PUBLIC TENDER OFFERS
Public tender offers
_____________________________________________________________________________________
The following table categorises the 1231 tender offers recorded in 2000 and shows the
comparison with the two previous years:
Standard procedure
Simplified procedure
Standing offers
Share buyback offers
Buyout offers
Buyout offers followed
by a squeeze-out procedure
TOTAL
2000
19
31
13
4
5
51
123
1999
25
27
23
2
3
51
131
1998
15
11
44
5
3
45
123
Tender offers continued at a brisk pace in 2000 but none of them gave rise to the sort of
substantive discussions sparked by the three previous years' bids. The biggest and most
remarkable of the year's offers, that made by HSBC for Crédit Commercial de France, raised no
particular problems vis-à-vis the prevailing regulations.
The number of standing offers declined yet again. As explained in previous annual reports, this
is attributable to the procedure introduced in late 1998 whereby the rules governing tender
offers (via the simplified procedure where appropriate) now apply to the acquisition of blocks of
shares from several shareholders who together did not previously have majority control or to the
acquisition of a majority interest through a holding company.
Out of a total of 51 buyout offers followed by squeeze-out procedures, 46 were for the securities
of companies listed on a regulated market. Fourteen of these, or 30%, were initiated following a
transaction (tender offer or standing offer) enabling the bidder to reach the required threshold
for which valuation and expert appraisal procedures had been implemented and made public.
A further 20 buyout offers followed by squeeze-out procedures involved the securities of
companies for which a bid had been lodged since the beginning of 1999. This development
confirms that, increasingly, a compulsory buyout procedure is the culmination of the takeover
process. In such cases, the price proposed in a buyout/squeeze-out has always been equal to or
greater than the price of the initial cash tender offer. Nevertheless, it is still difficult to combine
a buyout/squeeze-out, which by definition and by law must be for cash, with a share swap
takeover. It must be remembered that, in this case, the value of the securities remitted in
exchange cannot in itself be a yardstick for pricing the target securities. Therefore, the
possibility of denominating a buyout / squeeze-out in highly liquid securities merits reflection.
Another area for consideration is the possible advantage, while respecting the rights of minority
shareholders, of linking together a takeover offer and a squeeze-out procedure, on condition that
a significant proportion of the free float is tendered to such an offer. Similar provisions are in
force in neighbouring countries.
1
Offers examined by the CMF in the course of the year or launched before 31 December.
CMF ANNUAL REPORT
2000
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PUBLIC TENDER OFFERS
The requirement for filing a buyout offer is that the majority shareholder must have at least 95%
of the voting rights. The principle of a voting-right threshold has been enshrined in law2, and the
percentage is set in the General Regulations. As regards a compulsory acquisition, French law
requires that the minority shareholders own less than 5% of the company's capital or its voting
rights. Adopting a strict interpretation of the law, which is contrary neither to the wording of the
text nor to French grammar3, the CMF has always considered that a compulsory buyout may not
take place unless the offeror can actually prove that it holds more than 95% of the capital after
the buyout offer. In 2000, there were two further instances of an offeror that did not own, either
directly or indirectly, 95% of the capital4 on the day the buyout offer / squeeze-out was filed. As
a result, the outcome of the buyout offers in question was scrutinised before the squeeze-out
procedure was set in train.
Waiver of mandatory filing of proposed offers
A total of 26 decisions to waive the mandatory filing of a proposed offer were handed down in
2000 (not counting one decision that lapsed when the transaction in question did not go ahead).
Of these, 21 were made before the threshold-breaching transaction was effected, as permitted
under Article 5.5.8 of the General Regulations.
Nineteen of the waivers concerned intra-group or equivalent transactions (e.g. intra-group
disposals, restructuring of holding companies that already hold a majority stake, or the placing
of directly held interests in a holding company) that had no impact on corporate control.
In nine other instances, the waiver was granted on the grounds either that the offeror already
held the majority voting rights after having raised its stake by more than 2% of the capital, or
that one of the entities of the controlling group breached the threshold of one-third of the capital
or the voting rights, either actively (by acquiring shares or double voting rights) or passively
(following a capital reduction). One waiver concerned a situation in which the threshold of onethird of the voting rights was breached following a share buyback programme that reduced the
total number of voting rights.
