Luxembourg Takeover Guide

Transcription

1 Luxembourg Takeover Guide Contacts Guy Harles & Katia Gauzès Arendt & Medernach

2 Contents Page INTRODUCTION 1 SCOPE OF THE TAKEOVER REGULATION 1 GENERAL PRINCIPLES 1 REGULATION AUTHORITY 2 BINDING OFFER AND NON-BINDING OFFER 3 INFORMATION REGARDING THE OFFER 4 RESTRICTION MECHANISMS 6 SQUEEZE-OUT AND REVERSE SQUEEZE-OUT 8 TIMING OF THE TAKEOVER _2_ takeover guide - luxembourg

3 INTRODUCTION This chapter seeks to the present the reader with an overview of key points relating to the Luxembourg legislation on takeover bids. This chapter will discuss the scope of the takeover regulation, general principles of the takeover legislation, the regulation authority, binding and non-binding offers, information regarding the offer, restriction mechanisms, squeeze-out and reverse squeeze-out provisions and the timing of a takeover. SCOPE OF THE TAKEOVER REGULATION Public takeover bids in Luxembourg are governed by the Law of 19 May 2006 which implements Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids. The Law of 19 May 2006 pertains to public takeover bids for the securities of companies governed by the laws of a member state of the European Union or the European Economic Area, if all or some of the companies securities are admitted to trading on a regulated market in one or more member states. According to the Law of 19 May 2006, a public takeover bid is defined as a public offer made to the holders of the securities of a company (excluding offers made by the offeree company itself) in order to acquire all or some of the securities, whether mandatory or voluntary, on the condition that this follows or has as its objective, the acquisition of control of the offeree company in accordance with the national law. This broad scope of the Law of 19 May 2006, means that the law applies not only to takeover bids for the securities of a Luxembourg-based company whose securities are admitted to trading on the Luxembourg regulated market, but also relates to takeover bids for the securities of Luxembourg companies with all or some of their securities admitted to trading on the regulated market of another member state as well as takeover bids for the securities of non-luxembourg companies governed by the law of another member state whose securities are admitted to trading on the Luxembourg regulated market. Thus the scope of the Law of 19 May 2006 extends to companies and securities beyond the borders of Luxembourg, as long as there is a specific link to a Luxembourg company or the Luxembourg regulated market. Outside the scope of the Law of 19 May 2006 are (1) takeover bids for securities issued by the central banks of a member state and (2) takeover bids for securities of companies that have as their object the collective investment of capital provided by the public, which operate on the principle of risk-spreading and the units of which are, at the holders request, repurchased or redeemed, directly or indirectly, out of the assets of those companies. GENERAL PRINCIPLES Protection of security holders, protection of minority shareholders and the proper functioning of the offeree company The Law of 19 May 2006 has as one of its main objectives the effective protection of security holders in the face of a public takeover bid. Under the law, all security holders are to be given sufficient time and information in order to make a fully-informed decision on the bid. All holders of securities of the same class also must benefit from equal treatment during the takeover bid process. The board of the offeree company must facilitate the decision-making process of the security holders by presenting its opinion relative to the possible repercussions the bid may have upon the employment, the conditions of employment and the locations of the company s places of business (i.e. whether the company s places of business would move as a result of the bid). In so doing, the board of the offeree company must act in the interest of the company as a _2_ takeover guide - luxembourg page 1

