Advisory Board

  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Peter Clarke
  • Barry Diller
  • IAC/InterActiveCorp
  • Fu Chengyu
  • China National Petrochemical Corporation (Sinopec Group)
  • Richard J. Gnodde
  • Goldman Sachs International
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V.
  • Jiang Jianqing
  • Industrial and Commercial Bank of China, Ltd. (ICBC)
  • Handel Lee
  • King & Wood Mallesons
  • Richard Li
  • PCCW Limited
  • Pacific Century Group
  • Liew Mun Leong
  • Changi Airport Group
  • Martin Lipton
  • New York University
  • Wachtell, Lipton, Rosen & Katz
  • Liu Mingkang
  • China Banking Regulatory Commission (CBRC)
  • Dinesh C. Paliwal
  • Harman International Industries
  • Leon Pasternak
  • BCC Partners
  • Tim Payne
  • Brunswick Group
  • Joseph R. Perella
  • Perella Weinberg Partners
  • Baron David de Rothschild
  • N M Rothschild & Sons Limited
  • Dilhan Pillay Sandrasegara
  • Temasek International Pte. Ltd.
  • Shao Ning
  • State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC)
  • John W. Snow
  • Cerberus Capital Management, L.P.
  • Former U.S. Secretary of Treasury
  • Bharat Vasani
  • Tata Group
  • Wang Junfeng
  • King & Wood Mallesons
  • Wang Kejin
  • China Banking Regulatory Commission (CBRC)
  • Wei Jiafu
  • Kazakhstan Potash Corporation Limited
  • Yang Chao
  • China Life Insurance Co. Ltd.
  • Zhu Min
  • International Monetary Fund

