Norway Takeover Guide

Transcription

1 Norway Takeover Guide Contacts Øystein Rød, partner, and associates Øyvind Skaara and Cathrine Schlytter Killi Advokatfirma Ræder DA

2 Contents Page INTRODUCTION 1 RELEVANT NORWEGIAN LEGISLATION 1 SUMMARY OF THE MAIN STRUCTURE 1 VOLUNTARY OFFERS 2 MANDATORY OFFERS MORE THAN ONE THIRD 3 CORPORATE GOVERNANCE PRINCIPLES 6 COMPULSORY ACQUISITION OF SHARES IN A SUBSIDIARY 7 NOTIFICATION TO THE NORWEGIAN COMPETITION AUTHORITY _1_takeovers guide - norway

3 INTRODUCTION This outline provides an overview of the Norwegian law on takeovers of shares in public companies. Some of the provisions only relate to companies listed at the Norwegian regulated market on either the Oslo Stock Exchange (OSE) or Oslo Axess. The outline will concentrate on the main current regulatory takeover framework. The two main takeover rules that will be discussed are mandatory offers and voluntary offers. Anyone involved in a takeover action should seek advice from legal counsel. While this outline is intended to give an introduction to the relevant laws and regulations, it is not intended to serve as, and should not be construed as, legal advice. Moreover, this outline does not intend to cover all aspects of the takeover process and/or regulations. RELEVANT NORWEGIAN LEGISLATION All relevant Norwegian statutes, regulations and directives are available at in the Norwegian language. Unofficial translations into English of certain relevant statutes and regulations can be found at Oslo Stock Exchange s website. However, these translations may not be current at all times. The main relevant statutes are the Norwegian Securities Trading Act (Verdipapirhandelloven, 29 June 1997 No. 75), the Norwegian Public Limited Companies Act (Allmennaksjeloven, 13 June 1997 No. 45), the Norwegian Limited Liability Companies Act (Aksjeloven, 13 June 1997 No. 44), the Norwegian Stock Exchange Regulations (Børsforskriften, 29 June 2007 No. 875) and the Norwegian Stock Exchange Act (Børsloven, 29 June 2007 No. 74). Reference is also made to the Norwegian Code of Practice on Corporate Governance dated 4 December 2007, which, amongst other things, includes guidelines and recommendations in relation to corporate takeovers. By way of introduction, it should be noted that Norway s legal system is a mixed common law and civil law system, where the latter has the most significant influence. SUMMARY OF THE MAIN STRUCTURE This section briefly provides a summary of the main terms applicable to a situation where a person wishes to acquire all the issued shares in a listed company. The typical threestep procedure would be: the person submits a voluntary offer, where the offer is made conditional on the person becoming the owner of more than 90% of the shares in the company, at which time such person has a right to a compulsory acquisition of the remaining shares. The mandatory offer obligation is triggered at such time as the person becomes the owner of more than one third of the shares. To the extent the voluntary offer causes a mandatory offer obligation to be triggered in the case where the voluntary offer is accepted by those able to make use of it, the voluntary offer must be in the form of a prescribed offer document; a mandatory offer must be presented upon reaching the statutory threshold level, in which an offer document on the compulsory acquisition upon becoming the owner of more than 90% of the shares is announced; _1_takeovers guide - norway page 1

