Procedure mandatory public takeover bid

Article 3, §1, 1° defines a public bid as: “an offer addressed to the holders of securities of the offeree company to acquire all or some of their securities, whether the bid is voluntary or mandatory”. In other words, a public bid can be divided into voluntary and mandatory bids. Such a distinction is important, since both forms of bids are subject to separate procedures. The most important rules concerning the various procedures are set out below.

A mandatory bid occurs when someone acquires shares exceeding a certain percentage of the control rights under the law of the Member State applicable to the target company. In other words, the law where the registered office is situated. The threshold can be freely determined by the Member States. Belgium applies four conditions for the existence of a mandatory takeover bid:

• as a result of a self-acquisition or an acquisition by persons acting in concert with him or persons acting for the account of such persons, directly or indirectly,
• holds more than 30% of the securities with voting rights,

• in a company having its registered office in Belgium, and
• of which at least part of the voting securities are admitted to trading on a regulated market, he must make a public takeover bid for all the voting securities or securities giving access to voting rights issued by this company and notify this to the FSMA.

The ratio legis for this mandatory bid is to protect the minority shareholders against possible abuse of power by the controlling shareholder. It offers them the possibility to leave the company if they do not agree with the new majority shareholder and this at a fair price for all their securities.

Now, most of the rules are to be found in the Royal Decree on Takeovers since article 8 of the Takeover Act gives the King the power to further elaborate the public offer. The Takeover Decree mainly deals with voluntary bids, but many of its provisions also apply to forced/compulsory bids.

The most important question in the event of a forced public bid is how to escape it. In practice, we find in Belgium there have been very few forced public bids since the 2007 legislation and the 2004 Takeover Directive. This while, in the preceding period,

between 1989 and 2007, forced public offers were pouring in. This is due to the introduction of article 52 of the Takeover Decree, which regulates all kinds of situations that result in no mandatory bid. The person who has exceeded the 30% threshold through an acquisition will have to contact the FSMA and explain on what grounds the derogation from the bidding obligation may be invoked. This concerns cases where either there is no actual change of control or it is only temporary, or where the security holders are sufficiently protected in another way. We list the most important deviations from the obligation to launch a bid:

• in the context of a regular voluntary takeover bid. The minority then had the opportunity to sell at the same price; 
• in the case of intra-group transactions, whereby securities are transferred between related persons within the meaning of the WVV; 
• when it is shown that a third party exercises control over the company or holds a larger stake than the person who, alone or jointly, holds 30% of the voting rights in the company;

• in the context of a subscription to a capital increase of a company in difficulty decided by the general meeting;
• in the framework of a subscription to a capital increase with preferential rights of a company, which has been decided by the General Meeting. In such a case, all existing shareholders can participate and respect the equal division of the shares by participating in the capital increase;
• sixth, an exemption applies in the case of a merger. All shareholders are treated equally and therefore adequately protected. If one or other shareholder voluntarily decides not to participate in the merger, this cannot have the effect of penalising other shareholders who, as a result, acquire more than 30% with a bidding obligation;
• leading to a temporary excess of the threshold of up to 2%, provided that the additional shareholding is disposed of within a period of 12 months and that the persons concerned do not exercise the voting rights attached to the additional shareholding. This derogation concerns a temporary excess due to oversight which is rapidly reduced; 
• following an acquisition due to death, a marriage contract or a legal

matrimonial property regime, as well as a distribution resulting from an inheritance or the dissolution of a marriage.

The price of the mandatory bid cannot be exempted. Article 53 of the Takeover Decree already specifies a minimum price that is more favourable to the minority shareholders than what the Takeover Directive provides. Thus, the mandatory bid price is at least equal to the highest of the following two amounts:

• the highest price paid for the securities concerned by the offeror or a person acting in concert over a period of 12 months before the bid was announced;
• the weighted average of the most liquid market prices for the securities concerned in the last thirty calendar days before the beginning of the bid.

The price of the bid can consist of cash, negotiable securities or a combination of both. Naturally, the offeror can offer a higher price if he considers this appropriate in order to avoid a counterbid. A counter-bid must be made at a price that is at least 5% higher than the price of the last bid.

In addition, article 56 of the Takeover Decree offers a number of interesting insights into the fulfilment of the bidding obligation. For instance, the person who triggers the above-mentioned bidding obligation (by exceeding the 30% threshold) has to inform the FSMA within two working days. They then proceed with a public takeover bid for all securities with voting rights or giving access to voting rights issued by the target company. This bid must be announced within three working days after the offer obligation arises, with the acceptance period starting no later than 40 working days after the event that triggered the offer obligation. The announcement and publication shall be made in accordance with the rules governing voluntary bids. Thus, a prospectus must be drawn up and submitted for approval to the FSMA. The board of the offeree company must prepare a memorandum of reply. For the further procedure and formalities, I refer to the contribution on the voluntary bid.