Legal Roundtable

  • Dimitry Afanasiev
  • Egorov Puginsky Afanasiev and Partners (Moscow)
  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Johan Aalto
  • Hannes Snellman Attorneys Ltd (Finland)
  • Nigel P. G. Boardman
  • Slaughter and May (London)
  • Willem J.L. Calkoen
  • NautaDutilh N.V. (Rotterdam)
  • Peter Callens
  • Loyens & Loeff (Brussels)
  • Bertrand Cardi
  • Darrois Villey Maillot & Brochier (Paris)
  • Santiago Carregal
  • Marval, O’Farrell & Mairal (Buenos Aires)
  • Martín Carrizosa
  • Philippi Prietocarrizosa & Uría (Bogotá)
  • Carlos G. Cordero G.
  • Aleman, Cordero, Galindo & Lee (Panama)
  • Ewen Crouch
  • Allens (Sydney)
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Rachel Eng
  • WongPartnership (Singapore)
  • Sergio Erede
  • BonelliErede (Milan)
  • Kenichi Fujinawa
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Manuel Galicia Romero
  • Galicia Abogados (Mexico City)
  • Danny Gilbert
  • Gilbert + Tobin (Sydney)
  • Vladimíra Glatzová
  • Glatzová & Co. (Prague)
  • Juan Miguel Goenechea
  • Uría Menéndez (Madrid)
  • Andrey A. Goltsblat
  • Goltsblat BLP (Moscow)
  • Juan Francisco Gutiérrez I.
  • Philippi Prietocarrizosa & Uría (Santiago)
  • Fang He
  • Jun He Law Offices (Beijing)
  • Christian Herbst
  • Schönherr (Vienna)
  • Lodewijk Hijmans van den Bergh
  • De Brauw Blackstone Westbroek N.V. (Amsterdam)
  • Hein Hooghoudt
  • NautaDutilh N.V. (Amsterdam)
  • Sameer Huda
  • Hadef & Partners (Dubai)
  • Masakazu Iwakura
  • TMI Associates (Tokyo)
  • Christof Jäckle
  • Hengeler Mueller (Frankfurt)
  • Michael Mervyn Katz
  • Edward Nathan Sonnenbergs (Johannesburg)
  • Handel Lee
  • King & Wood Mallesons (Beijing)
  • Martin Lipton
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Alain Maillot
  • Darrois Villey Maillot Brochier (Paris)
  • Antônio Corrêa Meyer
  • Machado, Meyer, Sendacz e Opice (São Paulo)
  • Sergio Michelsen Jaramillo
  • Brigard & Urrutia (Bogotá)
  • Zia Mody
  • AZB & Partners (Mumbai)
  • Christopher Murray
  • Osler (Toronto)
  • Francisco Antunes Maciel Müssnich
  • Barbosa, Müssnich & Aragão (Rio de Janeiro)
  • I. Berl Nadler
  • Davies Ward Phillips & Vineberg LLP (Toronto)
  • Umberto Nicodano
  • BonelliErede (Milan)
  • Brian O'Gorman
  • Arthur Cox (Dublin)
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz (New York)
  • Sang-Yeol Park
  • Park & Partners (Seoul)
  • José Antonio Payet Puccio
  • Payet Rey Cauvi (Lima)
  • Kees Peijster
  • COFRA Holding AG (Zug)
  • Juan Martín Perrotto
  • Uría & Menéndez (Madrid/Beijing)
  • Philip Podzebenko
  • Herbert Smith Freehills (Sydney)
  • Geert Potjewijd
  • De Brauw Blackstone Westbroek (Amsterdam/Beijing)
  • Qi Adam Li
  • Jun He Law Offices (Shanghai)
  • Biörn Riese
  • Jurie Advokat AB (Sweden)
  • Mark Rigotti
  • Herbert Smith Freehills (Sydney)
  • Rafael Robles Miaja
  • Robles Miaja (Mexico City)
  • Alberto Saravalle
  • BonelliErede (Milan)
  • Maximilian Schiessl
  • Hengeler Mueller (Düsseldorf)
  • Cyril S. Shroff
  • Cyril Amarchand Mangaldas (Mumbai)
  • Shardul S. Shroff
  • Shardul Amarchand Mangaldas & Co.(New Delhi)
  • Klaus Søgaard
  • Gorrissen Federspiel (Denmark)
  • Ezekiel Solomon
  • Allens (Sydney)
  • Emanuel P. Strehle
  • Hengeler Mueller (Munich)
  • David E. Tadmor
  • Tadmor & Co. (Tel Aviv)
  • Kevin J. Thomson
  • Barrick Gold Corporation (Toronto)
  • Yu Wakae
  • Nagashima Ohno & Tsunematsu (Tokyo)
  • Wang Junfeng
  • King & Wood Mallesons (Beijing)
  • Tomasz Wardynski
  • Wardynski & Partners (Warsaw)
  • Rolf Watter
  • Bär & Karrer AG (Zürich)
  • Xiao Wei
  • Jun He Law Offices (Beijing)
  • Xu Ping
  • King & Wood Mallesons (Beijing)
  • Shuji Yanase
  • OK Corporation (Tokyo)
  • Alvin Yeo
  • WongPartnership LLP (Singapore)

Founding Directors

  • William T. Allen
  • NYU Stern School of Business
  • Wachtell, Lipton, Rosen & Katz
  • Nigel P.G. Boardman
  • Slaughter and May
  • Cai Hongbin
  • Peking University Guanghua School of Management
  • Adam O. Emmerich
  • Wachtell, Lipton, Rosen & Katz
  • Robin Panovka
  • Wachtell, Lipton, Rosen & Katz
  • Peter Williamson
  • Cambridge Judge Business School
  • Franny Yao
  • Ernst & Young

Issues

UK UPDATE – UK Government consults on new powers to control foreign investment

Editors’ Note: Contributed by Nigel Boardman, a partner at Slaughter and May and a founding director of XBMA.  Mr. Boardman is one of the leading M&A lawyers in the UK with broad experience in a wide range of cross-border transactions. The article was co-authored by Lisa Wright, partner, and Ying-Peng Chin, associate, at Slaughter and May (London).  

The UK Government recently published its long awaited green paper on control of foreign investment (the Green Paper).1 It proposes measures to increase Government scrutiny of foreign investment but only in relation to national security and not on the broader political grounds previous public statements have hinted at. Specifically, the Green Paper sets out two proposals: (1) urgent changes to the existing system to allow the Government to intervene in more mergers in the military, dual-use and parts of the advanced technology sectors; and (2) options for more extensive and long-term reform of the existing system. Recognising the importance of foreign investment to the UK – particularly given the UK’s impending departure from the EU – the Green Paper has as one of its central aims the need to ensure that the UK remains attractive to inward investment.

