During 2008, Austrian takeover activity fell to a new low. One of more notable deals was in March 2008 when BFI launched a mandatory offer for Brain Force Holding, a medium-sized IT company, listed on the Vienna Stock Exchange (Wiener Boerse) (VSE) and the regulated prime standard market in Frankfurt.
During the first quarter of 2009, Lufthansa launched a public offer for Austrian Airlines as part of the ongoing privatisation of the financially distressed national airline. The offer is aimed at control and is subject to several conditions which must be met latest by 31 July 2009, including:
Regulatory clearances in the EU, US and several countries.
State aid clearance for EUR500 million (about US$641 million) of state aid from the state holding ÖIAG as part of the transaction.
A 75% acceptance threshold (including the 48% share of ÖIAG/Bank Syndicate).
The target, Austrian Airlines, not becoming insolvent.
In 2008 the Takeover Commission (Übernahmekommission) (see box, The regulatory authority) published rulings concerning:
RHI. By decision of 28 January 2008, the Takeover Commission ruled that the core shareholder MS Private Foundation, which controls 29% of the voting stock, did not act in concert with, but only in parallel to, another 5% shareholder of RHI. The decision ended an investigation by the Takeover Commission on whether MS Foundation had to launch a mandatory offer as a result of voting in parallel with the 5% shareholder in the May 2007 shareholders' meeting replacing the supervisory and management board.
C-QUADRAT Investment. By decision of 31 July 2008, the Takeover Commission held that the accession of a new subordinated member to the syndicate agreement of an already established syndicate of three members, which included two private foundations currently controlling C-QUDRAT, did not trigger the obligation to launch a mandatory offer.
Following the change in chairman from Peter Doralt to Martin Winner as of 1 January 2009, the Takeover Commission is currently conducting investigations concerning:
Meinl European Land. The Takeover Commission is investigating whether the company was subject to the rules of the Takeover Act 1998 (Übernahmegesetz) and if so, whether the rules on the obligation to launch a mandatory offer were violated. Meinl European Land, now renamed Atrium, is a real estate fund listed on the VSE but incorporated in Jersey, which became the target of investigation by the Financial Market Supervisory Authority (Finanzmarktaufsichtsbehörde) (FMA) and was taken over by Israeli Gazit Globe in mid 2008. The investigation is still pending.
S&T. The Takeover Commission investigated whether AvW Group, an investment fund company in financial difficulty, violated the obligation to launch a mandatory offer on S&T, a computer systems integration company. AvW had exceeded (temporarily) the critical 30% threshold by exercising options. By a ruling of 7 April 2009, the Takeover Commission confirmed that AvW Group had acquired control and therefore was under an obligation to launch a mandatory offer. AvW Group was ordered to file a mandatory offer on S&T or sell down in an off market sale below 30%, both within 20 trading days from the date of service of the ruling.
A public offer, whether voluntary, mandatory or voluntary aimed at control (see Question 16), is the most direct and common way to obtain control of a public company.
A recommended offer can be carried out by a scheme of arrangement, which requires certain steps such as a demerger, or a merger (or both). These require the support of certain shareholder resolutions. A scheme of arrangement can involve a voluntary public bid or a mandatory public bid, particularly if it would otherwise deprive shareholders of opportunities to sell their shares under the Takeover Act.
In 2000, the Takeover Commission issued a landmark ruling on schemes of arrangement in the HypoVereinsbank and Bank Austria merger (Takeover Commission 12.09.2000 GZ 2000/1/4-171). The Takeover Commission applied a new controlling shareholder test, holding that the Takeover Act did not apply if the shareholders of the listed target, on completion of the transaction, did not confront the new controlling shareholder. While it has narrowed the application of the Takeover Act to schemes of arrangement, the Takeover Commission also held that it will consider applying the Takeover Act if the equal treatment of the target's shareholders is an issue.
Hostile bids are permitted. However, they are not as common as in some other jurisdictions due to the:
Two-tier board structure of Austrian stock corporations (Aktiengesellschaft) (AG); that is, a stock corporation must have a management board (Vorstand) and a supervisory board (Aufsichtsrat).
