Sweden Takeover Guide

Transcription

1 Sweden Takeover Guide Contacts Marcus Nivinger Advokatfirman Delphi

2 Contents Page INTRODUCTION 1 THE REGULATION OF TAKEOVERS 1 A SURVEY OF THE REGULATION 1 THE BIDDING PROCESS 4 SQUEEZING OUT THE MINORITY AFTER A TAKEOVER 8 IMPORTANT DETAILS CONCERNING THE REGULATION 8 THE LIFECYCLE OF A TAKEOVER 10 DEFENDING A TAKEOVER WHAT CAN BE DONE? _3_2014 takeover guide - sweden

3 INTRODUCTION This guide gives an overview of the rules and regulations dealing with takeovers in Sweden of shares in companies which are listed on one of the stock exchanges or marketplaces in Sweden. This guide provides information concerning takeover restrictions, permitted pathways to increase shareholdings, what a target company s board may do in response to a takeover and a number of practical tips for both bidders and targets. The guide deals with the main rules on takeovers valid as at Anyone involved in takeover action should however, seek specialist advice. THE REGULATION OF TAKEOVERS Sweden s regulatory regime aims to protect the shareholders of a target company and to create a system of rules for participants in a takeover. The Swedish takeover rules are based on the European Parliament and the Council s directive 2004/25/EC on takeover bids. The regulation is based on a number of key principles. According to these principles, in order to promote an efficient, competitive and informed market, it is necessary to ensure that the shareholders: know the identity of the bidder; have enough information to assess the merits of the takeover proposal; have reasonable time to consider and assess the proposal; and have a reasonable and equal opportunity to share in the benefits of the proposal. The regulation on takeovers is essentially governed by the Swedish Stock Market (Takeover Bids) Act (Swedish: Lag (2006:451) om offentliga uppköpserbjudanden på aktiemarknaden) (the Takeover Act ). Other important rules relating to takeovers are implemented in the rules of the Swedish stock exchanges and the Swedish MTF s. In addition, the Swedish Securities Council (Swedish: Aktiemarknadsnämnden) (the Securities Council ) provides substantial guidance on conduct which is or is not permissible. Takeovers are about control. A takeover is only one way of obtaining control of a company. Other methods to achieve control include schemes of arrangement, selective reductions of capital and share buy-backs. A SURVEY OF THE REGULATION The regulatory map Regulations concerning takeovers are found partly in the Takeover Act and partly in the rules of the stock exchanges and the MTF s. There are two stock exchanges in Sweden; NASDAQ OMX Stockholm AB ( NASDAQ ) and Nordic Growth Market NGM AB ( NGM ). There are presently three MTF s in Sweden; NASDAQ OMX First North ( First North, run by NASDAQ), Nordic MTF (run by NGM) and AktieTorget. (run by Aktietorget AB). The Takeover Act is only applicable to public takeover bids on companies listed on a regulated market. The only two regulated markets are the NASDAQ OMX Nordic of NASDAQ and NGM Equity of NGM _3_2014 takeover guide - sweden page 1

4 The Takeover Act is applicable both to voluntary bids and mandatory bids. The level of control selected under Swedish law as the trigger for mandatory bids is 30 % of the voting power in a company. Each regulated market has an obligation under the Swedish Securities Market Act (Swedish: Lag (2007:528) om värdepappersmarknaden) to adopt its own takeover rules. A public takeover bid may only be issued by a party which has made an undertaking to the regulated market on which the company s shares are listed to comply with the takeover rules determined by the regulated market in question and to accept any sanctions which may be imposed by the regulated market in the event of infringement of these rules. This regulation also makes the takeover rules of the regulated markets binding on the bidder. Apart from the main regulation mentioned above there are several other rules and regulations that overlap and act together with these rules, such as those requiring declaration of substantial holding of shares or voting power (which exceed 5 %), in accordance with the Swedish Securities Market Act. Since it is impossible to regulate this field of law in detail, the Securities Council has been given the power to give authoritative advice concerning the interpretation and application of the rules. The main objective of the Securities Council is to promote good practices on the Swedish stock exchanges and make sure that the rules are interpreted and applied in accordance with their purpose. The Securities Council also has the power to decide on exceptions from the listing rules. Exceptions from the law on public takeover bids on the share market are decided by the Securities Council through delegation from the Swedish Financial Supervisory Authority (the SFSA ). When do the takeover rules apply? The takeover rules primarily apply when a bidder publicly offers shareholders (with shares issued by a Swedish company listed on a Swedish regulated market) to sell all or some of these shares to the bidder. Application of the takeover rules to foreign transactions The rules will apply to acquisitions of shares in a Swedish company which has its shares listed on a Swedish regulated market whether the acquisition takes place within or outside Sweden. The rules also apply to acquisition of shares in a foreign company whose shares are not listed on a stock exchange in its home country, but instead has its shares listed on a stock exchange in Sweden. Also, the rules apply when a foreign company has its shares listed on a Swedish regulated market as well as another regulated market within the EEA if the shares were first listed in Sweden, or if they were listed at the regulated markets at the same time if the SFSA is chosen as supervisory authority. Some important percentage thresholds regarding takeovers of Swedish companies 5 % of the total number of shares or votes - substantial holding level which requires the holder to give information to the company and the regulated market (subsequent increases in holdings need to be notified when the shareholder passes the following holdings: 10, 15, 20, 25, 30, 50, 66 2/3 and 90 % of the total number of shares or votes in the company); 10 % or more of the total number of shares - holder can block compulsory acquisition (which requires holding of more than 90 % of the shares in the company) and can exercise certain minority rights e.g demand extraordinary _3_2014 takeover guide - sweden page 2