This briefing considers the rationale for increased scrutiny of foreign investment, why and how the Government proposes to reform the existing regime and how the Government is seeking to ensure that it does not deter foreign investment at this critical time for the UK.

Rationale for increased Government scrutiny of foreign investment

Expansion of the Government’s ability to review mergers on non-competition grounds has been mooted since at least 2016 when Theresa May described her desire to develop an industrial strategy that would enable the Government to defend domestic firms against foreign takeover: referring to Pfizer’s aborted takeover of AstraZeneca she said, “A proper industrial strategy wouldn’t automatically stop the sale of British firms to foreign ones, but it should be capable of stepping in to defend a sector that is as important as pharmaceuticals is to Britain”. In doing so, she suggested that the UK might develop a more politically interventionist approach to merger control. Although the industrial strategy green paper published in January 2017 made no such proposals, comments made by the Prime Minister just prior to publication of that green paper suggested that the issue was still on the agenda. There were, however, signs that the focus had shifted from a broad approach to intervention to a focus on national security and particular sectors (“[The Government] will be looking at how we develop ideas I’ve already talked about on national security and critical national infrastructure” (emphasis added)).

This narrower approach is reflected in the Green Paper with the Government stressing that the reforms are designed to increase its ability to scrutinise foreign investment for reasons only of national security (“All reforms that the Government makes in this area will only be the necessary and proportionate steps to protect national security”), albeit that the proposals are not limited to critical national infrastructure. Indeed the Green Paper appears implicitly to criticize the recently published EU proposals for screening foreign investments (the Proposed EC Regulations) for having protectionist motivations.2 This is in addition to the Government’s more explicit denouncement of the Proposed EC Regulations for placing “additional burden and uncertainty on prospective investors, which is at odds with the UK’s stance as an open and liberal investment destination” in an Explanatory Memorandum published on 5 October 2017.

Existing foreign investment regime

The Government can call in foreign investment for review on grounds of national security where: (1) the transaction qualifies for merger control review under the EU Merger Regulation or the UK merger control regime; or (2) where the transaction does not qualify for merger control review under either of the EU or UK regimes but involves a “relevant government contractor” (current and former government contractors holding confidential information relating to defence). Where concerns arise the Government can seek remedies and ultimately can block the transaction.

So why does the Government believe it needs to expand these existing powers and how does it propose to do so?3

Proposal 1: Urgent changes in relation to the military, dual-use and advanced technology sectors

The Government believes the existing regime leaves an enforcement gap in so far as transactions which do not qualify for EU or UK merger control review and do not involve a “relevant government contractor” cannot be called in for review on national security grounds. The Green Paper identifies a particular concern in relation to acquisitions of small UK businesses with products, IP and expertise in key parts of the military and dual-use and advanced technology sectors which it says pose “clear and immediate risks to the UK” and “raise legitimate and significant national security concerns for the country as a whole”.4

To plug this gap the Government proposes to amend the UK merger control rules so as to bring more transactions in these specific sectors within scope and thereby to give itself jurisdiction to review them on national security grounds. Specifically, the Government proposes to reduce the turnover threshold so that mergers in these sectors would qualify for review under the UK merger control rules where the target has over £1m of UK turnover (compared to £70m under the normal rules) and to amend the share of supply test so that mergers in these sectors will qualify for review under the UK merger control rules where the target has a 25% share of supply of goods/services of a particular description in the UK (compared to the normal rules which require the transaction to create or increase a share of supply of 25%).5

Underlining the urgency described in the Green Paper (and considering that these changes are expected to impact only a small number of transactions), the Government has provided for just four weeks (ending 14 November 2017) for the consultation on Proposal 1.6 The Green Paper also makes clear that the Government intends to implement Proposal 1 immediately after consultation. We can therefore expect the new thresholds to apply to mergers in the relevant sectors (i.e. military and dual-use and key parts of the advanced technology sectors) within the next few months.