Limited number of publicly held shares (free floats).
Ability of companies to resist hostile bids (see Question 23).
The Siemens/VA Tech offer was initially perceived to be hostile but did not result in a takeover battle.
Public bids are regulated under the Takeover Act, as substantially amended by the 2006 Takeover Amendment Act. The Takeover Act applies provided the target is an AG based in Austria and its shares are admitted to trading on the VSE at a regulated market. If the AG is incorporated in Austria but the shares of the AG are not admitted to trading on the VSE but on a regulated market in another member state of the EU and a public bid is launched, the Takeover Commission has authority. In this case, certain Takeover Act provisions apply including, for example, on notification of employees, the control threshold triggering a mandatory bid, exemptions from an obligation to launch a mandatory bid and defensive measures.
If a public company is not incorporated in Austria and the shares are not admitted to trading at the seat of incorporation but on the VSE (if shares are trading on different exchanges within the EU, the first admission of trading took place on the VSE), the Takeover Act provisions regarding the tender offer content and tender offer proceedings apply.
Other legislation relevant to public bids includes:
The Joint Stock Corporation Act 1965 (Aktiengesetz) (SCA) with respect to equal treatment of shareholders and directors' statutory duties, among other things. The SCA is applicable to AGs incorporated in Austria no matter whether the AG is a public or a private company (admission to trading is therefore irrelevant).
The Stock Exchange Act 1989 (Börsegesetz) (SEA) with respect to stake building, ad hoc disclosure duty and insider trading, among other things. The SEA is only applicable to public companies admitted to trading on the VSE. It is irrelevant whether the company is incorporated in or outside of Austria.
The Law on Exclusion of Shareholders 2006 (Gesellschafterausschlussgesetz), which regulates the squeeze-out of up to 10% of the remaining shareholders in an AG or a company with limited liability in Austria (GmbH).
The Cartel Act 2005 (Kartellgesetz) (CA), which applies to mergers not subject to EC merger control. The applicability of the CA focuses only on the turnover generated in Austria. It is irrelevant whether the company is incorporated or admitted to trading in or outside Austria.
Regulatory control provisions in certain sectors such as in the banking, insurance, utilities, gambling, telecommunications and aviation industries. The scope of applicability is regulated differently in the various industries. The admission of trading (either in or outside Austria) is irrelevant.
For a recommended bid, the bidder carries out due diligence using publicly available information and then asks the target for further information before proceeding with the bid. Due diligence can be extensive in takeovers of private companies, but is usually more limited when the target is listed. This is because the target's management board must carefully balance the need to disclose information to the bidder against more extensive legal and contractual secrecy obligations, and its fiduciary duties to its shareholders. If there are competing bidders, the target's boards are subject to an objectivity obligation (see Question 23), requiring them to provide the same information to all bidders or potential bidders acting in good faith.
For a hostile bid, the bidder is limited to obtaining publicly available information, as the target does not have to disclose unpublished information to the bidder.
Certain information is recorded in a computerised public company register (Firmenbuch), and basic corporate documentation, the annual accounts and auditor reports are accessible at the district courts of first instance (Landesgerichte) with substantive jurisdiction for commercial matters.
Information on company assets including real estate, patents and trade marks can also be obtained from the relevant public registers.
It is difficult to access shareholder information on a stock corporation, as company law allows nominee shareholdings and does not require them to be disclosed, other than in limited circumstances such as during litigation.
Secrecy must be maintained until a bid is announced, to avoid the creation of a false market, unfair disclosure of its bid (or plans which may cause a mandatory bid) and the abuse of insider information (section 5, Takeover Act). The bidder must notify all persons involved in the bid of their secrecy obligations and the prohibition of the abuse of insider information.
If the bidder has negotiated with the target before making a bid, the target's management board (and, if involved, the target's supervisory board) must also maintain secrecy before the bid is announced.
If secrecy is not maintained before the bid is announced, the bid is prohibited and the bidder must notify the Takeover Commission of sales and purchases of shares and share options in the target by the bidder (alone or in concert).