5 Voting power shareholders meetings, require appointment of a minority auditor and require certain distribution of dividends; 30 % of the total number of votes in the company - substantial holding level which requires the holder to announce the magnitude of the shareholding and within four weeks place a mandatory bid regarding the remaining shares; Over 50 % of the total number of votes in the company - voting control of the target; Over 66 % (2/3) of the total number of votes in the company - holder can ensure that certain special resolutions are passed e.g. directed share issues; Over 90 % of the total number of shares in the company - confers the ability to compulsorily acquire remaining shares in the company. The benchmark for determining whether an acquisition triggers a mandatory bid is the shareholder s post-acquisition voting power in the company. According to Swedish law, companies are allowed to determine the number of votes per share in the range 1 to 10. Consequently, the number of shares does not always correspond to the voting power. Acquisitions of shares An acquisition of shares occurs if any person acquires a relevant interest in a voting share as a result of a transaction. Consequences of breach A breach of the takeover rules does not automatically invalidate a share acquisition. Uncertainties regarding the interpretation of the rules of the regulated markets or the breaches of them are handled by the Securities Council. The Securities Council, which is intended to be the main forum for resolving disputes during a takeover bid, can make a wide range of remedial orders on the interpretation and application of the applicable regulations. The instructions the Securities Council gives serve as guidance in similar following situations. If a bidder violates or breaches the rules of the regulated markets or the interpretations of the Securities Council, the disciplinary committee of the relevant regulated market may decide that a special charge shall be paid by the bidder. The charge shall total, at the minimum, SEK and at the maximum, SEK If the violation is less serious or excusable, the disciplinary committee may abstain from sanction. Some other questions, mainly questions concerning whether a buyer is obliged to place a public offer and questions concerning the defensive measures taken by the target, shall be handled by the SFSA. If a bidder violates or breaches these rules confirmed by the Takeover Act the bidder shall pay a special charge that shall total, at the minimum, SEK and at the maximum, SEK _3_2014 takeover guide - sweden page 3

6 THE BIDDING PROCESS When the obligation to place a bid arises The bid If a person does not hold any shares or holds shares representing less than 30 % of the voting power of all the shares in a company that is listed on a Swedish regulated market (or a corresponding market outside the EEA) and by acquisition of shares in that company alone or together with someone related, reaches a holding of shares representing at the minimum 30 % of the voting power of the shares in the company, they must immediately: announce the size of his holding of shares in the company; within four weeks thereafter make a public offer regarding the remaining shares in the company. The following are considered to be related to the buyer: company in the same group as the buyer; husband or cohabitant of the buyer; the buyer s children, if they are under his or her custody; someone with whom it has reached an arrangement to act jointly in relation to the exercise of votes and thereby act in concert over a long-term, with the purpose of exerting a controlling influence over the management of the company; someone that co-operates with the buyer with the purpose of obtaining control over the company. The bidder shall compile a bid document. Each takeover bid must be accompanied by a bidder s offer. When a buyer crosses the 30 % threshold it is obliged to place a bid, however, a buyer is free to place a bid even though it does not own any shares at all in the company or it holds shares below 30 %. A bid is essentially an offer to all members of a target company to purchase their shares in the target for a specified consideration. A bidder is only allowed to submit a public offer if it can demonstrate that it has the capacity to carry out the offer. This means that the bidder, after the bidding process, must be able to show documents demonstrating this. If the shares or the instruments do not have identical conditions, the general rule is that a difference in the pricing or the offered consideration is not permitted. If the shares differ in respect of their economic right, the bidder may give offers that differ in value, as long as the difference is not unreasonable. Should the difference be attributable to the shares voting rights and not all classes of shares be listed, the offer must be equal for all shares. If there is a difference in the shares voting rights and all classes of shares are listed, the bidder may seek consent to deviate from the equal treatment from the Securities Council. The board of directors in the bidding company is responsible for the preparation of the bid document. It must contain information designed to enable the target shareholder to assess whether or not to accept the offer, including inter alia: _3_2014 takeover guide - sweden page 4

