing employment contracts remain valid, unless workers choose to be laid off for economic reasons.

As far as is known, there is no national security review of acquisitions in Cameroon.

As far as is known, there have been no significant court rulings or legal developments related to M&A over the past three years.

There have been no changes to takeover law in the past 12 months, and no review is currently underway, as far as is known.

Under current legislation, a bidder may hold a stake in the target company before launching an offer. However, given the embryonic state of the CEMAC stock market, there are no standard acquisition strategies.

Under the CEMAC Financial Market Regulation, shareholders of publicly traded companies who cross a 5% threshold in share capital ownership or voting rights are required to file a declaration with the Financial Market Supervisory Commission (COSUMAF).

Furthermore, whenever the thresholds of 10%, 15%, 20%, 25% or 30% are crossed upwards or downwards, the shareholder must also specify their objectives for the next six months.

The CEMAC Financial Market Regulation does not provide for the option of higher or lower reporting thresholds. No other significant hurdles for stakebuilding in Cameroon are known.

Under the COSUMAF General Regulation, dealings in derivatives are allowed.

As far as is known, there are no filing/reporting obligations for derivatives under securities disclosure and competition laws.

Under the CEMAC Financial Market Regulation, shareholders have to make known their objectives and intentions regarding control of the company.

Under the CEMAC Financial Market Regulation, it falls upon the bidder to disclose the deal by filing an information document along with their offer.

Market practices generally comply with the legal requirements.

Legal due diligence in business combinations usually covers:

• corporate structure and governance;
• general and sectoral regulatory compliance;
• labour matters;
• commercial contracts;
• real estate and land matters;
• IP and IT;
• tax compliance; and
• ongoing and potential litigation.

The pandemic has not had an impact on the standard scope of due diligence.

As most companies are not publicly traded, deals are often made privately and confidentially between parties. For this reason, standstill and exclusivity clauses are not often demanded.

As far as is known, nothing prevents tender offer terms and conditions from being documented in a definitive agreement. However, most deals are not made through tender, so this is not common.

Acquisitions/sales typically take between six months and more than two years. As far as is known, governmental measures have not caused significant delays or practical obstacles to the deal-closing process.

Under Sections 233 et seq of the COSUMAF Regulation, any individual who comes to own more than one third of the share capital of a publicly traded company must immediately inform the COSUMAF and submit a public offer project targeting the entire share capital in wording that is admissible by the COSUMAF.

Furthermore, individuals who directly or indirectly own between one third and one half of the capital of a company must immediately inform the COSUMAF of any changes in the number of shares they own. Such information is published by the COSUMAF.

Exemptions to mandatory offers may be granted by the COSUMAF.

Consideration can be cash, stock swaps or both. Tools to bridge value gaps are rarely employed, but the most common is the net debt bridge.

The terms of a takeover bid vary depending on the specific circumstances and are set by each bidder, either by press release or in an information document filed with the COSUMAF.

Generally, the information includes:

• the financial terms of the proposed offer;
• disclosure of any agreements that may impact the offer’s completion;
• the issuer's stake in the share capital;
• any conditions precedent to the filing of the proposed offer; and
• the provisional timetable.

As far as is known, there are no minimum acceptance conditions for tender offers.

As bidding documents often contain clauses enabling the bidder to withdraw from the deal if the financial conditions are not met within a specified time period, it is conceivable and not prohibited under law that a business combination may be made contingent on the bidder obtaining financing.

Current legislation does not mandate which deal security measures may be sought by the bidder.

As far as is known, there are no new contractual considerations or tools for managing “pandemic risk” in the interim period, and no changes in the regulatory environment have impacted the length of the interim periods.

Governance rights beyond ownership interests may be provided under a shareholder agreement. Preferred stock options may also be put in place.

Shareholders have the option of voting by proxy.

Under the COSUMAF Regulation, when a shareholder or group of shareholders owns 95% of the share capital, they may file a public offer to buy out the shareholders owning the remaining 5%. Short-form merger procedures may be used when a shareholder or group of shareholders already owns two thirds or more of the share capital and commits to acquire all shares presented to them without limitation.

The COSUMAF has not yet detailed the above-mentioned procedures.

Irrevocable commitments are possible under the current legislation. However, the COSUMAF has not yet detailed the relevant procedures.

The offer file is filed with the COSUMAF by one or more brokerage firms. This dossier includes a letter and a draft information document, which is submitted to the COSUMAF for prior approval and is sent to the target company on the same day.

If the offer is hostile, a reply to the information document is filed.

The filing of the offer entails the suspension of the listing of the stock until the start of the offer period.

The required information notably includes:

• the objectives pursued by the bidder;
• the number and specification of shares offered;
• where applicable, the minimum number of shares that must be sold by the offeror in order for the outcome of the business combination to be successful;
• the proposed sale price; and
• the terms of payment of that price.

The bidder's information document must include their certified financial statements for the last three financial years or, failing that, a certified copy of a verification of assets or liabilities report.

Transaction documents do not have to be disclosed in full.

During a business combination, the directors of the bidder and the target company must ensure that their acts, decisions and declarations do not have harmful effects on the interests of the company, nor on the equal treatment and information of the company's shareholders.

These duties therefore go beyond the sole interest of shareholders.

Current legislation allows for the creation of committees to tackle specific issues. The law is silent on whether such committees may be used when certain directors have a conflict of interest.

As far as is known, the business judgement rule does not exist as such in Cameroon.

No specific advice is commonly given to directors in a business combination beyond complying with the law and not unduly interfering with the deal.

As far as is known, conflicts of interest of directors, managers, shareholders or advisers have not yet been subject to judicial or other review in Cameroon.

Hostile tender offers are permitted but no hostile takeover has yet been launched on the CEMAC Financial Market, as far as is known.

The use of defensive measures is allowed.

Under current legislation, defensive measures are not forbidden. However, the prevalence of various defensive measures cannot be evaluated as there have not yet been any hostile takeovers on the market.

Current legislation does not elaborate on the duties of directors when enacting defensive measures.

Under current legislation, nothing would prevent directors from “just saying no” and taking action to prevent a business combination.

Litigation is not common in M&A transactions in Cameroon.

There is no data on the stage at which litigation is likely to be brought in Cameroon.

The available information does not allow the identification of any potential disputes or lessons learned therefrom.

Current stock market conditions do not enable any conclusions on whether shareholder activism is a major force, nor on the areas in which activists are most active.

No information is available on activists’ M&A-related activity, nor on the possible impact of the pandemic on this type of activism.

As far as is known, there has been no interference with the completion of an announced deal by activists.