Consultation on new Order on Takeover Bids

Date 11 mar. 2014
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Introduction

On 5 March 2014, the Danish FSA submitted a draft order on takeover bids for consultation. The order contemplates a number of significant changes compared to the current rules on takeover bids.

Background

In recent years, the rules on takeover bids, including the current order, have been under pressure from market participants and advisors for not being able to handle situations encountered in practice. Inspired by foreign law, the new order was drafted in order to better meet the market’s needs.

The structure of the order has also been amended to make it clearer and easier to use in practice.

 

Significant Amendments

Exceptions to the mandatory Bid
Under the current rules, the exception to the mandatory bid applicable to creditors who gain controlling interest through debt enforcement is amended so that the exemption only applies if the creditor sells  a sufficient number of shares within two months after the acquisition of the shares in order for the creditor to no longer have a controlling interest in the target company.

Furthermore, the exemption for mandatory bids is repealed in cases where the person obtains controlling interest through a gift.

Equal Treatment of Shareholders within the same Class
The highest share price principle is extended to a period of six months after the offer is completed in accordance with the principle of equal treatment. This means that if any bidder acquires shares in the target company on more favorable terms than those offered in the original offer within six months after the offer is completed, the bidder must compensate the shareholders who accepted the original offer.

The compensation must be paid in cash in the currency in which the bid was settled and must be calculated as the difference between the consideration offered in the original offer and the consideration for which the bidder subsequently acquired shares. 

Offer Period
The total offer period, i.e. including extensions and improvements to the offer, cannot exceed 10 weeks. This is an amendment to the existing rules under which the offer period could be up to 12 weeks if the offeror improved the bid within the last two weeks of the offer period.

In cases where the acquisition requires regulatory approval, the offer period may be extended for up to nine months. The possibility for such an extension includes all regulatory approval, unlike the current rules where the approval from the competition authorities alone could extend the offer period.

Terms attached to voluntary Offers
The new order clarifies that a voluntary offer must not contain any terms whose fulfillment the bidder has control over. This is due to the fact that the bidder, in practice, will be able to choose whether the offer is to be maintained, and it will thus no longer be a genuine offer. For example, in several countries it is difficult to have a condition approved in which the offeror undertakes to only acquire a limited amount of the target company's shares – a so-called partial offer. Another example is the requirement of a satisfactory due diligence from the offeror.

The Offeror’s Option to count Acceptances after the Offer Period
For the purpose of assessing whether there should be an extension or termination of the offer, the bidder has an option to count acceptances of the offer for up to 18 hours after the end of the offer period. Under the current rules, this period coincides with the offer period.

Overview of the significant Amendments
Figure: Overview of amendments resulting from the proposed new order

 

 

  

If you have any questions or would like additional information regarding the amendments to and the impact of the new order, please contact partner Dan Moalem (dmo@mwblaw.dk) or junior associate Mattias Vilhelm Warnøe Nielsen (mvn@mwblaw.dk).


 The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis of decisions or considerations.