4 whole and must not hinder a security holders ability to decide on the bid based upon its merits. The law also establishes a mandatory bid structure to protect minority shareholders. Under the mandatory bid system, if a person, either by way of his own acquisition or the acquisition of persons working in concert with him, acquires securities in the offeree company that entitle him to thirty-three and one third per cent (33⅓%) of the voting rights in the company, he must make an offer to buy the remaining shares of the minority shareholders. In calculating this threshold percentage, all the securities of the offeree company, except for those which confer voting rights only in specific circumstances, are taken into account. This mandatory bid must be made at the fair equitable price of the shares. In the event of a mandatory bid, the equitable price of the shares is set by the Law of 19 May 2006 as being the highest price paid for the same securities by the offeror, or by persons acting in concert with him, over a period of twelve (12) months prior to the mandatory bid. If the offeror, or a person acting in concert with him, purchases securities for a price higher than the offer price of the mandatory bid after the bid has been made public but before the end of the acceptance period, then the equitable price of the mandatory bid will increase accordingly so that it is not less than the highest price paid for the same securities. The activities and proper functioning of the offeree company must not be hindered by the bid for longer than a reasonable period of time and this time period must not extend beyond six (6) months from the date that the decision to make the bid became public by the offeror. Offerer s ability to furnish consideration Additionally, in regards to the timing of the publication of the bid, the Law of 19 May 2006 requires that the offeror must not announce the bid until it is sure that it can furnish all necessary consideration, including assuring, in full, any cash consideration, if such consideration is offered. False markets The Law of 19 May 2006 also prohibits the creation of false markets relating to the securities of the offeree company, or the securities of any other company concerned by the bid, in such a way that would result in the rise or fall of securities prices and thereby disrupt the normal functioning of the regulated markets. REGULATION AUTHORITY The competent regulation authority for takeover bids in Luxembourg is, according to the Law of 19 May 2006, the Commission de Surveillance du Secteur Financier (the Commission for the Supervision of the Financial Sector, hereafter the CSSF ). The CSSF, created by the Law of 23 December 1998, is an impartial and independent organ whose employees are bound by professional secrecy. Information covered by the rules of professional secrecy cannot be divulged to any person or authority, except by virtue of certain specific derogations clearly defined by the Law of 23 December The authority of the CSSF extends to all public takeover bids where the offeree company has its registered office in Luxembourg and the securities of the offeree company are admitted to trading on the regulated market of Luxembourg. Under certain circumstances where there is a more tenuous connection between the securities and the Luxembourg economy, the Law of 19 May 2006 grants the power of supervision to authorities outside of Luxembourg. For example, in the case in which the _2_ takeover guide - luxembourg page 2

5 offeree company has its registered office in Luxembourg but its securities are not admitted to trading on the regulated market of Luxembourg, the competent authority for the regulation of the bid is the member state on whose regulated market the offeree company s securities have been admitted for trading. If the company s securities are admitted to trading on the regulated markets of multiple member states, the competent authority is the member state on whose market the securities were first admitted to trading. Where the admission to trading was done simultaneously on the markets of more than one member state, the offeree company is given the choice of which of these member states will serve as the competent authority for the regulation of the bid. The offeree company must notify those regulated markets and their supervising authorities on the first day of trading. The CSSF must ensure that the decision taken by the offeree company in such a situation is published, thus notifying third parties. In each of the abovementioned cases, the laws of the member state of the competent authority govern questions relating to the offered consideration and value or price of this consideration, procedure of the bid including the offeror s decision to bid, contents of the offer document and disclosure of the bid. In contrast, the rules of the member states in which the offeree company maintains its registered office control questions relating to the information that must be furnished to the personnel of the offeree company and questions relating to company law, notably the percentage of voting rights that confers control of the company and any derogations from the obligation to make a bid, as well as the conditions in which the board of the offeree company may undertake any action that might frustrate the bid. The CSSF works in cooperation with and shares information with the supervising authorities of other member states and other authorities charged with supervising capital markets in order to ensure the proper supervision of takeover bids involving multiple jurisdictions. All exchanged information falls under the purview of the rules of professional secrecy. The cooperation between the CSSF and other supervising authorities includes the ability to serve legal documents necessary to enforce the measures taken by the competent authorities in relation to the bids, as well as all other aid that can reasonably be requested by the supervising authorities for the purpose of investigating actual or alleged breaches of the rules adopted or introduced in application of Directive 2004/25/CE. In furtherance of its supervisory authority, the CSSF is permitted to allow certain derogations from the provisions set out in the Law of 19 May 2006, yet all such derogations require a specifically reasoned decision. BINDING OFFER AND NON-BINDING OFFER The offerer s bid Takeover bids are generally binding, as a rule. In making a bid, the offeror commits itself to, by the full extent of its powers, bring the bid to a successful completion in accordance with the conditions authorised by the CSSF. Thus, once a bid has been published, it is irrevocable, unless it meets one of the following conditions: the offeror s bid is met by a competing bid; the offeror has not received the required administrative authorisation for the acquisition of the securities that are subject to the bid, in particular where the transaction cannot be completed because of a decision by the authorities in charge of supervising free competition; a requirement of the offeror s bid is not fulfilled for reasons independent of the willingness of the offeror; or _2_ takeover guide - luxembourg page 3