4 upon becoming the owner of more than 90% of the shares in the company (and a corresponding percentage of the votes in the company) the person carries out a compulsory acquisition of the remaining shares. VOLUNTARY OFFERS Takeovers often start with a voluntary bid. This gives the purchaser good flexibility and enables the purchaser to set forth the relevant terms of the offer, such as the required percentage for acceptance, terms of settlement, partial offers, terms for concession, complete financial and legal due diligence, and other conditions precedent. However, the purchaser has to act in compliance with the terms of an offer document, obtain acceptance from the stock exchange, and receive a statement from the target company etc. Also, all shareholders have to be treated in an equal manner. In some cases a voluntary bid will be regarded as equal to a mandatory bid, as a voluntary bid fulfilling all requirements pertaining to a mandatory bid entails that the obligation to launch a mandatory bid no longer applies. In the Securities Trading Act the regulatory focus is on the mandatory bid. However, according to Section 6-19 of the Securities Trading Act: (1) The provisions of section 6-10 final paragraph and sections 6-12 to 6-18 apply correspondingly in the event of voluntary offers which entail that a mandatory offer obligation under section 6-1 comes to play if the bid is accepted by those able to make use of it. (2) Subsection (1) does not apply where the bid is addressed specifically to certain shareholders unless the bid is made simultaneously or in conjunction and has the same content. Section 6-10 final paragraph requires an equal treatment of the shareholders when making an offer. Section 6-13 regulates the requirements of, and the information that must be included in, the offer document. To the extent the voluntary offer causes a mandatory offer obligation to be triggered in case the voluntary offer is accepted by those able to make use of it, the voluntary offer must be in the form of a prescribed offer document, the required content of which is set out in Section Section 6-14 refers to the approval by the stock exchange and publication of the offer and offer document. Section 6-15 regulates the fees that the stock exchange may charge for the approval and publication and Section 6-16 sets forth the requirement that the company issues a statement regarding the offer. The requirements as to the offer price and settlement are not applicable for voluntary bids. This means that the bidder may include reservations and conditions in the voluntary bid. Settlement under a voluntary offer may also be by way of non-cash consideration (as opposed to a mandatory offer where the settlement must be in cash unless the shareholder accepts other forms for settlement). A voluntary bid shall indicate a period allowed for shareholders to accept the bid. The period may not be shorter than two weeks or longer than 10 weeks _1_takeovers guide - norway page 2

5 MANDATORY OFFERS MORE THAN ONE THIRD In general According to the Securities Trading Act Section 46-1, any person who through acquisition becomes the owner of shares representing more than one third of the voting rights in a Norwegian company whose shares are quoted on a Norwegian stock exchange is obliged to make an offer for the purchase of the remaining shares in the company, with repeated obligations upon reaching thresholds of 40% and 50%. Conversely, a purchaser of shares in a company whose shares are not listed on a Norwegian stock exchange is not subject to the mandatory offer laws. However, there are certain exceptions where the company has links to more than one state, please see Takeover bids where the company has links to a state outside the EEA below. There is an immediate obligation to notify the stock exchange if the mandatory offer obligation is activated (Section 46-8 of the Securities Trading Act). The notification shall state whether a mandatory offer will be submitted or if the purchaser instead will sell shares in order to come below the statutory threshold. In the latter case, the sale has to be carried out within four weeks from the date the mandatory offer obligation is activated (that is, the day the shares were acquired) (see Section 46-9 of the Securities Trading Act). Acquisitions of shares representing more than 50 per cent of the votes in a company whose principal activity consists of owning shares in a company quoted on a Norwegian stock exchange are also regarded as acquisitions within the meaning of Section 46-1 of the Securities Trading Act. This also applies to an owner interest in a general partnership which owns shares in such a company and where the partners are exclusively close associations. Where a person s acquisition of the right to become owner of shares has to be regarded as effective acquisition of the shares in question, the stock exchange may impose a mandatory offer obligation if such acquisition gives the party the right to become owner of shares which, together with that party s remaining shares, represent more than one third of the votes in a listed company. This provision also applies when the acquirer has previously made a voluntary offer, unless the voluntary offer was made in accordance with the rules on mandatory offers and this was stated in the offer document. As mentioned, the mandatory bid requirement comes into force when a person acquires shares in a Norwegian company listed on the Norwegian regulated market on either Oslo Stock Exchange or Oslo Axess. However, pursuant to the Securities Trading Act Section 6-23, the takeover bid rules in the Securities Trading Act apply correspondingly in relation to: 1. Companies with their registered office in anther state whose shares or other securities comparable to shares are not quoted on a regulated market in the state in which the company has its registered office but on a Norwegian regulated market, and 2. Companies with their registered office in Norway whose shares are quoted on a regulated market in another European Economical Area ( EEA ) state. Please see Takeover bids where the company has links to a state outside the EEA below. The rules on mandatory offers only come into force when the shares carry voting rights. Shares without voting rights will not trigger the mandatory offer obligation. The condition _1_takeovers guide - norway page 3