Before a public offer, there are no restrictions on a bidder from seeking irrevocable undertakings from the target's shareholders to accept its offer for their shares. However, shareholders may not want to give these in case a competing higher bid is made during a subsequent public offer.
A shareholder can revoke his acceptance of a public offer, if a higher competing bid is made (section 17, Takeover Act).
To increase its chances of success, a bidder can take an initial stake in the target. However, the following factors must be considered.
To increase its chances of success, a bidder can take an initial stake in the target. However, a controlling shareholder, who owns controlling voting stock between 30% and 50%, must make a mandatory bid if it acquires 2% or more of voting shares within 12 months (known as creeping in).
A key question is whether building a stake will breach the insider dealing rules. A bidder must comply with:
The general rules on insider dealing (Stock Exchange Act). If and when due diligence enquiries with the target are started, the bidder is considered an insider, and if it purchases target shares in the market it will be committing an offence under the insider dealing rules.
Compliance rules in the Banking Act (BGBl 1993/532, as amended).
The notification and disclosure requirements of the Stock Exchange, the target and the FMA.
Generally, shareholder approval is not required to transfer shares in listed companies, unless the articles of association (articles) state otherwise.
If the bidder acquires, directly or indirectly, listed target shares so that its voting rights reach, exceed or fall below 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 75% or 90%, the shareholding must be notified to the FMA, the Stock Exchange and the target (section 91, Stock Exchange Act). The target's articles may provide for other percentages triggering disclosure. The implementation of Directive 2004/109/EC on transparency requirements for securities admitted to trading on a regulated market and amending Directive 2001/34/EC, among other things, into the Stock Exchange Act in mid 2007, led to shortened publication and disclosure terms and extended the disclosure requirements to various derivative transactions.
The bidder's obligations extend to all parties acting in concert with it in relation to acquiring voting shares or the exercise of voting rights (see Question 16).
It is not common for the bidder and target to enter into a merger agreement (even in recommended bids). This is because restructuring a stock corporation to implement certain takeovers requires shareholder support (by shareholder resolution). The target's board is required to refrain from all actions, which could impair the free and informed decision of the shareholders and which could prevent the success of an offer (section 12/1, Takeover Act), although a search by the board for a white knight is allowed. An agreement by the boards not to solicit or recommend other offers would violate the board's neutrality obligation under the Takeover Act.
Break fees are not common because:
The payment of a break fee must be disclosed.
The target could be deemed to be giving unlawful financial assistance for the purchase of shares in itself.
If a break fee is paid, the target pays an agreed amount to the bidder if specified events delay or prevent a successful public bid.
The bidder must appoint an independent expert to certify that the bidder can finance the intended public offer. The expert's certification and report must be submitted to the Takeover Commission before it decides whether the offer can proceed (see Question 12).
The bidder must immediately inform the public and the target of its intention to make a bid if (section 5(3), Takeover Act):
Its management and supervisory boards have passed a resolution to make a bid.
Circumstances arise which trigger the obligation to make a mandatory bid (see Question 16).
At an earlier stage, there is both:
a significant shift in the target's share price or there is speculation in the market of a potential offer by the bidder;
reasonable grounds for concluding that either of these factors results from a bid being prepared, the bidder's intention to make a bid or the bidder purchasing shares.
The target faces similar obligations if it is given confidential information in a recommended bid (section 6(2), Takeover Act).
The announcement must be made either:
By publication in a daily newspaper or information leaflet.
Through an accessible electronic medium used throughout Austria (section 11(1), Takeover Act and section 78, Stock Exchange Act). The announcements must also be published on the bidder's and target's websites (section 11 (1a), Takeover Act).
The bidder and the target must each in turn notify its respective works council (section 11(3), Takeover Act).
At the bidder's request, the Takeover Commission can suspend the requirement to make an announcement for a short period if this will help prevent damage to the bidder (or parties acting in concert with it) (section 5(4), Takeover Act).
No details of the intended offer need to be published with the announcement.