Beyond these sectors, the Government wishes to consult more extensively (see below) before making any changes.

Proposal 2: Longer term substantive changes

The Green Paper notes that, in contrast with other countries (e.g. Australia, Canada, US and France), the UK’s approach to national security review “appears less well developed […] to deal with the potential risks to national security that we face, and the scale of investment our national infrastructure will require”. In particular, the Government believes the existing regime is ill suited to combat risks of espionage, sabotage or the ability to exert inappropriate leverage.

This is principally because the existing regime is limited to transactions which involve businesses and which qualify for review under the EU or UK merger control regimes. Whereas national security concerns may also arise in relation to transactions which do not involve a business per se – for example, new projects, land sites near sensitive locations and acquisitions of bare assets (non-business entities such as machinery or intellectual property) – or which do not meet the merger control tests. The Green Paper also identifies the voluntary nature of the existing system as a potential risk in that it may mean that the Government is not aware of transactions that could raise national security concerns, as well as a potential source of uncertainty for transaction parties since they cannot be certain which transactions the Government may or may not call in for review.7

The Government proposes to address these concerns by either or both of:

  1. expanding the existing call-in power to capture any acquisition of a UK business entity by any investor which the Government reasonably believes raises national security concerns (i.e. removing the turnover and share of supply tests as limits on the Government’s ability to call in transactions for review on non-competition grounds); and
  2. a mandatory notification regime applicable only to foreign investment in the provision of essential functions in certain parts of key sectors of the economy. Recognising the potential burden on business of a mandatory notification system, the Government aims to “ensure the tightest possible focus” for a mandatory regime: only an identified set of essential functions within the civil nuclear, communications, defence, energy and transport sectors are proposed to be within scope.8
  3. The Green Paper also proposes to bring transactions involving new projects, bare assets and land within the Government’s national security jurisdiction (consistent with the position in overseas regimes).9

Impact on the UK as a destination for foreign investment

Although the Green Paper proposals seek to tighten up regulation of foreign investment, there are reasons to retain some confidence in the UK’s pledge to stay open to foreign investment. Certain features of the UK proposals are aimed at reducing the regulatory burden on investors.

For instance, the Green Paper proposes a well-defined call-in window for intervening in a transaction post-closing (in contrast, CFIUS for example has an indefinite ability to call in unnotified transactions); and, as discussed above, it contemplates the possibility of applying either voluntary or mandatory notification requirements, depending on the sector/type of transaction. This targeted approach should constrain the additional burden on businesses and should facilitate efficient operation of the regime by the

Government, although it is clear that extra public resources will be needed.

Comment

The message that the UK remains open for business is repeated often in the Green Paper. The focus on Government intervention on national security rather than broader political grounds is welcome. By incorporating various safeguards – for instance limiting the more interventionist proposals such as mandatory notification to specific activities in specific sectors – and positioning the reforms as aiming to bring the UK regime broadly into line with those operating in other major destinations for foreign investment, the Government hopes to be seen as being genuinely focused on “protect[ing] national security without disrupting or discouraging the vast majority of foreign investment”. It remains to be seen whether the eventual firm proposals, if and as adopted, strike the right balance.

_________________________________________

1 See Green Paper published on 17 October 2017 here. Reforms in this area were promised in the Queen’s Speech in June 2017.

2 Concluding a brief discussion of the Proposed EC Regulations, paragraph 70 of the Green Paper states that “screening to prevent [national security threats] merit special treatment but this should not be conflated with screening to control market access for protectionist reasons. The UK is committed to free trade and investment, which must remain a priority for both a successful UK and European economy.

3 The Government has no plans to change its powers to review transactions on grounds of financial stability and media plurality.

4 The dual-use sector refers to the design and production of items that could have both military and civilian uses, and which are on the Strategic Export Control List. The relevant parts of the advanced technology sector are multi-purpose computing hardware and quantum-based technology.

5 The existing UK merger control rules will continue to apply to transactions outside these specific sectors.

6 The Green Paper notes that only around 4% of UK businesses are above the £1m threshold and past public interest interventions for national security purposes have been extremely low (only seven times since the introduction of the existing regime).

