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What process applies to public takeover bids? For Issuers of securities

The following is a short summary of the most important rules relating to the process of making a public takeover bid.

Announcement of a public takeover bid

In most cases, the bid process begins with the announcement of the intention to make a public takeover bid. This will usually be in the form of a press release stating that the parties have reached ‘conditional agreement’. This means that negotiations between an offeror and a target company have led to an agreement between the parties, whether conditional or unconditional, regarding the public takeover bid.

The takeover bid process may also start in other ways. For example, a hostile bid can begin due to the publication of ‘concrete information’ (see below). The provision of concrete information is in any case deemed to have occurred if the offeror publishes the name of the target company in combination with a proposed offer price or a preliminary timetable for the conduct of the proposed bid. This concrete information does not necessarily have to be published by the offeror in the form of a press release. However, a target company may prevent a public takeover bid from being announced under the rules relating to public takeover bids.

This requires a public statement from the target coming stating that the offeror and the target company are in consultation concerning the intended public takeover offer. Such statement must be published immediately after the offeror’s statement containing concrete information has been published. The offeror’s statement then no longer qualifies as the formal announcement of a public takeover bid under the rules relating to public takeover bids. This means that the regulatory periods set out in the rules relating to public takeover bids will not yet commence.

A third possibility is that the bid process starts with the announcement of a ‘mandatory bid’ (see below).
See the ‘Put up or shut up’ rule below for a description of a fourth possibility for for launching a public takeover bid.

The above does not affect the obligation of both the offeror and the target company to publish price-sensitive information without delay. For instance, this obligation applies in the event that information on preparations for a public takeover bid has been ‘leaked’.

The ‘Put up or shut up’ rule

The bid process may also begin as a result of a potential offeror announcing a public takeover bid due to the ‘put up or shut up’ rule. On the basis of this rule, a target company can request the AFM to require a potential offeror to clearly state its intentions regarding a possible public takeover bid. If the AFM imposes the ‘put up or shut up’ rule, the potential offeror must, within six weeks, either announce a public takeover bid or publicly state that it will not announce a public takeover bid. If the potential offeror states that it will not announce a public takeover bid, it will not be able to announce a new public takeover bid for the same target company for six months.

This period will increase to nine months if the potential offeror does not comply with the ‘put up or shut up’ rule imposed by the AFM. In addition, the offeror may not assume a position of decisive control in the target company during such six or nine month period.

This prohibition will lapse if a third party announces a public takeover bid for the same target company during the above mentioned six or nine month period. Obviously, this must involve a third party that is independent of the original offeror.

The ‘put up or shut up’ rule also applies when a public takeover bid is announced but not continued (see the paragraph, “The ‘Put up or shut up’ rule after announcement of a public takeover bid”).

Hostile bid

If the target company is not interested in being acquired by the offeror, but the offeror still wishes to make a bid, the offeror will have to adopt a hostile approach. The rules relating to public takeover bids do not oblige the offeror to inform the target company of its intentions prior to the announcement of the proposed bid. A hostile bid is deemed to have been announced if the offeror has published concrete information regarding its proposed bid. Concrete information has been published if the offeror has published the name of the target company in combination with a proposed price or a preliminary timetable for the intended bid.

There is no announcement of a hostile bid and the statutory periods set out in the rules relating to public takeover bids will not commence if the target company makes a public statement that the offeror and the target company are holding talks immediately after the offeror’s statement publishing the name over the target company in combination with a proposed price or a preliminary timetable for the course of the intended bid. In this case there is also no announcement of a friendly bid.

Mandatory bid

Any person or entity, whether acting alone or in concert, who can exercise at least 30% of the voting rights at a general meeting of shareholders is required to make a public bid for all the remaining shares. If the holder of at least 30% of the voting rights does not make such a bid, it can be forced to do so by the Enterprise Chamber of the Amsterdam Court of Appeals (the ‘Enterprise Chamber’. The Enterprise Chamber will only rule that such a bid has to be made if the shareholders or the target company request it to do so. A request submitted to the Enterprise Chamber by the AFM concerning a mandatory bid will be considered inadmissible.

In a mandatory bid, the offeror must offer shareholders the ‘equitable price’ for their shares. The ‘equitable price’ is considered to be the highest price paid by the offeror in the year preceding the announcement of the mandatory bid. Alternatively, the Enterprise Chamber may determine the equitable price, if it is requested to do so. The ruling as to whether a mandatory bid has to be made and the authority to establish the equitable price are thus powers of the Enterprise Chamber and not the AFM.

A mandatory bid is announced by means of the offeror issuing a press release concerning the bid or the ruling of the Enterprise Chamber requiring a shareholder holding at least 30% of the voting rights to bring out a mandatory bid has become irrevocable. Another possibility is that the target company issues a press release stating that a mandatory bid is required by the law of another Member State of the European Union. The offeror must issue a press release stating the amount of the equitable price and the method used for its calculation not later than at the time of the announcement of a mandatory bid.

Once a mandatory bid has been announced, it falls under the AFM’s supervision of public takeover bids and is therefore (apart from minor exceptions) subject to the bid process described below.