When an intention to make a bid has been announced, the bidder (and parties acting in concert with it):
Cannot sell target shares.
Must improve the conditions of the entire public offer if they acquire target shares on more favourable terms outside the public offer (section 16, Takeover Act). The Takeover Amendment Act provides for a post-offer improvement. The bidder must make a payment to the shareholders who accepted the public offer corresponding to the balance between the share price received in the offer and any higher per share consideration paid nine months after the deadline of the public offer (section 16(7), Takeover Act).
Must notify the Takeover Commission of any purchase and sale of the target's shares and share options. This duty also applies to the target's board (including group companies as well as advisers and shareholders).
After the offer has been announced, the bidder (and the target in a recommended offer) starts to work on the offer document, which must contain the bidder's formal contractual offer to the target's shareholders.
The bidder must also appoint a qualified independent expert (an auditor or bank) to (section 9, Takeover Act):
Report on the offer document, confirming it is complete and complies with the law.
Certify that the bidder can finance the offer.
The expert's report is filed with the Takeover Commission and the certification must be included in the offer document.
The bidder must notify its bid, together with the offer document, to the Takeover Commission within ten trading days of announcing its intention to make a bid. The Takeover Commission can extend this to up to 40 trading days at the bidder's request.
If notification is not made within 40 trading days after the intention to bid is announced, the bidder cannot make another bid for the target for one year, starting 40 trading days from the announcement. For mandatory bids, the notification term is 20 trading days, which cannot be extended.
A foreign bidder must have its notification submitted by a bank, accountant or lawyer domiciled in Austria.
On receipt of the offer document, the Takeover Commission has up to 15 trading days to do one of the following:
Prohibit the offer if the legal requirements have not been met and require new bid documents.
Request additional information or amendments to the documents.
Allow this period to pass. If this happens, the bidder sends a copy of the offer document to the target and then publishes it.
The bidder must publish the offer document not earlier than 12 to 15 trading days after notifying the Takeover Commission, unless the Takeover Commission has prohibited publication of the bid. A copy of the offer document must be sent to the target before it is published.
The Takeover Commission can postpone publication of the offer document or, following agreement with the bidder, shorten the period in which it must be published.
Publishing the offer document triggers the offer period. This must be set at a minimum of two weeks and a maximum of ten weeks (section 19, Takeover Act), but can be extended by the Takeover Commission in certain circumstances (see below, Competing bids). The period for accepting the bid cannot expire less than three weeks after the target's response is published.
The target's management board must:
With supervisory board approval, appoint an independent expert, who can be an auditor or a bank, to report on the terms of the bid, particularly the consideration offered (section 13, Takeover Act).
Make a statement to its shareholders together with the supervisory board on whether to accept or reject the offer. If it is unable to do this, it must list the advantages and disadvantages of the bid and send this to its shareholders (section 14, Takeover Act).
Following this, the target's management board must:
Notify the Takeover Commission of its response, the response of the supervisory board and, if any, of the work's council, and the expert's report within ten trading days from publication of the offer document, at the latest, five trading days from the expiration of the offer term.
Publish to the public at least five trading days before the deadline of the public offer its response, the response of the supervisory board and of the work's council, and the expert's report.
Send details of the bid, its response and the expert's report to its works council.
If a competing bid is made during the offer period, the target's shareholders can rescind their acceptance of the first bid, regardless of whether they accept the second bid (section 17, Takeover Act). A competing bid automatically extends the offer period until at least the end of the competing bid period. The Takeover Commission can also extend the offer period if it considers it reasonable to do so.
During the offer period the bidder can improve its offer (in relation to consideration and other conditions) provided that it is in the interests of the target's shareholders.
The bidder must publish the outcome of the bid immediately after the offer period expires. The offer term can be extended on request of the bidder, unless the bidder declared that the offer term would under no circumstances be extended. In the case of a mandatory bid the offer term is automatically extended by three months from the date of the announcement of the outcome of the bid; this mandatory extension also applies if the bidder reached more than 90% of the voting stock of the target in the course of a voluntary offer.
