Karatzas and Partners Law Firm

Mandatory and Voluntary takeover Bids

By Catherine Marie Karatzas, Attorney at Law, Managing Partner at Karatzas & Partners Law Firm

 

What is a “takeover bid” and which is the scope of the application of the “takeover” legislation?

Greece transposed the EC Directive 2004/25/EC on takeover bids into Greek law with the enactment of Law 3461/2006 (“Takeover Bid Law”), which applies to “takeover bids” launched for the acquisition of the securities of a company with registered seat in Greece (“Target”), provided that the total or part of the Target’s securities have been admitted to trading on a regulated market in Greece, subject to the provisions of the Takeover Bid Law and the decisions of the Hellenic Capital Market Commission (“HCMC”). In particular, according to the Takeover Bid Law, the notion of a “takeover bid” refers to the public offer made to the holders of the securities of the Target by another company or natural person (“offeror”) to acquire all or part of such securities. A takeover bid may either be mandatory or voluntary. Since its enactment, the Takeover Bid Law has been amended through Law 3756/2009 (Government Gazette Α 53/31.03.2009), Law 3943/2011(Government Gazette Α 66/31.03.2011), Law 4013/2011 (Government Gazette Α 204/15.9.2011), Law 4281/2014 (Government Gazette Α 160/8.8.2014) and Law 4335/2015 (Government Gazette Α 87/23.7.2015) Law 4514/2018 Government Gazette Α’ 14/30.01.2018.

When is the mandatory takeover bid obligation triggered?

The mandatory takeover bid obligation is triggered when specific conditions provided under the Takeover Bid Law are met. In particular, each person, acquiring directly or indirectly, on his/her own account or through or in concert(1) with third parties acting on his/her behalf or in concert1 with him/her, at least one third (1/3) of the voting rights of the target company, is obliged to address within twenty (20) οr thirty (30) days, in case a valuation report is required for the calculation of the minimum cash consideration (see below) from the date of acquisition a mandatory (and unconditional) bid for the total outstanding shares of the target company(2) The same obligation applies to each person who already owns more than one third (1/3) but less than the half (½) of the total voting rights of the target company and who acquires within 6 months, directly or indirectly, on his/her own or through or in concert with third parties acting on his/her behalf or in concert with him/her, securities representing more than 3% of the total voting rights of the target company. The said obligation shall not apply, if the offeror has already made a mandatory bid. For the purposes of calculating the thresholds mentioned above, the voting rights that the offeror or any other party acting on its behalf or in concert with it acquires or holds shall also include any voting rights which are acquired or held by such persons on the basis of an agreement, a right of pledge or usufruct, a safekeeping or administration arrangement, provided that the

beneficiaries are entitled to exercise such rights at their discretion. Mandatory bids cannot be subject to any conditions other than the granting of any administrative or regulatory approvals or clearance.

Are there any dispensations from the obligation to launch a mandatory takeover bid?

The obligation to launch a mandatory takeover bid does not apply if:

a. a third person holds a higher percentage of voting rights than the offeror (or persons acting for its own account or in concert with the offeror);

b. the securities of the Target have been acquired following a voluntary takeover bid launched according to the provisions of the Takeover Bid Law to all holders of Target’s securities and for the entirety of their holding, provided that the consideration of the voluntary takeover was fair and equitable, as required for mandatory takeover bids (without the need for payment of a cash consideration);

c. the acquisition of securities is the result of a transfer due to parental donation or hereditary succession;

d. the offeror or persons acting for its own account or in concert with the offeror have acquired a percentage of voting rights which does not exceed the aforementioned thresholds of 1/3 by more than 3% of the total voting rights and undertakes in writing the obligation:

i) to dispose the securities required in order to fall below the relevant threshold, within six (6) months from the acquisition; and

ii) not to exercise the voting rights attached to the securities that shall be disposed within that six-month period.

e. the securities have been acquired through the exercise of a pre-emption right under a share capital increase by the offeror or persons acting for its own account or in concert with the offeror, as existing securities holder(s), provided that the exercise of the preemption right is not accompanied by the abolition of the other shareholders’ pre-emption rights.