6 for mandatory offers is acquisition. The investor must in fact acquire shares in the company. Acquisition of share options, subscription rights and similar rights of more than one third of the shares generally will not trigger the mandatory offer rule. These statutes require a shareholder to maintain full control of the size of its shareholding in a takeover process. Typically, the acquirer will wish to control the timing of the obligation to provide the mandatory bid. This can be of importance for several reasons, including financial considerations. A mandatory bid also comes to force in case of consolidation, where shares owned or acquired by close associates of the shareholders are deemed to be included in that shareholder s shareholding. As set out in Section 2-5 of the Securities Trading Act, close associates include, amongst others, spouse, live in spouse, children, other group companies, or companies where the purchaser and/or the above mentioned have such influence. The provision also includes as a close associate someone that the purchaser has a co-operation with. The co-operation does not have to be legally binding or possible to enforce legally. A common understanding could be enough, where important decisive criteria could be the probable goal with the acquisition, what the connection between the companies (shareholders) is, and their economic interests. Further, a close associate is also defined to be persons acting in concert in cases where a bid is frustrated or prevented. The mandatory bid must be unconditional. The bid must include all the shares in the company, of whatever class. Consequently, all shareholders have the right to receive the offer, including owners of shares without voting rights. Exemptions for certain types of acquisitions In accordance with Section 6-2 of the Securities Trading Act, gifts and inheritance of shares will not trigger the mandatory offer obligation. The legislative reason behind this exemption is that this is out of the control of the shareholder concerned and that the legislator has viewed it unreasonable to impose a duty on the recipient to incur the cost of a mandatory bid or sell the shares in order to not become subject to the mandatory bid obligation. Neither will payment in connection with probate nor payment in connection with the merger or de-merger of a limited liability company or a public limited company trigger the mandatory offer obligation. However, if the merged company acquires just one more share, the mandatory bid obligation will be triggered. Exemptions for certain institutions In accordance with Section 6-3 of the Securities Trading Act, no mandatory offer obligation is triggered where a financial institution acquires shares in a company in order to avoid or limit loss on a financial engagement, provided the institution immediately notifies the stock exchange thereof. The stock exchange may instruct the institution to make an offer within a specified period, or to dispose of shares so that the mandatory offer obligation ceases to apply. Takeover bids where the company has links to a state outside the EEA According to the Securities Trading Act Section 6-23 (3) the takeover supervisory authority, the Oslo Stock Exchange, may make exceptions from the provisions in the Securities Trading Act where a company with a registered office in Norway has shares quoted on a regulated market both in Norway and a state outside the EEA. The same applies for companies with a registered office in a state outside EEA whose shares are quoted on a regulated market in Norway _1_takeovers guide - norway page 4

7 The mandatory offer price, offer period etc The mandatory offer shall be made without undue delay and no later than four weeks after the mandatory offer obligation is activated. Section 6-10 of the Securities Trading Act provides that the mandatory offer price shall be at least as high as the highest payment the offerer has made or agreed in the period six months before the mandatory offer obligation was activated. If the market price is clearly higher at the time the mandatory offer obligation is activated, the offer price shall at least equal this higher market price. Settlement of the terms of the offer must be in cash; provided, however, that an offer may give the shareholders the right but not the duty to accept other forms of settlement. Payment shall be guaranteed by a financial institution. The offer period shall be four weeks at a minimum and six weeks at a maximum. Given the requirement that the mandatory offer shall be unconditional, the offer may not contain conditions precedent, such as a minimum of acceptance, concession acceptance from the Government etc. An offer document has to be prepared and be approved by the Oslo Stock Exchange prior to publication. Sections 6-13 and 6-14 of the Securities Trading Act. It has to contain true and complete information about circumstances that can be of significance for the valuation of the offer. Section 6-13 contains an overview of the information that has to be given in the offer document. Statement by the Company The company that is the subject to the mandatory offer is obliged to discuss it at board level and issue a written statement on the offer including information on the board s views and other factors of significance for assessing the offer (ref. Section 6-16 of the Securities Trading Act), such as the views on the effects of implementation of the bid on the company s interests, and on the offeror s strategic plans for the offeree company and their likely repercussions on employment and the locations of the company s places of business. The board of directors shall also present the views of the directors and the manager in their capacity as shareholders in the company. The statement shall be made available at least one week prior to the expiry of the offer period and be sent to the stock exchange, and be made available to the shareholders and the employees. After the company is informed that a bid will be made and until the bid has expired and the result is clear, the board and the manager are effectively in charge subject to the restrictions on the following actions (according to Section 6-17 of the Securities Trading Act): issuance of shares or other financial instruments by the company or by a subsidiary; merger of the company or subsidiary; sale or purchase of significant areas of operation of the company or its subsidiaries, or other dispositions of material significance to the nature or scope of its operations; or purchase or sale of the company s shares _1_takeovers guide - norway page 5