If the bid is subject to merger control, the need to apply to the competition authorities for clearance will delay the closing of the bid (see Question 25). To obtain merger control and other government approvals, the Takeover Commission (GenRuling, Takeover Commission GZ 2001/V/1) allows the bidder, within limits, to control the timing and type of a public bid. For example, the bidder can pre-empt a subsequent mandatory offer by making a voluntary offer aimed at control (section 22(11), Takeover Act) (see Question 16).
The period to obtain regulatory approvals can be extended on application by the bidder to the Takeover Commission beyond the maximum offer period, making a total period for government approvals to be obtained of about 90 trading days. In exceptional cases, this period can be longer. For example, in the Siemens AG offer for VA Tech, this period was 140 trading days.
Generally, the same procedures apply to voluntary, mandatory and voluntary offers aimed at control (see Question 16), regardless of whether they are hostile or recommended. The main difference is that in a recommended bid the target's shareholders and board are involved at an early stage and often make a joint announcement with the bidder. There is no additional prescribed structure for hostile bids, although the Takeover Commission usually imposes tight controls and intervenes more.
Voluntary offers and voluntary offers aimed at control (see Question 16) can be subject to conditions and rights of withdrawal, provided that they are objectively justified (sections 7(7) and 8, Takeover Act). Fulfilment of the condition and withdrawal cannot be at the bidder's discretion. Conditions and rights of withdrawal are part of the offer document (section 7(7), Takeover Act), which must be approved by the Takeover Commission (see Question 12). The Takeover Commission interprets conditions and withdrawal rights narrowly.
Permitted conditions include:
Obtaining government or other regulatory authority approvals, including merger control (see Question 25).
Acceptances reaching minimum or maximum shareholding levels.
Events affecting the target company not occurring, including:
insolvency;
changes caused by defence measures, including changes to the capital or capital structure of the target (see Question 23); and
material adverse change events (see below).
Approval of the transaction by the bidder's shareholders' meeting.
Competing bids not occurring.
The Takeover Commission allows the bidder to include a condition defining a material adverse change in the target's economic condition if the following are met:
The material adverse change must be clearly defined in the offer document, occur during the (extended) offer period and refer to objective, measurable criteria (for example, financial data such as accounts).
The clause must not involve the bidder's discretion.
The bidder and the target must agree procedures for the following before the bid is made:
the supply and determination of financial data;
a review of the financial data; and
notification of the review results to the Takeover Commission.
An independent third party (for example, the company's auditor) must determine whether the criteria for the material adverse change event have been met.
Whether such conditions have been met must be decided within the offer period.
Following the 2003 GE/Jenbacher offer (which, among other things, introduced material adverse change conditions), both the Siemens/VA Tech and the Dicom/Topcal offers contained several conditions. The Takeover Commission has allowed for a unilateral waiver of certain conditions by the bidder during the offer period, deeming the waiver as an improvement of the offer under the Takeover Act.
In Siemens/VA Tech, the Takeover Commission even allowed the bidder to introduce a new 90% acceptance condition during the offer period against a substantial increase in the offer price (18%), and the waiver by the bidder of a condition of the original offer (which required the maximum voting right restriction under the articles to be lifted during the offer period).
However, in its related ruling, the Takeover Commission stressed the exceptional nature of allowing this change of offer. It also invoked special circumstances in allowing such a (generally prohibited) trade-off, of an improvement against a deterioration of the terms of the offer (that is, waiving one condition against introducing a new one).
Mandatory offers must not include conditions, unless they are required by law. Permitted conditions include:
Regulatory approvals, particularly merger control (Cartel Act and Article 7, Regulation (EC) No. 139/2004 on the control of concentrations between undertakings).
Other government approvals, for example under banking and insurance regulations.
Approval of the bid by the bidder's shareholders, if required by the bidder's articles or the law where it is incorporated (this is likely to be allowed by the Takeover Commission as a condition).
Anticipated mandatory offers aimed at control, may be conditional on acceptances reaching or exceeding certain key shareholdings, for example 75% and 90%.