The same applies if the existing shareholder declares during the exercise of his preemption right, that, in addition to the new securities allocated to him as beneficiary existing shareholder, he intends to acquire additional unsubscribed securities, provided the Target’s board of directors distributes the unsubscribed securities pro-rata, according to the existing shareholders’ declarations;

f. the acquisition of securities is the result of a merger between companies which are affiliated, in accordance with article 32 of Law 4308/2014;

g. a privatisation procedure for the Target is in progress, including a sale of shares pursuantto Law 3049/2002 or Law 3986/2011;

h. the acquisition of securities is part of a rehabilitation (pre-insolvency) process of the Target, in accordance with the Greek Insolvency Code (chapter 6 of Law 3588/2007, as amended on September 2011).

i. the acquisition of voting rights results from the implementation of credit institutions’ and investment firms’ resolution measures, powers or resolution mechanisms under articles 3183 and 110 of Law 4335/2015.

Is it possible to set defined thresholds in a voluntary takeover bid?

According to Article 6 of Law 3461/2006, any person may launch a voluntary takeover bid.

Such person is then obliged to acquire all securities offered by the public, unless a maximum limit has been previously set. A voluntary takeover bid may also be made subject to the condition of a minimum number of shares offered to the offeror in order for the bid to be valid. The voluntary offer can be revoked by the offeror in instances where competitive offers are launched or following the permission of the HCMC due to unexpected change in circumstances resulting to the launching of the offer becoming excessively burdensome for the offeror. The offered consideration under the voluntary takeover bid may be freely determined by the offeror, unless the voluntary takeover bid shall be followed by a squeeze-out, in which case the minimum consideration offered shall be calculated on the basis of the

rules applicable to mandatory takeover bids (see below). Furthermore, it is possible to submit a voluntary takeover bid for the acquisition of a Target’s securities which are admitted to trading in a regulated market operating in Greece, which, however, do not carry voting rights. In this case the provisions of the Takeover Bid Law are equally applicable.

How is the consideration calculated in case of a mandatory or a voluntary takeover bid?

The consideration offered by the offeror may take the form of either (a) listed or non-listed securities or (b) cash or (c) a combination thereof. In case of a mandatory bid, the offeror must always offer, as an option, cash consideration. In all cases, a Greek or EU credit institution or investment firm shall certify the availability of the consideration to be offered as per the above.

Following the launch of the offer and during the acceptance period the offeror may be engaged in market purchases. However, in instances where, after the announcement of the bid but prior to the expiration of the acceptance period, the offeror or any parties concerted with him have acquired shares of the Target at a price higher than the offered consideration, the offeror must increase the offered consideration so as to match such higher market purchase price. Such adjustment is not required in case of market purchases performed by credit institutions or investment services firms in fulfilment of their obligations as: (a) “market-makers” in a regulated market; (b) systematic “internalizers”; or (c) members of clearing and settlement systems being responsible for the clearing and settlement of transactions.

Minimum cash consideration

In particular in case of a mandatory bid, in order for the cash consideration to be considered as “fair and equitable” the offered price per share cannot be lower than:

  • the volume weighted average on-exchange price (so-called VWAP) of the target shares during the period of six (6) months preceding the date at which the offeror was for the first time obliged to launch the mandatory bid or;
  • the highest price at which the offeror or any concerted parties have acquired shares of the target in a period of twelve (12) months before the date at which the offeror was for the first time obliged to launch the mandatory bid.

In both cases, any market purchases of shares effected by credit institutions or investment services firms in fulfillment of their obligations as: (a) ‘market-makers’ in a regulated market; or (b) systematic ‘internalizers’; or (c) members of clearing and settlement systems being responsible for the clearing and settlement of transactions, are not taken into account for the above price calculation.

As a measure to further ensure the rights of the minority shareholders of the target company, Greek Law 4514/20183(3) introduced the obligation of the offeror to proceed to the drawn up of a valuation report with respect to the targeted shares in cases where specific conditions are met. In such cases, the minimum cash consideration will be determined by taking into account both the market value and the valuation, as the minimum price per targeted share will be the higher of (i) the share market price calculated on the basis of the thresholds described above and (ii) the value calculated under the valuation report.

The offeror is obliged to proceed with a valuation when at least one of the following conditions is met:

  • sanctions have been imposed by the Board of Directors of HCMC for manipulation over the targeted shares, and such manipulation took place within eighteen (18) months prior to the date when the offeror became obliged to launch the takeover bid.
  • during the six (6)-month period prior to the date when the offeror became obliged to launch the takeover bid, transactions on the target’s shares were carried in less than three-fifths (3/5) of the market days of the said market or did not exceed ten percent (10%) of the total shares of the target company.
  • the equitable and fair consideration, as determined in accordance with the thresholds mentioned above based on market value, is lower than eighty percent (80%) of the book value per share, based on the average of the last two (2) consolidated published financial statements of Greek Law 3556/2007, provided that consolidated financial statements are drawn up.