7 The merger notification regime in the UK is voluntary (rather than mandatory) so there is no obligation to submit a notification for review even where the transaction meets the relevant thresholds.

8 These essential functions have been narrowed down from amongst the 13 sectors of UK national infrastructure and excludes parts of these sectors that either do not pose national security risks or are already sufficiently protected under existing regulations. The Government also believes that there may be a case for including emergency services and government; but that chemicals, financial services, food, health, space and water should not automatically fall within scope.

9 The Committee on Foreign Investment in the United States (CFIUS) for example takes account of proximity of the target’s assets to sensitive governmental locations when assessing national security risks. The Australian and Canadian regimes capture investments in new businesses and investments in assets.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

POLISH UPDATE – Polish protection of strategic companies and new rules of administering state assets

Editors’ Note:  This article was contributed by Tomasz Wardyński, founding partner of Wardyński & Partners and a member of XBMA’s Legal Roundtable, and Izabela Zielińska-Barłożek, head of Wardyński & Partners’ Mergers & Acquisitions Practice. Mr. Wardyński co-authored this article with Maciej Szewczyk, senior associate, and Wojciech Szopiński, associate, from the firm’s Mergers & Acquisitions Practice.

Executive summary

Legal restrictions concerning companies operating in certain strategic sectors of the economy and state companies were enacted in Poland. The Polish regulations track similar limitations already functioning in some other countries in the European Union and elsewhere. Under these restrictions, the Polish authorities can object to numerous transactions involving companies deemed to be key entities. A planned transaction was blocked for the first time on this basis in late 2016. On 1 January 2017, new rules also entered into force concerning trading in shares belonging to companies in which the State Treasury holds an ownership stake, providing among things for a requirement to include limitations on alienation of share rights in the articles of association of the companies in question. The scope of these limitations is broad and the consequences of violating them are severe. First and foremost, failure to follow the procedure provided for a transaction involving a key company will render the transaction void. Violation of restrictions on alienation of shares held by state companies included in the company’s articles of association will not invalidate the transaction but will expose the persons involved in the transaction to liability in damages.

Main Article:

Polish protection of strategic companies and new rules of administering state assets

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

 

GLOBAL STATISTICAL UPDATE – XBMA Quarterly Review for Third Quarter 2017

Executive Summary/Highlights:

  • Global M&A volume in Q3 was ~US$820 billion, consistent with Q2 levels.
  • Cross-border transactions continued to account for approximately 38% of both overall deal activity and of the largest deals.
  • Deal volume involving an emerging economy acquirer and a developed economy target grew nearly 12% relative to Q2 and continued to substantially outpace deals involving a developed economy acquirer and an emerging economy target.
  • Still, all ten of the largest deals in Q3 involved a developed economy target, and only one of the ten involved an emerging economy acquirer.
  • China continued to show strength, accounting for 20% of global M&A activity, while Europe and the U.S. accounted for 22% and 39% respectively, generally consistent with recent historical averages.
  • The High Technology sector accounted for the most cross-border M&A in Q3, exceeding US$58 billion in volume and accounting for 19% of all cross-border deal activity and 54% of total deal activity within the sector, in Q3.
  • The Industrials sector had the strongest Q3 with over US$145 billion in total deal volume and was the only sector to experience a relative high over the past four quarters.

Click here to see the Review.  

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

 

AUSTRIA UPDATE – Legislative Changes Affecting Private and Public M&A – New Delisting Rules

Editors’ Note: Christian Herbst is a partner of Schönherr and a member of XBMA’s Legal Roundtable. He is one of the leading Austrian specialists in cross-border M&A, takeovers and joint ventures, representing mostly foreign clients with respect to investments in Austria and Central Eastern Europe.

Executive Summary: Recent legislative measures affecting private and public M&A include: Effective November 2017, the scope of the Austrian merger control regime will be broadened. Effective January 3, 2018, public M&A will be affected by a change in takeover procedures as well as new delisting rules allowing voluntary de-listings from the Vienna Stock Exchange in connection with public offers or re-listings at other EU Stock Exchanges. Additionally, in implementing the Fourth EU Anti-Money Laundering Directive, the establishment of a Beneficial Ownership Register will require companies to notify the Register of their ultimate beneficial owners during H1 2018.