On a hostile bid, the bidder and the target typically issue a series of documents, including newspaper adverts, to persuade shareholders and counter each other's arguments. On a recommended bid, the main document that the target's shareholders receive is the offer document.
This is the formal legal document making the offer, and contains detailed information to allow the target's shareholders to decide whether they should sell their shares. It must include an expert's report (see Question 12) and contain, among other things, information about (section 7, Takeover Act):
The terms and conditions of the bid.
The bidder.
The securities for which the bidder is making an offer.
The consideration and the valuation method used.
The conduct of the bid, particularly relating to the agents authorised to receive acceptances and pay the consideration.
Maximum and minimum percentages of shares which the bidder undertakes to acquire (if applicable).
The bidder's existing shareholdings in the target or rights relating to target shares.
Conditions for withdrawing the bid.
The bidder's intentions and strategic planning in relation to the target's business and employees.
The period for accepting the bid and paying the consideration.
The financing of the bid.
Entities acting in concert with bidder or target.
Compensation if rights are taken as a result of breakthrough.
Law and venue applicable to sale of shares tendered under offer.
As the offer document must contain information on the bidder's intentions, it normally contains a responsibility statement from the bidder's directors.
The target's management and its supervisory board must issue its response to the bid and an independent expert's report (see Question 12). It can recommend the bid or if it remains indifferent, the board must list the pros and cons. If it is opposing the bid, its response will be the equivalent of a defence document in other jurisdictions.
There is no obligation to consult or involve the works council in the takeover process except for the obligation on:
The bidder's and the target's boards to inform their respective works councils of announcements and publications relating to a bid or public offer, including the publication of the offer document.
The management board to publish a response, if any, by the works council of the target.
A mandatory offer to the target's remaining shareholders is triggered if a person or legal entity acquires, by any means, a controlling shareholding in the target (section 22(1), Takeover Act). A controlling shareholding enables the bidder (alone or acting in concert (see below)) to exercise a dominant influence on the target. A dominant influence is determined by:
The number of voting shares acquired.
The number of voting shares in public hands.
The number of treasury shares.
The ability to exercise influence or appoint and remove directors (indirect control test).
Control can be acquired directly, indirectly or contractually, for example by a shareholder agreement. The Takeover Act distinguishes between direct and indirect control in the target. For direct participations in the target, a controlling holding of voting stock exceeding 30% will trigger the obligation to launch a mandatory offer. A holding of up to 26% of the voting stock does not trigger a mandatory bid (safe harbour provision). A controlling holding of between 26% up to and including 30% must be notified to the Takeover Commission within 20 trading days; the voting rights on stock exceeding 26% will be suspended ex lege but there is no obligation to launch a mandatory offer.
There are exceptions to the 26% plus voting stock suspension including when another shareholder (group) holds at least the same percentage of voting stock, the articles provide for a maximum voting right of 26% or there is no change in the controlling shareholder (for example, in the case of intra-group transfers or the dissolution of a syndicate without change of control).
A shareholder who has become subject to the suspension of voting rights has the following options:
Accept the suspension.
Sell a part of the stock.
Launch a public offer.
The shareholder can also apply to the Takeover Commission for the suspension of voting rights exceeding 26% (up to a maximum of 30%) to be lifted against submission to and subsequent compliance by the shareholder, with restrictions and conditions protecting the minority shareholders as imposed by the Takeover Commission.
The Takeover Act provides for various exceptions from the mandatory offer regime including if the 30% threshold was exceeded only temporarily, or in the case of a subsequent squeeze-out, provided the minimum price rules of the Takeover Act are complied with.
An exception from the mandatory offer requirement applies in case of a passive control change. This is a control change that could not reasonably be expected to occur and that happens without a contributory action by the majority shareholder. Although no obligation to launch a mandatory offer will be triggered, the voting rights exceeding 26% will be suspended.
The Takeover Act does not specify the means by which indirect control is acquired or exercised at the holding level. A substantive control test is applied, determining the ability to exercise influence on the target, including on the appointment and removal of directors.