4-weeks press release

The offeror must issue a press release within four weeks of the announcement of a public takeover bid, which states (i) that it will file a request for approval of the offer document to the AFM within a period specified in the press release, but in any case not more than 12 weeks after the announcement of the proposed bid or (ii) the offeror has decided not to make a bid. The possibility mentioned under (ii) does not apply in the case of a mandatory bid. In practice, this press release also contains an update concerning the progress made in the preparation of the bid.

If the offeror fails to submit its application for approval of the offer document to the AFM within the stated period, it shall make a public statement to that effect.

Certainty of funds press release

A offeror must ensure that it has the cash funds available to pay the offer price or has taken all reasonable measures to be able to provide any other form of payment in order to pay for its bid by the time it submits its request for approval of the offer document to the AFM at the latest. This is known as ‘certainty of funds’. As soon as the offeror has ‘certainty of funds’, it must make a public announcement to that effect.

The offeror must also issue a certainty of funds press release on each occasion that the offer price is raised.

The offer document

The offeror must submit a request for approval of the offer document to the AFM within the period stated in its 4-weeks press release. It typically takes one or two months for the AFM to approve an offer document. This is due to the fact that multiple rounds of comments are necessary before the AFM is satisfied that an offer document satisfies the legal requirements necessary for approval. The AFM will then make its decision regarding the request.

After the offeror has been informed that the document is approved, it must announce the bid by making the approved offer document generally available. This is typically done by publishing the offer document on the target company’s website and on the offeror’s website and stating where the offer document can be obtained free of charge. The offeror issues a press release regarding this general availability of the offer document and stating where it can be obtained.

It is also possible that the offeror publicly announces that it will not make a public takeover bid within the above-mentioned six business day period.

The Position Statement and the shareholders’ meeting

The target company must hold a shareholders’ meeting concerning the bid at least six business days prior to the end of the offer period. At least four days prior to this shareholders’ meeting, the target company must provide a reasoned statement as to whether it supports the bid or not (the so-called ‘Position Statement). In the case of a friendly bid, the position statement will generally be published simultaneously with the offer document. Unlike the offer document, the approval of the AFM does not approve the statement of position prior to its publication.

Offer period

The offer period starts no earlier than the first business day following the announcement formally bringing out the bid, but not later than nine business days after the approval of the offer document by the AFM. The legislation and regulations prescribe different minimum offer periods for the various types of bid. For instance, a minimum period of eight weeks applies to a (voluntary or mandatory) bid for all of the shares in the target company. Under a partial bid or tender bid, the minimum offer period is two weeks. A maximum offer period of ten weeks applies to all types of bid.

The offer period may be extended once if any of the conditions attached the bid have not been fulfilled. An extension must be publicly announced not later than on the third business day after the end of the original offer period (at the latest). Shareholders have the option of withdrawing their previously tendered shares if the offer period is extended.

In the specific situation in which a competing bid is made (see below), the first offeror has the option of extending the offer period once during the offer period. This extension can be used to extend the offer period until the closing date of the offer period of the competing bid.

The offeror may raise the offer price several times during the offer period, whether the offer period has been extended or not. However it is necessary to make a public announcement to raise the offer price. If there are less than seven business days remaining in the offer period at the time the offer price is raised, the offer period shall automatically be extended to seven business days by law. Depending on the type of additional payment offered, the offeror must provide investors with a supplemental information document.

Competing bid

A competing offeror may announce competing bid at any time during an existing bid process. In practice, a competing bid is often a hostile bid, since the target company will usually be bound by its recommendation of the initial bid (assuming that the initial bid was friendly).

Declaring unconditional

The offeror must state whether the offer is to be declared unconditional not later than the third business day after the end of the (possibly extended) offer period.

Post-offer period

Not later than three business days after the offer has been declared unconditional, the offeror may publicly announce that it will initiate a post-offer period of not more than two weeks. During the post-offer period, shareholders who have not yet tendered their shares under the offer may still tender their shares at the same price and under the same conditions that applied to the bid. A post-tender period is typically announced in the press release in which the offer is declared unconditional.

The ‘Put up or shut up’ rule from the announcement of a public takeover bid

In the event that a public takeover bid was announced but such bid was not declared unconditional, an offeror is not permitted to announce a further public takeover bid for the target company for a period of six months.

Furthermore, if the bid process lapses in the period between the announcement of the bid and the approval of the offer document (in other words: prior to the approval of the offer document by the AFM), the offeror is not permitted to hold 30% or more of the voting rights in the target company for a period of the six months. If the offeror nonetheless does obtain 30% or more of the voting rights in the target company, the target company may request the Enterprise Chamber of the Amsterdam Court of Appeals to order the offeror to reduce its holdings in the target company.

This prohibition will lapse if a third party announces a public takeover bid for the target company during the above mentioned six or nine month period. Obviously, this must involve a third party that is independent of the original offeror.

The specific rules applying to takeover bids can be found in Section 5.5 of the Financial Supervision Act (Wet op het financieel toezicht, or ‘Wft’) and are further elaborated in the Public Takeover Bids Decree (Besluit openbare biedingen Wft, or ‘Bob’). In addition, a number of exemptions to the public takeover rules are included in Sections 56a to 56c of the Exemption Regulations under the Financial Supervision Act (Vrijstellingsregeling Wft) and the Takeover Bids Exemption Decree (Vrijstellingsbesluit overnamebiedingen Wft).

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