Proposed new rules for public takeover offers
On 23 January 2019, the Securities Law Committee, chaired by Wikborg Rein partner Filip Truyen, proposed new rules for voluntary and mandatory takeover offers. The proposal entails a tightening of the rules for the implementation of voluntary offers. For both voluntary and mandatory offers, it has been proposed to grant extended discretionary powers to the takeover authority (Oslo Stock Exchange). It will be possible to withdraw acceptances if there are competing offers. It will be required with better information to the market in situations where companies are subject to speculations regarding possible offers, and a shorter time period from the announcement of voluntary offers until the offer is launched. The thresholds for mandatory offers are proposed continued.
Requirements for preparations before the bid is published and deadline for launching of voluntary offers.
The committee proposes that it should be required that the offeror must make necessary preparations before publishing the offer. The essence of such preparations should be that the offeror shall be able to execute the offer. Clarification of financing and regulatory approvals will be important, but it is not required that all matters have been clarified before the notification is published. Circumstances the offeror does not have a sufficient overview of, for example the need for approval from competition authorities, will have to be adequately described. The degree of preparation may be subject to control by the takeover authority.
The committee further proposes that the notification to announce the offer should contain significantly more information than according to current requirements, i.a. a plan for financing of the acquisition, the expected date for publication of the offer document and a timeline for execution. An explicit obligation is further introduced to inform of any transaction agreements between the target company and the offeror, in particular elements in the transaction agreement that limit the target company's freedom of action when it comes to facilitating for competing offers.
The committee further proposes to introduce a deadline for submitting voluntary offers of four weeks from publication. The deadline will coincide with the deadline for submitting a mandatory bid. It is proposed that the takeover authority may grant dispensations from the deadline.
In summary, the proposed new rules involve that an offeror is expected to be sufficiently prepared before publishing a bid notification, so that the tenderer does not put the target company into play until the offeror is in a position to execute the offer.
Minimum requirements for the offer period in voluntary offers are proposed to be extended from two to four weeks. The proposal coincides with the current requirements for offer periods for mandatory offers. The committee states that the reason for the proposal is i.a the target company's board of directors' time pressure to prepare and submit a recommendation on the offer, including obtaining an independent valuation (fairness opinion) in accordance with the Norwegian Corporate Governance recommendation. It is assumed that a short tender period may place restrictions on the possibilities to submit competing offers. It is proposed to provide legal basis for the takeover authority to grant dispensation from the said minimum offer period.
The committee has not found reason to change the current regime regarding the offeror's right to set subjective conditions for voluntary offers, but points out that conditions must be presented in a clear, transparent and understandable manner. The Norwegian rules will continue to be liberal and deviate from the rules in other European markets.
It is proposed to include a rule stating that settlement in voluntary offers must take place within reasonable time. The committee amplifies that settlement should normally take place within two weeks after completion of the offer. In our opinion, the term reasonable time is understood in light of what the consideration will be, and it is natural to assume that a cash bid normally can be completed faster than offers with settlement in shares that could rely on the issuance and approval of a prospectus.
No further rules regarding transaction agreements have been proposed. However, the committee proposes to introduce a regulatory legal basis where such rules can be provided. No restriction has been proposed to the access to agree different types of deal protection arrangements making it more difficult to submit competing offers (e.g. break fee, no-shop etc.). Also here, the Norwegian regime will continue to deviate from the rules in other European markets.
Mandatory offer obligation
The committee mainly proposes to continue the rules for when and how the obligation to make a mandatory offers is triggered. However, the committee proposes further basis for exemptions i.a. in the acquisition of shares in companies in a financial crisis. This would be welcomed in the market and make it easier for companies in financial distress to convert debt or raise new equity. The proposal will in particular facilitate for major owners to contribute in a restructuring process.
The provisions regarding consolidation/acting in concert are proposed continued. The committee proposes that the wording of the law specify what is meant by "binding cooperation" and codify the current practice in the area. The current non-statutory rule that the offer obligation in connection with consolidation lies with the consolidated party that made the acquisition that triggered the offer obligation is continued, is specified in the bill. However, the takeover authority is given legal basis to impose the offer obligation on the dominant party in the consolidated group.
According to current rules, offer obligations are triggered by an indirect acquisition of 50% of the votes in a company whose most significant business consists of owning shares in a company whose shares are listed on a regulated market. The committee has proposed to replace this condition with a requirement that the intermediate company holds shares that represent more than 1/3 of the votes in a listed company.
It is proposed to amend the rules regarding adjustment of the offer price. The offer price shall still continue to be the highest price paid by the offeror in the preceding six months before the mandatory offer obligation was triggered, but the takeover authority is given the discretionary power to determine that the offeror shall pay market price if this deviates significantly (the so-called "market price alternative"). For the sake of predictability, the takeover supervisory authority's right to adjust the offer price is specified to (i) if the price in the relevant period was at a level not reflecting assumed market price, (ii) the acquisition that triggered the offer obligation did not take place on commercial terms, or (iii) in the event of ownership restructuring of companies in financial distress.
The committee has further proposed that access be given for shareholders to withdraw their acceptances for a period of three trading days if a competing offer is submitted and announced during the original tender period.
The committee proposes to introduce a general rule requiring that the information which is published about a planned or announced offer must be correct, clear and not misleading. It is i.a. pointed out that this is intended to include that the offeror in a notification of a conditional voluntary offer must be clear as to in what cases the offeror may refrain executing an offer in accordance with the announcement. The offeror has an obligation to act in accordance with what is communicated to the market. The purpose is to prevent the target company from contributing to speculations about acquisitions where there is uncertainty as to whether an offer will be executed. The sanctions regime is proposed to be tightened. It has been proposed to impose penal fines.
Wikborg Rein is leading within public take-overs on the Oslo Stock Exchange and has assisted in most offer processes in the Norwegian market in recent years.