7 the bidder s identity and the time of decision of submission of the bid; conditions and directions for acceptance as well as the time for acceptance and the bidders right to extend the time-limit; offered consideration, how the offer is being financed and, if the consideration is other than cash, a description of the consideration which makes it possible to evaluate it; background, motives and consequences; number of shares in the target company held by the bidder and the proportion of the share capital and voting rights these shares represent; statement from the board of the target company (if available); the composition of the new group; short description of the target company; description of the bidder; matters concerning taxes; the examination of the accounts made by the auditors; and other relevant information. As soon as the bidder has decided to make a public offer, it must immediately submit a public offer by press release to at least two news agencies and at least three nation-wide daily newspapers. The corresponding information shall at the same time be given to the stock exchange or marketplace in question, the Securities Council and the SFSA. The information shall also be made available on the website of the bidder company. The offer shall also be sent to the shareholders and news media within four weeks of the announcement. If the offer is too extensive, an information pamphlet may be created and sent to the shareholders. However, the information pamphlet must contain information on how to, in an easy and cost free manner, obtain the offer document. Consideration The consideration offered may comprise cash, shares, other securities or a mixture of each. If the consideration is increased during the term of the offer, the increase will extend to offers already accepted, preserving equality of opportunity between shareholders. The law prohibits the giving of any benefit to some target shareholders and not others during the bid that is, no control premiums are payable to the majority shareholders during the offer period (which means six months before the bid and six months after the bid). Conditional bids Voluntary offers may be conditional or unconditional and the general rule is that conditions are allowed. The conditions shall, however, be formulated so that it can be objectively determined whether the conditions are fulfilled or not. Conditions are not permitted which allow the bidder a determinant influence over their fulfilment. Besides these limitations, there are no other conditions that are prohibited _3_2014 takeover guide - sweden page 5

8 Some common conditions are: minimum acceptance conditions, pitched at a level the bidder believes it requires to gain control of the target; usually either 90 % if the bidder wishes to own 100 % of the target by proceeding to compulsory acquisition, or 50 % (if the bidder merely wants to control the target); if the bidder is relying on external financing for implementation of the offer and the lender stipulates conditions for issue of the loan or corresponding sum, the offer shall be made conditional on the provision of such funds; and conditions that make the offer dependant on regulatory approval. If completion conditions are stipulated, the bidder must state that the offer may only be withdrawn on the grounds of failure to fulfil a condition of this nature (if failure to fulfil the condition is of material importance for the bidder s acquisition of the target company). However, this does not apply to a condition regarding achievement by the bidder of a given level of acceptance for the offer. In regards to mandatory bids, the only condition that is permitted is the attainment of necessary regulatory approval. Partial bids Public offers to acquire shares comprise, as a rule, all the shares in the company not already owned by the bidder. Offers can, however, be made to acquire part only of the target s shares. However, such an offer must state the maximum number of shares that the bidder wishes to acquire by the bid. A partial bid shall be announced to the press in the same way as a normal bid. Such a bid is only allowed if: the bidder, subsequent to the acquisition of shares in accordance with the offer, cannot own shares representing 30 % or more of the number of votes in the company; or the bidder, when announcing the bid, owns shares representing 30 % or more of the number of votes but is not obliged to acquire more shares (for example as a result of a ruling by the Securities Council granting exemption from the mandatory offer rules, depending on how the exemption is formulated). If acceptances are received for more than the specified percentage of shares to be acquired, the bidder must make a proportional reduction of the shares comprised by the acceptances. Duration of offer Offers must remain open for acceptance for a minimum of three weeks (four weeks if a member or deputy member of the board of directors, or a senior executive, of the target company or its subsidiary participates in the offer) and a maximum of ten weeks. The offer period may be extended if the bidder has reserved the right to prolong the time for acceptance. The aggregated offer period may not be longer than three months, or, if the offer is conditional on the attainment of necessary regulatory approval, nine months. However, the bidder may prolong the bid without limit subsequent to the bidder s completion of the offer _3_2014 takeover guide - sweden page 6