6 if in the case of exceptional circumstances that do not allow the realisation of the bid for reasons independent of the willingness of the offeror, the CSSF may give a reasoned authorisation for the revocation of the bid. In such exceptional cases, the CSSF must be notified of the revocation of the bid. The CSSF, in turn, must make the revocation known to the public, at the expense of the offeror and according to the conditions set forth by the CSSF. This publication must occur, at the latest, the day after the CSSF was notified of the revocation. Security holders acceptance Security holders may validly revoke their acceptance of a bid, if one of the conditions prescribed by the Law of 19 May 2006 is not respected by the offeror or someone acting in concert with him. The CSSF must be notified of such a withdrawal and, upon notification, the CSSF will make the withdrawal known to the public. INFORMATION REGARDING THE OFFER Publication of the bid In making a takeover bid, upon deciding to make a bid the offeror must first notify the CSSF of its decision. The offeror is required to publicise the bid immediately upon making the decision and notifying the CSSF of its decision. The bid must be made public in order to assure the transparency and integrity of the securities of the offeree company, the offeror or all other companies concerned by the bid, in order to avoid the dissemination or publication of false or misleading information. Once the bid has been made public, the boards of the offeree company and the offeror must inform the representatives of their respective employees or, where there are no such representatives, the employees themselves of the bid. CSSF approval of the offer document Within ten (10) days of the bid s publication, the offeror must draft and submit to the CSSF an offer document containing all information required to enable security holders of the offeree company to make an informed decision on the bid. The offeror may draft the offer document in any of the following languages: Luxembourgish, French, German or English. Upon submission of the offer document to the CSSF, the offeror is forbidden from making changes to the terms of the bid to the disadvantage of the security holders of the offeree company. The CSSF has thirty (30) days following the submission of the offer document to approve the document. In making its decision, the CSSF is not to consider the economic and financial opportunity of the operation or the solvency of the offeror or the offeree company and instead the CSSF reviews the document based on whether it conforms to the dispositions laid out in the Law of 19 May If the CSSF finds, for good reason, that the offer document is incomplete or that supplementary information is required, the CSSF must inform the offeror within ten (10) days of the submission of the offer document. In such an event, the thirty (30) day window for the approval process does not start to run until after the offeror has submitted all of the additional requested information. If the bid does not fall directly under the competency of the CSSF, the offer document will be acceptable in Luxembourg without CSSF approval if it has received the approval of a competent supervisory authority and, if necessary, has been translated into Luxembourgish, French, German or English, if the offeree company s securities are traded on the Luxembourg regulated market. In such cases, the CSSF may only request the inclusion of additional information in the offer document if the information is specific to _2_ takeover guide - luxembourg page 4