8 Miscellaneous A takeover bid is a contractually binding action that has major consequences for the employees, board of directors and shareholders of both the bidder and the target company. All parties involved must therefore conduct themselves in such a manner as to maintain public confidence in the stock market. For the target company, it is therefore important that the board has considered in advance, some of the guiding principles as to how it will behave in the event of receiving a bid, for example whether it will seek to encourage competing bids and how it will ensure equal treatment of the company s shareholders. There is, however, no requirement for a company to disclose in advance the position it has taken on these principles. A bid must only be made when the bidder has carried out sufficient preparations to demonstrate its ability to carry through the bid, including access to sufficient financing for the terms of the bid. CORPORATE GOVERNANCE PRINCIPLES As discussed above the Securities Trading Act regulates the situation that arises when a company receives a mandatory offer. The Code of Practice on Corporate Governance (the Code ) on the other hand covers the situation prior to this, which is not regulated by legislation. The rationale behind this code is to ensure that individual shareholders are given the opportunity to form their own view of any offer for the company regardless of the board s view of the bidder, pricing etc. Openness in respect of takeover situations will help to ensure equal treatment of all shareholders. The board of directors and the executive management are expected to refrain from implementing any measures intended to protect their personal interests at the expense of the interests of shareholders. The Code supplements the provision in the Securities Trading Act on the limitation of the company s freedom of action once it is aware that a mandatory offer is to be made. The objective of the Code is that listed companies will practice corporate governance that regulates the division of roles between shareholders, the board of directors and executive management more comprehensively than is required by legislation. The Code is principally intended for companies whose shares are listed on the Oslo Stock Exchange or Oslo Axess. The Code also applies to saving banks with listed primary capital certificates to the extent that it is appropriate. The Code is a comply or explain recommendation, which means that the company must inform whether it is compliant with the recommendations and, if not, the grounds for non-compliance. The corporate governance statement by the company shall be contained in its annual report. Clause 14 of the Code gives an overview of what should be considered good practice in relation to takeovers, and states: The board of directors should establish guiding principles for how it will act in the event of a take-over bid. During the course of a take-over process, the board of directors and management of both the party making the offer and the target company have an independent responsibility to help ensure that shareholders in the target company are treated equally, and that the target company s business activities are not disrupted unnecessarily. The board of the target company has a particular responsibility to ensure that shareholders are given sufficient information and time to form a view of the offer. The board of directors should not seek to hinder or obstruct take-over bids for the company s activities or shares unless there are particular reasons for this. In the event of a take-over bid for the company s shares, the company s board _1_takeovers guide - norway page 6