9 Variations to bid terms Takeover offers can be varied in a number of different ways, such as by increasing the bid price, by extending the bid period or by offering additional alternative forms of considerations. Offers are generally varied where the bidder makes an improved offer, which is a condition for the possibility to vary the bid terms. Further, there needs to be at least two weeks of the offer period remaining, in order to change the offer. A change in the conditions must be announced immediately and information about the change must be sent to the shareholders. The bidder s ability to place collateral bids If the bidder, after the offer is announced, acquires shares in the company and conditions in the collateral bid are more favourable than in the public bid, the public bid must be adjusted to the more favourable bid. The provision applies irrespective of whether the transaction takes place on a market place or in some other way. Agreements on future acquisitions as well as issuing of options on new shares in the target company also fall within this rule. The target s response the target s statement The launching of a bid triggers an obligation on the directors of the target company to respond by issuing a target s statement. The target s statement is designed to provide target shareholders with information to assist them in their decision whether or not to accept the offer. The board shall act in all the shareholders interests. The board is normally not obliged to engage independent expertise to provide documentation for the statement, but normally it is considered suitable that this is done. The announcement shall be made within two weeks before the end of the offer period or, if a change has been made in the conditions of the offer, as soon as possible or at least within one week before the end of the offer period. If a board member or a deputy board member of the target company or of a subsidiary of the target company is making or participating in a public offer, or if a senior executive of the target company or a person equated with a senior executive, participates in a public offer the board has an obligation to obtain a valuation opinion from an independent expert regarding the company s shares. The commitment of the shareholder after acceptance The general rule is that a shareholder who has accepted the offer may not withdraw the acceptance. However, if the offer contains conditions that the bidder has reserved a right to have at its disposal (e.g. reaching a certain holding level), the shareholder has the right to withdraw an acceptance. The bidder s obligation to announce the result of the bidding process When the time for acceptance has ended, the bidder shall at the earliest opportunity publish: the number of shares in the target company the buyer acquired under the offer, and the share capital and the number of votes that these represent; how many shares in the target company the buyer acquired outside the offer, and the share capital and the number of votes that these represent; _3_2014 takeover guide - sweden page 7

10 if set conditions for fulfilment were satisfied and, when applicable, if the bidder will carry out the offer even though the conditions were not fulfilled; the number of shares in the target company that the bidder holds or controls, and the share capital and the number of votes that these represent; the buyer s holdings of financial instruments which gives the buyer financial exposure equivalent to a shareholding in the target company, and when the time for payment is scheduled to begin. When applicable, the bidder shall publish if the bidder intends to: prolong the time for acceptance; reduce the number of shares that are bid for; request a compulsory purchase of the remaining shares; or acquire additional shares on the market. SQUEEZING OUT THE MINORITY AFTER A TAKEOVER The takeover regime incorporates a policy that a small minority of shareholders should not be able to thwart an otherwise successful bid. The policy protects minority shareholders from being locked in. Following a takeover bid, a bidder will be permitted to compulsorily acquire securities in the bid class if the bidder and its associates have a relevant interest in at least 90 % (by number) of those securities. Where there are dissenting minority shareholders who, in aggregate, hold 10 % of the securities covered in the compulsory acquisition notice, the majority holder must apply to the court for approval of the acquisition of the securities covered by the notice. The majority holder must, in most cases, pay the legal costs of a dissenter associated with any such application. The flip side to the bidders right to squeeze out the minority, is that the bidder must offer to, and the minority has the right to require the bidder to, purchase the securities. This right of the minority to force such a buy-out extends to warrants and securities that are convertible into bid class securities. IMPORTANT DETAILS CONCERNING THE REGULATION Due diligence and insider trading In order to obtain more information about the target it is common for the target to allow the bidder to perform due diligence on the target before announcing the bid. It is up to the target s board of directors to decide whether a due diligence is appropriate in the individual case. The board in the target company shall also make sure that the due diligence is not more extensive than necessary for the offer. If the bidder becomes aware of inside information that is, information which is price sensitive and not generally available - the target s board should make sure that the same information reaches the shareholders before they have to decide whether to accept the _3_2014 takeover guide - sweden page 8