7 the Luxembourg regulated market and relates to the formalities to be complied with to accept the bid and to receive consideration due at the close of the bid, as well as to the tax arrangements to which to the consideration offered to the security holders will be subject. Once the offer document has received CSSF approval, the offer document has to be published. The means of publication is determined by the CSSF and the publication of the offer document must be done in a manner that ensures that security holders in those member states on whose regulated markets the offeree company s securities are traded, as well as the personnel of the offeree and offeror, are able to gain sufficient knowledge of the bid. The offer document The Law of 19 May 2006 dictates that the offer document must include the following: terms of the bid; identity of the offeror and, where the offeror is a company, its type, name and location of its registered office; the securities or, where appropriate, the class or classes of securities for which the bid is made; the consideration offered by security or class of security, in the case of a mandatory bid, the method used to determine the consideration, as well as the means of payment of the consideration; the compensation offered for the rights which could be eliminated in application of the rule relative to the neutralisation of restrictions as well as the means of payment of this compensation and the method used to tally the compensation the percentage or the maximum/minimum number of securities the offeror undertakes to acquire; details of the holdings that the offeror and individuals acting in concert with the offeror already have in the offeree company; all conditions to which the bid is subject; the offeror s intentions regarding the future business of the offeree company and, in so far as it is affected by the bid, the future of the offeror company in regards to the safeguarding of the jobs of employees and management, including any material changes to the conditions of employment, and in particular the offeror s strategic plans for the two companies and the probable repercussions on employment and the locations of the companies place of business; the time allowed for acceptance of the bid; where the consideration proposed by the offeror includes securities of any kind, information regarding these securities; information concerning the financing of the bid; the identity of individuals or companies acting in concert with the offeror or the offeree company and, where companies are acting in concert, their type, name and location of their registered office, as well as their relationships to the offeror and, if applicable, the offeree company; and _2_ takeover guide - luxembourg page 5

8 Acceptance period Sanctions the national law that will govern the contracts concluded between the offeror and the security holders of the offeree company as a result of the bid, as well as an indication of the competent jurisdictions. After the offer document has been published, the boards of the offeror and offeree companies must make the offer document known to the representatives of their respective employees or, in the case that such representatives do not exist, then directly to the employees themselves. The board must inform the representatives of the employees or the employees themselves of the repercussions the bid may have upon the interests of the company and those of the employees, in particular. The period of acceptance of the bid must not be less than two (2) weeks nor more than ten (10) weeks, starting from the date of the publication of the offer document. The period of acceptance may be extended beyond ten (10) weeks, on the condition that the offeror gives at least two (2) weeks' notice of his intention of closing the bid. The CSSF may permit a derogation of these time limits in order to permit the offeree company to hold a general meeting to consider the bid. The acceptance, however, may not exceed six (6) months after the publication of the offer document, even if extensions have been granted. In the event that the offeror achieves control of the offeree company, holders of securities not having accepted the bid before the end of the acceptance period have the possibility of accepting the offer within fifteen (15) days from publication of the outcome of the bid, except in the case of a mandatory bid. Similarly, if during the course of negotiations the consideration to the security holders increases before the closure of the acceptance period but after certain security holders have already accepted the bid, those security holders who accepted the bid earlier must also benefit from this increase in consideration. If the general principles of the Law of 19 May 2006 are not complied with or the CSSF finds that a condition precedent to the bid has not been followed, the takeover bid will be deemed null and void. In the event of non-compliance with the provisions set out in the Law of 19 May 2006, the CSSF may impose on the parties to the bid a fine ranging from one hundred and twentyfive euro (EUR 125) to twelve thousand five hundred euro (EUR 12,500). Failure to inform the CSSF of the bid, comply with the CSSF s request for supplementary information or provide the company personnel representatives with the offer document may result in criminal sanctions of a jail term of eight (8) days to five (5) years and a fine of two hundred and fifty-one euro (EUR 251) to one hundred and twenty-five thousand euro (EUR 125,000). RESTRICTION MECHANISMS The Law of 19 May 2006, like the directive it implements, seeks to reduce obstacles which in the past have been used by offeree companies to thwart hostile takeover bids. Whilst Directive 2004/25/CE sets forth a system of restrictions and breakthrough rules that have the effect of facilitating takeover bids, Directive 2004/25/CE also allows member states to opt out of this system and thereby companies with registered offices in these member states are not forced to adhere to these restrictions and rules. Yet member states that opt out must in turn allow companies to opt in to the system of restrictions and rules, if they so choose. Luxembourg has chosen to opt out of the system and thus, while the Law of 19 May 2006 includes the restrictions and rules established by Directive 2004/25/CE, companies are given the option as to whether they want to opt in and adhere to them _2_ takeover guide - luxembourg page 6