During the time period starting from the date on which the offeror became obliged to launch a takeover bid up to the publication of the valuation, the offeror is prohibited from carrying out transactions over shares of the target company, either directly or indirectly, for its own account or in concert with other parties acting on its behalf or in concert with it. The valuation report is completed within a thirty(30)-day period from the date when the offeror became obliged to launch a mandatory takeover bid, is submitted by the offeror to HCMC and is made available to the public.

Minimum consideration in kind

In case that the consideration offered consists of listed shares the following prices shall be taken into account for the target shares and the offered shares, accordingly:

Target Shares:

The reference price of the target shares shall be the higher of: (a) the volume weighted average on-exchange price of the target shares during the period of six (6) months preceding the date of launch of the offer and (b) the highest price at which the offeror or a party acting on its behalf or in concert with it have acquired shares of the target in a period of twelve (12) months preceding the date of launch of the offer;

Offered Shares:

The reference price of the target shares shall be the volume weighted average on-exchange price of the offered shares during the period of six (6) months preceding the date of launch of the offer.

What information must be disclosed to the public with reference to the takeover bid? Which is the minimum content of such announcement?

The announcement to the public must at least include the following information:

  • the corporate name and seat of the Target;
  • the name and address of the offeror or if offeror is a legal entity, its corporate name, its corporate form, its seat and address;
  • the corporate name and address of the adviser of the offeror;
  • the securities or class of securities that are subject to the takeover bid;
  • the maximum number of securities that the offeror undertakes (in case of a voluntary takeover bid) or is required (in case of a mandatory takeover bid) to acquire, the percentage of the share capital of the Target that the securities that are subject to the take-over bid represent, as well as the percentage of the total securities of the same class;
  • the consideration offered for each security;
  • the minimum number of securities which, in case of a voluntary takeover bid, must be offered so as the bid to be valid;
  • the number of Target’s securities already held directly or indirectly by the offeror or by any of the persons acting in concert or on the account of the offeror;
  • any intention of the offeror to acquire, during the period starting from the disclosure of the takeover bid until the end of the acceptance period, additional Target’s securities, outside the framework/process of the takeover bid.

What if a competing takeover bid emerges?

Withdrawal of a voluntary takeover bid is possible if competitive bids have been launched

The securities holders who have already accepted the voluntary takeover bid may accept the competing bid only if they have previously withdrawn their acceptance of the previous voluntary takeover bid. It is not possible to revoke a mandatory takeover bid. The voluntary takeover bid may also be revoked following receipt of HCMC’s permission in case of a sudden and unexpected change of events, which renders the continuation of the bid extremely burdensome for the offeror.

Can minority shareholders be squeezed out? If so, what steps must be taken and what is the time frame for such process?

In the event that, following expiry of the acceptance period of the takeover bid, the offeror has achieved to acquire at least 90% of the Target’s voting rights, the offeror may squeezeout minority shareholders in the basis of the special squeeze-out right provided under the Takeover Bid Law.

Such capital market law squeeze-out right enables the offeror to require all the Target’s minority shareholders to sell him/her their shareholdings at a fair price. In order for the offeror to be entitled to such squeeze-out right the offeror must have previously launched a (voluntary or mandatory) takeover bid for the total outstanding shares of the target company.

The squeeze-out right can only be exercised within three (3) months from the end of acceptance period, provided that the envisaged exercise of such squeeze-out right has been explicitly disclosed by the offeror in the information memorandum to be issued in published in connection with the takeover bid.

The consideration payable to minority shareholders shall be at least equal to and in the same form (i.e. in cash or in kind or a combination thereof) with the consideration paid by the offeror in the context of the preceding takeover bid and cannot be lower than the price he would have offered in a mandatory takeover bid.

In any case, minority holders have the right to require payment in cash as an alternative.

Importantly, in the context of the squeeze-out right, the minority shareholders are entitled to request the payment of the consideration in cash, in which case the price per share may not be lower than the applicable thresholds mentioned above on the calculation of the price per share under the mandatory takeover bid, including the provision for the calculation thereof of a valuation report.