9 of directors should not exercise mandates or pass any resolutions with the intention of obstructing the take-over bid unless this is approved by the general meeting following announcement of the bid. If an offer is made for a company s shares, the company s board of directors should issue a statement evaluating the offer and making a recommendation as to whether shareholders should or should not accept the offer. If the board finds itself unable to give a recommendation to shareholders on whether or not to accept the offer, it should explain the background for not making such a recommendation. The board s statement on a bid should make it clear whether the views expressed are unanimous, and if this is not the case it should explain the basis on which specific members of the board have excluded themselves from the board s statement. The board should consider whether to arrange a valuation from an independent expert. If any member of the board or executive management, or close associates of such individuals, or anyone who has recently held such a position, is either the bidder or has a particular personal interest in the bid, the board should arrange an independent valuation in any case. This shall also apply if the bidder is a major shareholder. Any such valuation should be either appended to the board s statement, be reproduced in the statement or be referred to in the statement. Any transaction that is in effect a disposal of the company s activities should be decided by a general meeting, except in cases where such decisions are required by law to be decided by the corporate assembly. COMPULSORY ACQUISITION OF SHARES IN A SUBSIDIARY If, as a result of an offer or otherwise, a shareholder acquires more than 90% of the total issued shares in a subsidiary, such parent company will have the right to effect a compulsory acquisition pursuant to Section 4-25 of the Public Limited Companies Act, whereby the offerer will acquire all remaining shares in the subsidiary not already owned by the offerer. Each remaining shareholder will also have the right to require the offerer to effect such compulsory acquisition of their shares in the company. At the time the offerer has resolved to acquire the remaining shares in the subsidiary and the purchase price offered for these shares has been paid into a separate account, the shares will be transferred to the parent company. The rationale behind the rule on compulsory acquisition is the need for freedom of action both for the majority as for the minority shareholder. The reason for compulsory acquisition will normally be opposite for the majority shareholder and minority shareholder. The majority shareholder s right for compulsory acquisition might be reasoned with the problems a minority shareholder might cause. The minority shareholders might claim compulsory acquisition because of the majority shareholder s strong position and control of the company. Also, the market and the minority shareholders already have the information and the expectations of the parent company as the decisive shareholder. The parent company must offer the shareholders a redemption price. The price to be paid in a compulsory acquisition will, in the absence of an agreement between the majority shareholder and the remaining shareholders, be determined in accordance with Section 4-25, second and third paragraph of the Public Limited Companies Act. According to such provisions, the majority shareholder shall first offer the remaining shareholders a price at which it is willing to purchase the shares in the subsidiary. If the offer is made in writing and on paper to all shareholders with a known address and is also made public by the insertion of a notice in the Internet announcement pages of the Norwegian Register of Business Enterprises and in a newspaper which is widely read in _1_takeovers guide - norway page 7

10 the area in which the registered office of the company is located, a deadline may be fixed within which the individual shareholder may make objections to or reject the offer. If no such objection is received by the company before the expiry of the deadline, the shareholder shall be regarded as having accepted the offer. The deadline cannot be fixed for a period of less than two months from publication. In the written communication and in the notices, the shareholders must be informed of the deadline and of the consequences of any failure to meet it. As mentioned above the offer must be in writing on paper to all shareholders with a known address. Consequently, a submission by is not sufficient. Each shareholder has the right, according to Section 4-25 of the Public Limited Companies Act, to reject or raise objections with regard to the offered redemption amount. The redemption amount may in such a case be determined through an assessment procedure by the Norwegian courts, subject to special rules. Both the size of the redemption amount and the payment date is determined as part of the assessment process. Under Section 4-25 of the Public Limited Companies Act, the offerer will, as a general rule, be obliged to pay the costs of such an assessment process, but the court may order the objecting minority shareholders to pay the costs. The court is not bound by the Redemption Amount offered and may accordingly determine that the redemption amount shall be higher or lower. Payment of the redemption amount will take place when a final and non-appealable ruling has been made by the Norwegian courts. In the case of a compulsory redemption in connection with the mandatory offer obligation and a voluntary offer pursuant to the abovementioned chapter 6 of the Securities Trading Act, the special rules in the Securities Trading Act regarding forced transfer of shares in connection with the mandatory bid obligation and voluntary bid will come into force. NOTIFICATION TO THE NORWEGIAN COMPETITION AUTHORITY The Norwegian Competition Act requires that concentrations (mergers, acquisitions, etc.) be notified to the Norwegian Competition Authority by way of a standardised notification. If the Competition Authority finds that a further examination of the concentration is necessary, it may order the submission of a complete notification of the concentration. The rules on notification of concentrations to the Norwegian Competition Authority are found in the Norwegian Competition Act of 2004, and in the regulations promulgated under the Act. The notification obligation will not be triggered in the event the undertakings concerned have a combined annual turnover in Norway of less than NOK 50 million, or only one of the undertakings concerned has an annual turnover in Norway exceeding NOK 20 million. In the case of an acquisition, the notification obligations are imposed on the acquiring company. The notification must be submitted at the latest at the time of the final agreement (or when actual control is obtained if that is at an earlier point in time) _1_takeovers guide - norway page 8