9 Restrictions and obligations placed upon the offeree company Under the Law of 19 May 2006, a company may opt in and subject itself to a number of restrictions that apply when the company is faced with a takeover bid for its securities. The board of an offeree company that has chosen to opt in is limited in the actions that it can take in regards to the bid, during the time period from the moment the board receives the bid until the result of the bid is made public or the bid lapses. Without prior authorisation from the general meeting of shareholders, the board of the offeree company must not engage in any activities, other than seeking alternative bids, that could result in the frustration of the bid or that could impede the offeror s ability to acquire control of the offeree company. Decisions made before the above-mentioned time period that were not taken as part of the normal course of business of the company and the implementation of which may encumber the offeror s bid must receive the approval or confirmation of the general meeting of shareholders of the offeree company. In order for the board of the offeree company to obtain the approval, confirmation or prior authorisation, the general meeting of the shareholders can be convened at short notice by simple notice publication in the Mémorial (official gazette) and a Luxembourg newspaper, at least two (2) weeks before the meeting s proposed date. The board of the offeree company is obligated to draft and make public a document detailing its opinion of the bid, including the board s perception on how the bid might affect employment and the company s interests. The board s opinion paper should also include an analysis of the offeror s strategic plans for the offeree company, as described in the offer document, and the potential repercussions of these plans. Before coming to a decision on the bid, the board must consult with the personnel representatives of their company or with the employees themselves, in the absence of such a representatives, and append to the board s opinion, if received within a timely fashion, an opinion document created by the personnel representatives or the employees regarding the impact the bid will have on employment concerns. Breakthrough rules In order to cut down on the usage of the poison pill defensive mechanisms, such as shareholders rights plans and restrictions on the transfer of shares, used by offeree companies in order to foil planned takeover bids, the Law of 19 May 2006 establishes breakthrough rules that restrict the rights of holders faced with a takeover bid. Under the breakthrough rules, all restrictions to the transfer of securities provided for in the articles of association of offeree company that has chosen to opt in will not apply with regard to the offeror during the time period allowed for the acceptance of the bid. Similarly, restrictions on the transfer of securities stipulated in contractual agreements between the offeree company and security holders, or contractual agreements made between security holders after 21 April 2004, also do not apply to the offeror during this period. Voting rights restrictions are also affected by the breakthrough rules. Restrictions placed on voting rights by the offeree company s articles of association will not apply when the shareholders general meeting decides on any defensive measures to the takeover bid. Such restrictions set forth by contractual agreements between the offeree company and security holders, or contractual agreements between security holders entered into after 21 April 2004, also will not apply when the shareholders general meeting considers defensive measures. In the case of multiple voting rights, these will be limited to one (1) vote during such general meetings of the shareholders deciding on defensive measures. If following a bid, the offeror holds seventy-five per cent (75%) or more of the share capital carrying voting rights, the restrictions on the transfer of securities or on voting rights, as well as any extraordinary rights of shareholders concerning the appointment or removal of board members provided for in the articles of association, will not apply. Similarly, in such an event, multiple-vote securities will be entitled to only one (1) vote at _2_ takeover guide - luxembourg page 7