Scope of Austrian merger control regime broadened 

For transactions which are implemented on or after 1 November 2017, an entirely new additional notification threshold will apply in the Austrian merger control regime. The new threshold is built on a combination of turnover, transaction value and the target being active in Austria and will in particular capture foreign companies which are active on the Austrian market from abroad, in particular online companies: 

For merger control purposes a notifiable concentration will now also apply, if cumulatively the combined worldwide turnover of the undertakings concerned exceeds EUR 300m, the combined Austrian turnover exceeds EUR 15m, the value of the concentration (purchase price plus liabilities taken over) exceeds EUR 200m and the target undertaking has significant activity in Austria (e.g. site in Austria or in the digital context, e.g. monthly active users with Austrian nexus). 

Minimum acceptance period for public offers extended

Under a 2017 Amendment Act to the Austrian Takeover Act, effective 3 January 2018, the following will apply. 

The minimum acceptance period which a bidder must allow in a public offer will be increased from two weeks to four weeks. The maximum initial offer period, however, will stay at ten weeks. Also, no change applies to the statutory 3 months additional offer period following the expiration of the initial offer period of a public offer.

The reason for the change of the minimum offer period to four weeks is to allow the target board a more reasonable period to react to public offers, including calling a shareholders meeting seeking shareholder approval for defensive measures. 

New voluntary delisting rules as of 3 January 2018 

Currently, Austrian law only allows a delisting of listed companies by squeeze out of minorities once a shareholder reaches a 90 percent participation threshold in a target. As of 2018, an additional voluntary delisting regime will apply in addition to the delisting by squeeze out.

Delisting by Squeeze Out: 

Listing stops if the listing requirements are no longer met. One key requirement is that at least 10,000 shares or a nominal value of EUR 750,000 must be held by the public (free float) (Section 66(7), Stock Exchange Act). 

A bidder can de-list a target by acquiring target shares by public offer or on or off market purchases so that fewer than 10,000 of them are held by the public and then initiate the squeeze out of the minorities under the Shareholder Exclusion Act. Upon completion of the squeeze out, the target company is delisted. 

Delisting under the voluntary delisting scheme of the Stock Exchange Act and Takeover Act: 

August 2017 amendments of the Stock Exchange Act, Stock Corporation Act and Takeover Act will allow for a voluntary delisting from the Vienna Stock Exchange as of 3 January 2018. The Takeover Act will provide new rules for public offers to achieve a voluntary delisting under Section 38 (new as amended) Austrian Stock Exchange Act in connection with or unrelated to a corporate restructuring like change of legal form, split or demerger. Takeover offers in this context will be subject to additional minimum pricing rules. 

Under the new rules, a withdrawal of the listing at the VSE may be requested provided that (i) the financial instruments have been listed for a minimum of three years and (ii) adequate investor protection is secured. 

A delisting complying with adequate investor protection requires the following: First, a resolution of the shareholders meeting of the listed company with a 75% majority or a notarized joint request by stockholders controlling at least 75% of the voting capital of the listed company must be secured. Subsequently, a full public offer aimed at a delisting and supervised by the Austrian Takeover Commission needs to be launched. Such full public offer can be launched independently from or in the context of a corporate reorganization, such as a change of the statutes including change of legal form, merger, transformation or split of the target company. 

In case of an offer aimed at a delisting, the following minimum pricing rules must be complied with: The price offered in a public takeover launched to delist must not be lower than (i) the weighted average price of the last six month, (ii) the highest price agreed or paid for target shares by the bidder or parties acting in concert with the bidder, in the 12 months before notification of the offer and (iii) the average price of the last 5 trading days before announcement of the intention to launch a delisting offer. If that price is apparently below the actual (market) value of the target company, an adequate offer price (based on a company valuation) must be fixed by the Austrian Takeover Commission. 

