The takeover bid

A fourth way to transfer a company is via the public takeover offers regulated by the Act of 1 April 2007 and the Royal Decree of 27 April 2007. These are share deals, i.e. the transfer of shares, but specifically aimed at shares of listed companies. Because there is an aspect of investor protection of financial markets here, this type of shares are transferred in a different way.

Takeover bids are a frequently used method of acquiring control over (market or exchange) listed companies in Anglo-American countries. It is used to acquire control over the target company by purchasing voting securities directly from the security holders. Control refers to “the power to exercise a decisive influence on the appointment of the majority of directors or managers or on the orientation of policy”. In other words, a person will publicly announce that he is willing to declare himself as a buyer of your shares at a certain price. He just doesn’t ask for it through the stock exchange mechanism. The reason for this may be that the acquirer thinks that it is justified to pay more than the stock exchange price, because he thinks that the target company is undervalued, or because he can make it more profitable (under his control).

The current legal framework regarding takeover bids consists of the Directive 2004/25/EC of 21 April 2004 on takeover bids (hereinafter: Takeover Directive), which was in turn transposed in Belgian law by the Act of 1 April 2007 on public takeover bids (hereinafter: Takeover Act) and the Royal Decree of 27 April on public takeover bids (hereinafter: Takeover Decree). The purpose of this Takeover Directive was to create a level playing field. Namely, the same rules across the Member States to launch a public bid as an offeror (“attack”) and to protect oneself against it as the board of the target company (“defence”). The Directive is adopted but only harmonisation of the rules for launching a public bid (unified procedure and forced public offer) has been carried out. Member States may determine the rules of protection themselves because there is a possibility of opt-out for a Member State/opt-in for the target company in the European defence principles.

The Belgian legislation has a broader scope of application because as it also governs target companies that are not listed on the stock exchange. According to Belgian custom law, one can make a public bid for a company that is not listed on the stock exchange because there are, for example, 50, 100 or more shareholders. While European law only deals with listed target companies.

In order to maintain an overview, we make a pedagogical distinction in the public offer. One is a legal distinction, the other is factual. The legal distinction attempts to contrast the public offer at a cash price with a public offer at an exchange price where, for example, shares are offered in exchange for the shares that the bidder wishes to buy. The so-called public exchange offer or “exhange offer”. The factual distinction is made between friendly and hostile public offers. One will call that bid more or less friendly, the more the board of directors of the target is contacted in advance and to some extent involved in the takeover process, even though it is not the board of directors that has the power to sell. In the case of a hostile bid, there will be a total surprise attack with no prior discussion.

Typical of a public offer is that the general meeting as such, as an organ of the company, is not involved at all. Although the public offer is an offer that relates to the shares of a company, it is not a company law technique. It is a technique of financial law. If it were a company law technique, it would be very similar to a merger, where the decision rests with the general meeting. With a public offer the general meeting has no say. It is a bid that

directly interferes with the portfolio of each shareholder. The latter is not solicited in his capacity as a member of a body, but as the owner of a piece of paper (shares). Therefore a financial law technique. The question remains whether a shareholder wants to be approached in this kind of way.