Such offered consideration, however, must be reasonable and fair. The fairness of the offered consideration could be challenged by the minority securities holders before courts by way of filing a petition within six (6) months, following the completion of the squeezeout process.

In order to exercise the “squeeze out right”:

  • the offeror is required submit to the HCMC a relevant request which is also notified to the Target. The request must refer to the amount and type of the offered consideration and must be accompanied by a confirmation by a credit institution – established either in Greece or in an another EU member state-ensuring the availability of the funds to pay in full and in cash the consideration for the acquisition of all remaining securities by the offeror;
  • following receipt of the squeeze-out request by the Target, the offeror is required to disclose within the next working day to the public, its request to acquire the remaining Target’s securities;
  • and the HCMC must issue its approval decision, after having ascertained the possession by the offeror of securities representing 90% of the total voting rights of the Target and the confirmation by the credit institution, with respect to the availability by the offeror of the funds to pay immediately to the remaining securities holders the total sum of the offered consideration. Such decision specifies the date on which the trading of the target’s shares is suspended (such date falling no sooner than ten (10) business days following the date of HCMC’s decision);
  • the offeror is required to publish HCMC’s resolution and the payment process of the offered consideration to the minority securities holders within the next business day.

The payment of the squeeze-out consideration must be performed immediately following the clearing of the transactions of the target’s shares performed on the last day prior to the date of suspension of trading.

Upon confirmation by the Central Securities Depository of the payment of the consideration for the acquisition of the remaining Target’s securities in full and subject to the payment of all other fees and expenses, the offeror is registered as the new owner of the securities. The “squeeze out right” regulated by the Takeover Bid Law must be exercised within three (3) months following the expiration of the takeover bid’s acceptance period, provided that the relevant intention for the exercise of such right was included in the Information Memorandum. For completeness, the Company Law provides for an additional “squeeze out right” applying to both listed and non-listed Greek sociétés anonymes, without prejudice to the provisions of the Takeover Bid Law. This additional Company Law “squeeze out right” is triggered when, following the incorporation of the company, a shareholder acquires and holds at least 95% of its share capital, in which case it has the right to proceed to the acquisition of the remaining shares of the minority shareholders for a consideration corresponding to their “real” value. This right must be exercised within five (5) years from the date that the majority shareholder reached the 95% threshold. The valid exercise of this Company Law “squeeze-out right” entails the submission of a relevant petition to the Court of First Instance by contrast to the Takeover Bid Law “squeeze-out right” that involves the submission of a request to the HCMC.

What is the “sell-out right” and when is it triggered?

“Sell-out rights” enable minority securities holders to require the majority shareholder of a Target (being the successful offeror) to purchase their securities at a fair price. According to the Takeover Bid Law, the “sell-out right” is triggered when an offeror, following the successful takeover bid, ends up holding securities representing at least 90% of the total voting rights in the Target, in which case it is required to purchase through ATHEX all those securities that shall be offered by the holders of the remaining Target’s securities by offering a cash consideration equal to the consideration of the bid, within a period of three (3) months following the disclosure of the result of the takeover bid. Upon request of the holders of the remaining securities of the Target, the consideration offered may be in the form of securities, if such were the subject of the takeover bid and are equal to the consideration offered in the takeover bid. The Company Law provides as well for an additional “sell-out right”, applying to both listed and non-listed Greek sociétés anonymes, without prejudice to the provisions of the Takeover Bid Law, granting the right to the minority shareholders to request the acquisition of their shares by the Target’s majority shareholder. This additional Company Law “sell-out right” is triggered when, following the incorporation of the company, a shareholder acquires and holds at least 95% of its share capital, in which case one or more of the residual shareholders may request through a petition to the Court of First Instance the acquisition of its/their shareholding participation in the Target by the majority shareholder. This “sell-outright” must be exercised within five (5) years from the date that the majority shareholder reached the 95% threshold.

[1]On the basis of any tacitly implied, oral or written agreement. Any person(s) which are directly controlled by or are subject to a joint control with the offeror, are deemed to act in concert with the latter.

[2]In which case setting a maximum or a minimum number of securities that he/she is bound to accept is not allowed.

[3]Law 4514/2018 on markets in financial instruments and other provisions, OGG Issue A, No. 14/30.1.2018.