No public offer is required for a delisting from the VSE in case the target company relists or stays listed (in case of a dual listing) at an EEA Exchange providing similar protection measures as the VSE; a case in point is the RHI/Magnesita merger as resolved in August 2017 where RHI will be delisted from the VSE and relisted in London.   

Beneficial Ownership Disclosure 

The Beneficial Ownership Register will implement the Fourth EU Anti Money Laundering Directive and require Austrian companies to take reasonable measures to determine the identity and subsequently notify the Register of defined beneficial owners by 1 June 2018 at the latest. The beneficial ownership test includes (i) a natural person holding directly more than 25% of the shares in an Austrian company; and/or (ii) more than 25% of the shares in an Austrian company are held by another legal entity which is directly or indirectly controlled by a natural person; control in this respect is indicated by directly or indirectly holding 50% of the shares; and/or (iii) a natural person directly or indirectly holding more than 25% of the voting rights of the Austrian company. 

The purpose of the new law is for all EU countries to store beneficial ownership information to combat money laundering and terrorism but also to allow governmental authorities and defined others to conduct customer due diligence.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

UK UPDATE – A New Takeover Panel Consultation

Editors’ Note: Contributed by Nigel Boardman, a partner at Slaughter and May and a founding director of XBMA.  Mr. Boardman is one of the leading M&A lawyers in the UK with broad experience in a wide range of cross-border transactions.

The Panel has today (19 September 2017) published its consultation paper PCP 2017/2 on statements of intention. The Panel has been concerned for some time that the disclosures by a bidder in relation to its intentions for the target business (required to be made in the offer document) have been bland and generic, and therefore do not really provide the target board and other stakeholders (particularly employees and pension scheme trustees) with sufficient specific information to make a meaningful assessment of the bid. This is an area of the Code that has now been consulted on a number of times, firstly following Kraft’s takeover of Cadbury, and subsequently following Pfizer’s possible bid for AstraZeneca (which did not proceed).  The consultation paper sets out certain proposals to address this issue and other related matters.

In summary, the proposals would, if implemented: 

widen the scope of “social/employment disclosures” by bidders from the current regime (impact on employees and places of business)

In particular, the Panel is requiring specific disclosures to cover:

o   the impact on the target’s R&D function

o   the “balance of skills and functions of [the target’s] employees and management”

o   location of the target’s HQ and HQ functions

The changes are presumably intended to make generic disclosures harder. Notably, the Panel has expressed the view that statements of intention should not be qualified by reference to a bidder’s “current” or “present” intentions.

require that the same “social disclosures” regarding the target business, employees and location be made at an earlier point in the offer timetable

This would be at the time of the Rule 2.7 firm offer announcement rather than just in the offer document. This front-loads the disclosures so that a bidder must disclose intentions for the target business by the time it makes the announcement of its actual offer (i.e. up to a 28 days’ acceleration of the information).

prohibit the bidder from publishing the offer document within 14 days of the Rule 2.7 announcement except with the consent of the target

The main impact of this proposal is on hostile offers since the bidder cannot launch a hostile offer and immediately publish the offer document. Currently a target has 14 days after publication of the offer document to publish its defence document. Further, in a situation where the target may need accountants and other advisers to produce profit forecasts and other reports to mount a proper defence, it was thought that the current 14 day period puts too much pressure on the target. This new requirement gives the target at least 28 days to respond to a hostile offer.

In a recommended offer, the target is normally involved in the production of the (combined) offer document and can, of course, consent to earlier publication.

impose additional requirements on the party which has made any post-offer undertakings or post-offer intention statements

This would require that party:

o   in relation to any post-offer undertakings, to publish the reports that it is currently required to submit to the Panel in relation to its compliance with those undertakings. Currently publication is only required at the Panel’s discretion. The reports must be produced and published at least on an annual basis (where the undertaking is for a period longer than a year)

o   in relation to post-offer intention statements, to confirm in writing to the Panel whether it has taken, or not taken the course of action described in the statement at the end of the 12 months following the end of the offer period (or such other period specified in the statement) and the confirmation must be published/announced via an RIS. Current practice only requires a private confirmation to be made to the Panel at the end of the period.

The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.

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