11 offer or not. The information must also be published as soon as possible, after the offer has been submitted. If there are several bidders that are planning to place a bid, the same information must be given to all of them if they demand it, if the conditions are otherwise similar. When a bid has already been made, a due diligence of the company may only be allowed if it is necessary to determine whether a condition in the offer is fulfilled or not. To maintain the principle of equal treatment of the shareholders and the confidence in the integrity of the share market way of operation, a bidder that has begun a due diligence may not buy or sell the target company s shares. This applies until the information either: is no longer price sensitive; or becomes generally available. It rests with the target company to make sure that such information is made available to the shareholders and stock market. Pre-bid purchases If the bidder, within a period of time of six months preceding the public bid, has acquired shares in the target company, the conditions in the offer may not be less advantageous than for the pre-bid purchase. If someone else during the period mentioned above announces an offer to acquire shares which, for the buyer are less favourable than the conditions in the pre-bid, the buyer is no longer bound to match the pre-bid purchase when drawing up the offer. Purchases during offer period If the bidder, after the offer is announced, acquires shares in the target company and the conditions for this acquisition are more favourable for the seller than the offer, the conditions in the offer must be amended so they match the more favourable terms. The rule applies regardless of whether the purchase is made on or off the stock exchange. Purchases after the offer If the bidder, within six months after the payment of the consideration in a public offer, acquires shares in the target company and the conditions are more favourable for the seller than the offer, the bidder shall compensate those who had accepted the offer. If someone else during the period mentioned above announces an offer to acquire shares that, for the buyer, are less favourable than the conditions in the post-bid offer, the buyer is no longer bound to compensate. Additional benefits to some shareholders control premiums As mentioned above, it is strictly forbidden to benefit some target shareholders and not others during the bid. Competing bids When a public offer is placed, a competing bid may emerge. Any competing bid is governed by the same requirements as to timing and documentation as the original bid _3_2014 takeover guide - sweden page 9

12 The competing bidder shall also be given the same rights as the original bidder as to, for example, the right to carry out a due diligence. THE LIFECYCLE OF A TAKEOVER Timetable and documents for a public offer Date Day 0 Day weeks Action The public offer or information regarding a planned offer is announced by press release and the SFSA is informed. Deadline for the drawing up of an offer document that shall be approved by the SFSA. Deadline for making a public offer regarding the rest of the shares in the company (mandatory bidding). Deadline for selling the shares in order for the mandatory bid to expire. Date of approval of bid document + 3 weeks Date of approval of bid document + 10 weeks Minimum time for acceptance. Maximum time for acceptance. The acceptance period may be prolonged if the bidder has reserved the right to do so. DEFENDING A TAKEOVER WHAT CAN BE DONE? Defensive measures If a public offer is announced, or if the board or the managing director consider that such an offer will be announced, the company may only carry out measures that are intended to adversely impact on the offer, if the general meeting has approved the measure. The company may however search for alternative offers. In spite of this, the company s management have several measures at their disposal in order to prevent bidders from taking over the company. There are two main categories of defensive takeover tactics the pro-active kind, which operate as a deterrent to takeover attempts before they occur, and the re-active kinds which are adopted only after a specific bid is made or anticipated. Examples of pro-active defences are: ensuring placement of shares with those likely to support the company by using for example, employee share schemes and superannuation funds; use of inter-company shareholdings between associated companies; and use of pre-emption clause in the company s articles of association (only possible to share classes that are not listed, e.g. if the company s B-shares with one vote _3_2014 takeover guide - sweden page 10

13 each are listed and a number of major shareholders hold A-shares with ten votes each and these are unlisted). Examples of re-active defences are: Fiduciary duties criticism of the bidder and the bid, to dissuade shareholders from accepting it; asset redeployment or corporate restructuring; and seeking someone else (a white knight) to make a rival bid or to acquire a large shareholding. One of the most fundamental principles in corporate law is that the directors of the board are obliged to always act in the best interest of the company and for a proper purpose. When it comes to a takeover situation, the directors of the board have a comprehensive duty to make sure that shareholders are provided with sufficient information and guidance in order for them to be able to make a decision in an objective way _3_2014 takeover guide - sweden page 11