10 the first general meeting of shareholders following the closure of a takeover bid, called by the offeror in order to amend the offeree company s articles of association or to remove or appoint board members. Neutralisation of restrictions As previously discussed, the before mentioned restrictive mechanisms are only mandatory for companies with registered offices in Luxembourg who opt in to the system. Companies who do not opt in are thereby not bound by these restrictions/obligations and breakthrough rules. Yet in not choosing to opt in, companies must submit themselves to other restrictions which limit their possible defences to a hostile takeover bid. In either case, whether a company opts in to the system of restrictions or instead chooses the neutralisation of the restrictions, holders are given fair equitable compensation for the resulting restraints placed on their rights. The CSSF sets the terms for determining the amount of this compensation and the arrangements for the payments thereof. The Law of 19 May 2006 charges the general meeting of shareholders with the power to decide whether to opt in or neutralise the above mentioned restrictions. The decision of the general meeting of the shareholders must be taken in a manner that conforms to the company s articles of association rules on amendments. Upon making such a decision, the company must notify the CSSF or the competent authority of the member state on whose regulate market the company s securities are admitted to trading. This decision is fully reversible and may be waived under certain circumstances. For example, a company may waive its decision to opt in if it is the object of a takeover bid by a company that has not similarly decided to opt in. A waiver of the opt in decision must receive authorisation from the general meeting of shareholders and such authorisation must be received at the earliest eighteen months before the bid is made public in compliance with the provisions of the Law of 19 May The CSSF, as the supervisory authority for takeover bids, ensures that such company decisions are disclosed without undue delay. SQUEEZE-OUT AND REVERSE SQUEEZE-OUT The Law of 19 May 2006 introduced into Luxembourg company law the concepts of the squeeze-out and reverse squeeze-out (also known as a mandatory buy-back). Both concepts facilitate the successful completion of an offeror s mandatory takeover bid, while also ensuring that security holders are adequately compensated for their securities. Squeeze-out According to the law s squeeze-out provisions, if an offeror further to a mandatory takeover bid holds securities representing not less than ninety-five per cent (95%) of the capital carrying voting rights and ninety-five per cent (95%) of the voting rights of the offeree company, he may require the holders of the remaining securities (a voluntary squeeze-out bid) to sell their securities to him at a fair price. Where the offeree company has multiple classes of securities, the offeror s right of squeeze-out can be exercised only in the class in which the threshold percentage has been reached. The squeeze-out right must be exercised within three (3) months from the end of time allowed for the acceptance of the bid. The squeeze-out must be at a fair price and the CSSF will ensure that the price is indeed fair for the particular set of circumstances involved in each individual case. The fair price for the squeeze out shall take the same form as the consideration offered in the bid or will be in the form of cash. In all cases, cash consideration will at least be offered as an alternative. In the event of a voluntary squeeze-out bid, the consideration offered in the bid is presumed to be fair if, through acceptance of the bid, the offeror has acquired _2_ takeover guide - luxembourg page 8

11 securities not less than ninety per cent (90%) of the capital carrying voting rights comprised in the bid. For a mandatory squeeze-out bid, the consideration is automatically presumed to be of fair value. Reverse squeeze-out or mandatory buy-back If an offeror alone, or together with persons working in concert with him, holds further to a mandatory takeover bid ninety per cent (90%) of the voting rights of an offeree company, security holders may force the offeror to repurchase its securities for a fair price. The fair price in such a reverse squeeze-out (mandatory buy-back) is determined in the same fashion as it is in the case of a squeeze-out and must be paid in cash or through liquid securities, with the security holder having the option of being paid in cash. According to the Law of 19 May 2006, the liquidity of the offeror s securities is either presumed to be sufficient if at least twenty-five per cent (25%) of the offeror s subscribed capital represented by the implicated class of securities is publicly held, or if, because of the high number of the same class of securities and the extent of their holding by the public, the regular functioning of the market is ensured with a lower percentage. The rules regarding the calculation of the threshold percentage of a squeeze-out and the time period for the squeeze-out apply mutatis mutandis to reverse squeeze-outs (mandatory buy-backs). TIMING OF THE TAKEOVER The time period for a completion of a takeover bid under the Law of 19 May 2006 should, in general, not be expected to exceed at most eight (8) months from the time the offeror decides to make a bid to the moment the bid is completed. Once an offeror has decided to make a takeover bid, he must immediately make the bid public. He then has ten (10) days from this publication to submit an offer document to the CSSF. The CSSF has thirty (30) days to approve the offer document, yet can extend this period if the CSSF requests supplementary information from the offeror. Upon CSSF approval and publication of the offer document, the offeree company has between two (2) and ten (10) weeks to accept the offer. The acceptance period may be extended, but must not exceed six (6) months _2_ takeover guide - luxembourg page 9