Amendments to Bidding Rules
· Introduction of put up or shut up rule
· Redefinition of the timing of announcement of a public offer
· Multiple price increases now allowed
· Additional exemptions to the mandatory bid rules
Last week, the Decree of 9 March 2012 containing amendments to the Decree on Public Takeover Bids (Besluit van 9 maart 2012 houdende wijziging van het Besluit openbare biedingen Wft, het Besluit bestuurlijke boetes financiële sector en het Besluit artikel 10 overnamerichtlijn) was submitted to both Houses of Parliament. The Decree is expected to enter into force on 1 July 2012, together with a separate Decree on amendment of the Exemption Decree Takeover Bids (Vrijstellingsbesluit overnamebiedingen Wft) and together with certain amendments to the provisions relating to public offers in the Financial Supervision Act (Wet op het financieel toezicht) pursuant to the Amendment Act Financial Markets 2012 (Wijzigingswet financiële markten 2012).
This Corporate Alert summarises some highlights of the amendments to the Decree on Public Takeover Bids (the "Bidding Rules"), as submitted to Parliament, and the expected amendments to the Exemption Decree Takeover Bids.
The Bidding Rules entered into force on 28 October 2007. The current structure of the bidding procedures – with supervisory roles of the Dutch Authority for the Financial Markets ("AFM") and the Enterprise Chamber of the Amsterdam Court of Appeal (Ondernemingskamer) – will be kept in place, without the introduction of a market manager such as the UK Takeover Panel, but the Bidding Rules will be amended in some respects to increase efficiency and transparency.
Put Up or Shut Up
An important change is the introduction of the "put up or shut up" rule: a target company may request that the AFM instruct a person who publishes – or causes the publication of – information that may give the impression that he is considering to prepare a public offer for a target company, to make a public announcement within six weeks, either announcing a public offer for that target company (to put up), or stating that he has no intention to do so (to shut up). The AFM must comply with the target company's request if the target company is suffering adverse consequences from the uncertainty whether a public offer will be made. However, the AFM has some discretionary power in this respect. The person who is instructed to make the put up or shut up announcement within six weeks must forthwith make a public announcement of that instruction.
If the person announces that he has no intention to make a public offer for the target company, he and any persons acting in concert with him are prohibited from announcing or making a public offer for that target company during the next six months. The same applies if the person does not comply with the obligation to make public announcement within six weeks, except that in that case the period of the prohibition is nine months starting from the end of the six-week period within which the announcement should have been made. The prohibition also applies in other situations under the Bidding Rules in which the potential bidder has decided not to pursue the public offer, for a period of six months. The prohibition ceases to apply in all cases if a third party announces a public offer for the relevant target company. Under circumstances the AFM may grant dispensation from the prohibition, e.g. with the consent of the target company.
Announcement of Public Offer
Under the Bidding Rules, certain time periods commence at the moment of announcement of a public offer. In addition to the situation that the proposed public offer is announced when conditional agreement has been reached between the bidder and the target company, a public offer is deemed to be announced when the bidder announces concrete information about the proposed offer. In practice, this assumption could lead to an early trigger of commencement of the time periods under the Bidding Rules, if the rules relating to publication of price sensitive information would require the bidder to announce such concrete information, while the bidder and the target company were still in negotiations but no agreement had been reached yet. In such situations, it may not be appropriate for the time periods to commence. Under the amended Bidding Rules, the publication of concrete information is therefore not deemed to constitute an announcement of a public offer provided that the target company promptly announces that it is in discussions with the bidder. Whether the formal time periods commence is therefore controlled by the target company. If the target company announced that it is in discussions with the bidder, the target company may at a later stage still invoke the "put up or shut rule".
Increase of Offer Price
The current rule that the offer price may only be increased once, will cease to apply: there will in principle be no limitation on the number of times that the offer price may be increased. If necessary, the tender period will be automatically extended to allow shareholders at least seven business days to respond to an increase. If the composition of a non-cash offer price changes, an additional information document must be made publicly available. This document is not subject to prior review by the AFM.
The Exemption Decree Takeover Bids (Vrijstellingsbesluit overnamebiedingen Wft) contains exemptions from the obligation to make a mandatory bid when 30% or more of the voting rights is acquired. The amendment Decree amends an existing exemption and introduces new exemptions:
• "Whitewash" Procedure. Under the current rules, the general meeting of shareholders of the target company may consent to an exemption from the mandatory bid obligation with 95% of the votes cast by others than the person who would be required to make the bid and persons acting in concert with him. This percentage is lowered to 90%, since in practice 95% has proved to be an almost prohibitively high percentage.
• Underwriting. There will be a new exemption for professional underwriters who acquire a controlling interest as a consequence of underwriting a placement of securities, provided that they do not exercise voting rights on the securities so acquired. The exemption lapses after one year.
• Irrevocables. Another new exemption relates to undertakings by major shareholders to tender their shares in the offer and to vote in favour of certain resolutions, effective after the offer has been declared unconditional, in the general meeting of shareholders held in relation to the offer. Such "irrevocable undertakings" will not lead to a mandatory bid obligation, provided that:
(i) the undertaking is irrevocable and unconditional;
(ii) the term of the agreement does not extend to beyond the time when the offer is declared unconditional; and
(iii) the undertaking to vote in favour of resolutions in the general meeting of shareholders must relate to specified resolutions which are subject to the offer having been declared unconditional and which directly relate to the offer, or the frustrating of an announced offer.
In particular the first requirement has met criticism, since in practice such undertakings are usually not unconditional (or irrevocable, despite what the name suggests) and it is unclear why this should be required.
• Acting in Concert. Under the current rules, there is an exemption for forms of cooperation that were in existence when the Bidding Rules entered into force on 28 October 2007. The amendment Decree introduces a new exemption for parties acceding to such forms of cooperation.
Notice Period Shareholders Meetings
Although falling outside the scope of the Bidding Rules it is important to note that the explanatory notes to the amendments to the Bidding Rules confirm the intention of the administration to propose an amendment of Dutch corporate law in order to reduce the period required for convening a shareholders meeting of a Dutch public limited company. This period is now 42 days and applies to both ordinary and extraordinary shareholders meetings. It is expected that this period will be reduced to 28 or even 21 days.
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