Seven decisions were take following asset contributions or mergers resulting in the effective
change of corporate control or a significant change in the exercise of that control. In most cases,
the capital of the company concerned was sufficiently widely held so that the decision to grant a
waiver was based on the fact that the transaction in question had been approved by an
extraordinary general meeting (EGM) of shareholders. In two cases, the controlling shareholder
of the target company or the offeror, which was already a shareholder in the target company,
proposed that some or all of their voting rights should be neutralised at the EGM.
2
Article L. 433-4-II of the Financial and Monetary Code
3
In French grammar, the word ou ("or") can mean et ("and") if the two words are placed together in a
clause with a negative. Therefore, by using a negative applicable to the entire clause: "dès lors que les
titres non présentés par les actionnaires minoritaires ne représentent pas plus de 5% du capital ou des
droits de vote" (a compulsory buyout may be organised..."where the securities not tendered by the
minority shareholders do not represent more than 5% of the capital stock or voting rights") the
legislation prohibits the holding of a higher percentage for each of the terms envisaged, i.e. capital stock
and voting rights.
4
A target company that holds its own shares, in compliance with Article L. 225-209 of the Commercial
Code, is not considered as a minority shareholder for the purposes of a compulsory buyout.
CMF ANNUAL REPORT
2000
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PUBLIC TENDER OFFERS
Forthcoming amendments to Title V of the General Regulations
The conclusions drawn from the tender offers made in 19995 were finalised in the first half-year,
and the CMF adopted the resulting amendments to Title V of its General Regulations in June
2000.
One set of issues that emerged pertained to the conditionality of bids, the revocability of a bid,
and the content and scope of withdrawal thresholds.
At present, an offeror can attach two conditions precedent to its bid:
-
it can withdraw the offer if the outcome is below a certain threshold, set by the offeror and
assessed by the CMF;
-
an EGM of its shareholders must authorise the issuance of securities to be remitted in
exchange, if the board of the offeror does not already have such delegation.
The offeror can withdraw its bid:
-
in the event of a competing offer for the same company by a third party, or of an improved
offer from a competitor already in the running, within five days of the competing or
improved offer being made;
-
if the target company adopts measures with immediate and unconditional effect that modify
its substance.
The opening of an offer is contingent on:
-
obtaining the authorisations provided for by law;
-
receiving prior approval from the general meeting of shareholders of the bidding company,
if so required by legal or regulatory provisions or the articles of association;
-
registering the offeror's prospectus with the Commission des Opérations de Bourse and
publishing said prospectus.
After consulting with organisations representing market participants, the CMF deemed it
necessary to supplement or amend the above rules, as follows:
-
authorise linked bids that depend on the success of each separate bid. In particular, this
measure would facilitate mergers and alliances via the creation of a new company
("newco") as well as cross-border alliances. The offeror can waive this condition during the
offer period, notably in the event of a competing offer or improved offer for one of the
target companies;
-
terminate the offeror's right to go ahead with an offer if it has not reached its stated
threshold. The inclusion of a withdrawal threshold will not be made obligatory.
Nevertheless, the CMF will still be able, depending on the offeror's intentions and aims and
on the circumstances of the offer, to order a minimum threshold if warranted by reasons of
market transparency, integrity and orderly conduct of events, as set forth in Article 5.1.1;
5
see the 1999 annual report page 20
CMF ANNUAL REPORT
2000
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PUBLIC TENDER OFFERS
-
amend the principle of irrevocability, which by definition protects the interest of investors
and the market, by making it possible to withdraw, with the agreement of the CMF, an offer
that has become "without cause". Such is the case when a stockmarket battle culminates in
the parties joining just one of the competing bids.
Other significant amendments and new provisions were adopted:
-
Bid timetable and duration: the duration rule established in 1997 will be maintained, but
amendments will be made with a view to exercising greater control over the duration of
competing bids and ensuring clarity vis-à-vis the market. As a result, an offeror will not be
permitted to lodge an improved offer during the last five days of the offer period. (At
present, it is already unlawful to lodge a competing offer during this period.) Moreover, a
cut-off bidding procedure will be introduced. The procedure, included in the New Economic
Regulations bill, will enable the CMF to order competitors to reveal their final offer.
-
Reopening of an offer: the initiator of a successful offer will have the right to request the
automatic reopening of the offer shortly after the publication of the outcome. This option
will be available on condition that, following the outcome of the offer, the offeror holds at
least two-thirds of the capital and voting rights. This threshold will be reduced to 50.01%
where several offers are in competition.
CMF ANNUAL REPORT
2000
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