New Executive Order on Takeover Bids

Date 15 aug. 2014
Download PDF version PDF

 

Introduction

On 1 July 2014, the new executive order on takeover bids entered into force. The executive order introduces a number of essential changes compared to the previous rules governing takeover bids.


Background

In recent years, the rules on takeover bids, including the previous executive 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 executive order was drafted in order to better meet the market’s needs.


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


Significant Amendments

Exceptions to the mandatory Bid

The exception to the mandatory bid in cases where a person gains a controlling interest by way of a gift is repealed in the new executive order. The mandatory bid is triggered if a transferee gains at least a third of the voting rights in the target company by way of 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 has been concluded 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 of the offer’s conclusion, 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

In future, 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 only the approval from the competition authorities could extend the offer period.


Terms attached to voluntary Offers

The new executive order clarifies that a voluntary offer must not contain any terms of which the fulfillment is in the control of the bidder. This is because in practice, the bidder 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 under 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 satisfactory due diligence from the offeror.

 

The Offeror’s Deadline after the Expiry of the Offer Period

For the purpose of assessing whether there should be an extension or a termination of the offer, the offeror will from now on have the option to include acceptances of the offer for up to 18 hours after the expiry of the offer period. In the previous executive order, this deadline was the same as the expiry of the offer period. The deadline for publishing the results of bids is still three days after the offer has been concluded.  


The Offeror’s Right to send Material to registered Shareholders

In addition to the bid announcement and the statement, the offeror has the option of ordering the target company to submit other information and material to the registered shareholders in the target company.


The offeror’s right is limited to three inquiries within the offer period. After this the target company is entitled to refuse to forward the information.


The Offeror’s Option to waive or reduce Terms

In voluntary offers the offeror may waive or reduce terms laid down by an additional provision to the offer document. From now on, this is an option which does not require an assessment of whether there are any improvements to the offer or not. The additional provision must still, however, be approved by the Danish FSA. 


Overview of the significant Amendments

 

Figure: Overview of amendments resulting from the new executive 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 Mathias 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.