Questions and answers on takeover bids and the MAR (dd. 15 January 2018)

The announcement of a bid generally takes place after its formal notification to the FSMA, and is made by the FSMA. The fact that the FSMA thus in principle has a 'monopoly' on the announcement of takeover bids enables it first to conduct an initial test of the seriousness of a bid and to determine that the necessary funds are available to finance the takeover.

At the request of the FSMA, exceptions may be made to this arrangement. In practice, the FSMA often asks potential bidders, with a view to the smooth functioning of the market (Article 8, § 1 of the Takeover Decree) and more specifically to ensuring correct pricing, to announce takeover bids before submitting a dossier to the FSMA.

Specifically, it asks potential offerors in that case to publish a press release on their intention to launch a takeover bid for an offeree company at the latest when their board has decided to launch a takeover bid.

Potential offerors are invited to contact the FSMA in good time in order to make concrete arrangements regarding the manner and the time of publication of the press release. In many cases, the publication of a press release will be accompanied by a suspension of trading in securities carrying voting rights or that confer access to voting rights in the offeree company and, where applicable, in the offeror.

The publication of the announcement of the offer by the FSMA – pursuant to Article 7 of the Takeover Decree – will then occur later, after the offeror has submitted the dossier.

In order to inform the market correctly, the press release must contain at least the following information: the offer price, the type of bid envisaged and, if it is a voluntary conditional bid, the conditions to which the bid is subject.

The press release can only contain factual information and its tone should be neutral.

The obligation, pursuant to Article 12 of the Takeover Decree, to notify transactions in securities carrying voting rights or that confer access to voting rights in the offeree company, the offeror or the company whose securities are being offered as consideration, takes effect in principle as from the date of the press release published in application of Article 8, § 1.

In order to inform potential notifiers about which companies they must make notifications for, the FSMA publishes on its website a list of pending takeover bids. The list includes both cases where a potential bidder has made known its intention to launch a bid and those where a dossier has already formally been submitted to the FSMA.

For offeree companies to which the Market Abuse Regulation (MAR) applies, the obligation to disclose any inside information to the public without delay also applies in the context of the preparation of a takeover bid.

If the offeree company is aware of a potential takeover bid for its securities, and if this information constitutes inside information on its part, in other words, if the information is not public, is specific and the publication thereof may have a significant effect on the price of its securities, then this inside information must in principle be made public without delay. However, the offeree company may, pursuant to Article 17, paragraph 4, first subparagraph of the MAR, delay the public disclosure of that inside information, provided the applicable conditions have been met.

If, however, the confidential nature can no longer be guaranteed (e.g. in the event of a leak to the press), then the company must make the information public without delay. The information to be provided in such a case must take into consideration the state of advancement of the dossier.

According to Article 9, paragraph 4 of the Market Abuse Regulation (MAR), such negotiations are regarded as legitimate if they are conducted solely for the purpose of proceeding with the takeover (unless the supervisory authority establishes that the underlying reason was illegitimate (see Article 9, paragraph 6, MAR) and provided that at the point of acceptance of the offer by the shareholders of that company, any inside information has been made public or has otherwise ceased to constitute inside information). This means that during such negotiations, inside information about the bid may be disclosed without there being question of an unlawful disclosure of inside information (Article 10, MAR) or inducement to engage in insider dealing (Article 8, paragraph 2, MAR). By way of example, the following types of negotiations are legitimate:

• Negotiations that the offeror conducts with the shareholders of the offeree company in order to agree on commitments to transfer their securities (such negotiations can also be considered market soundings under the conditions laid down in Article 11, paragraph 2, MAR);
• Negotiations that the offeror conducts with financial institutions within the context of the financing of the offer.

Anyone who is preparing a takeover bid will, for a period during its preparation, generally be in possession of inside information about the bid and, potentially, about the target company (often obtained while conducting due diligence at the offeree company). During this period, a bidder may not acquire any shares in the offeree company unless that acquisition triggers a mandatory takeover bid because it crosses the 30% threshold within the meaning of Article 5 of the Takeover Law.^[1] Stake-building on or off the stock exchange is thus prohibited from the time when the information which the offeror possesses meets the definition of inside information.

As discussed in FAQ no. 5, the use of inside information solely for the purpose of proceeding with a takeover bid in accordance with Article 9, paragraph 4 of the Market Abuse Regulation (MAR) is considered 'legitimate behaviour'. In this provision, stake-building^[2] is, however, explicitly excluded from the description of 'legitimate behaviour'.This confirms that the acquisition of securities in the offeree company by an offeror who has gained inside information in the course of preparing a takeover bid does not constitute 'legitimate' preparation of or proceeding with a takeover bid. An offeror who during the preparation of a takeover bid possesses inside information (about the offer and/or about the offeree company) and before the publication of the bid acquires securities in the offeree company, generally for a lower price than the subsequent takeover price, is thus engaging in insider dealing.^[3] Nor can stake-building by an offeror who is in possession of inside information be regarded as legitimate behaviour within the meaning of Article 9, paragraph 5 of the MAR. The latter provision refers only to the knowledge that one has decided to acquire or dispose of securities, whereby the mere existence of these transactions in itself constitutes inside information, for example because of their volume or the reputation of the investor in question, which may give rise to copycat behaviour among other investors. The provision does not apply, however, to knowledge of the decision to launch a takeover bid, and thus of the fact that in principle a premium will be paid over the market price (much the less, of course, to inside information on the offeree company which was obtained in the course of preparing the takeover bid).

^[1] Such an acquisition is distinct from building a stake outside of a takeover bid and at a potentially lower price than that of a subsequent takeover bid, precisely because it triggers the obligation to launch a takeover bid for (at least) the same price.

^[2] Defined in Article 3, paragraph 1, 31°, MAR as: 'an acquisition of securities in a company which does not trigger a legal or regulatory obligation to make an announcement of a takeover bid in relation to that company'.

^[3] In such cases, the essential characteristic of insider dealing is by definition present, namely, that an unfair advantage was obtained from inside information, to the detriment of third parties who were unaware of such information (within the meaning of Recital (23) of the MAR). It is therefore logical that European lawmakers do not consider this type of action to be legitimate behaviour.