In structuring transfers of de facto controlling positions or acquisitions of de facto controlling positions including by voluntary partial offers without triggering mandatory offers, the rules of the Takeover Act on concerted action and on shareholder syndicates must be complied with.
A mandatory bid is not usually triggered by just purchasing shares on the Stock Exchange. It is more likely to be triggered by acquiring a large number of shares from a key shareholder outside the Stock Exchange. Therefore, bidders will usually carry out stakebuilding in the Stock Exchange by acquiring smaller numbers of shares.
Within three months of publishing the result of the bid, one or more shareholders holding at least 1% of the issued share capital or a shareholding of EUR70,000 (about US$89,719) can ask the Takeover Commission to review the price offered in a mandatory bid. The Takeover Commission determines whether the bid complies with the Takeover Act's minimum price requirements (see Question 16).
These are voluntary public offers that, if successful, may lead to acquiring control of a company listed on the Stock Exchange (section 25a, Takeover Act). They have the following requirements:
The bidder must not have a controlling interest when making the offer.
The bidder must acquire more than 50% of the voting rights in the target when the bid is complete.
Acting in concert with the bidder or target is defined as acting in concert with the bidder in order to obtain or exercise control in the target company, in particular, by co-ordinating voting rights, or acting in concert with the target in order to prevent a successful takeover bid (section 1/6, Takeover Act). If a legal entity directly or indirectly holds a controlling stockholding in one or more other legal entities, it is assumed that all these legal entities are acting in concert (section 22 ss 2 and 3, Takeover Act). This assumption also applies if several legal entities have entered into an arrangement on the exercise of their voting rights to appoint the members of the supervisory board.
If a mandatory bid relates to securities other than ordinary shares (preference shares or participation rights) and the bidder (alone or in concert) has acquired ordinary shares in the 12 months before the bid is made, the price offered for those securities must be proportionate to the consideration offered for the ordinary shares. Proportionality depends on the specific rights involved in particular.
In a voluntary bid, the bidder can offer cash or securities, usually in companies owned or controlled by the bidder (or a mixture of cash and securities, but this is rare).
In a mandatory bid or a voluntary offer aimed at control (see Question 16), the bidder must offer all the consideration in cash, payable no later than ten trading days after the offer becomes unconditionally binding. The bidder can only offer securities (exchange offer) in addition to a cash offer. If the bidder offers securities as consideration:
It is up to the shareholder whether to accept securities instead of cash.
The securities must have at least the same value as the cash offered.
The bidder must give the target's shareholders enough information (similar to that in an offer document) to enable them to form an opinion of the securities and the bidder.
The final choice of consideration may depend on whether the bid is voluntary or mandatory (including anticipatory mandatory), since exchange offers can only be made on mandatory bids in addition to a cash offer.
Cash offers tend to be accepted more than exchange offers, but require a well-financed bidder.
In the 2005 Unicredito voluntary offer for Bank Austria shares, aimed at control, the Austrian market saw the first large-scale offer providing for a cash offer and alternatively for an exchange offer (HVB shares). The Takeover Commission:
Reviewed the price elements of both the cash and exchange offers to ensure that the paper offer complied with the minimum price requirements of the Takeover Act.
Allowed various conditions to the offer required by regulatory approvals and parallel public offers in various European countries including in Germany, Italy and Poland.
In a mandatory offer and a voluntary offer aimed at control (see Question 16), the consideration must be at least both:
The average quoted share price weighted according to the trade volumes of the respective security during the last six months before the day on which the intention to make a bid was disclosed.
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 the notification of the mandatory offer.
There are no minimum consideration or cash requirements on straight voluntary bids.
There are no specific restrictions on the form of consideration that a foreign bidder can offer to shareholders.
Under the 2006 Shareholder Exclusion Act, the majority shareholder which owns directly or indirectly 90% of the stated capital of the target may adopt a shareholders' resolution on the squeeze-out with a simple majority of votes. Minority shareholders may not block the squeeze-out but can under certain circumstances request a review of the compensation.
If the squeeze-out takes place following a public offer, not later than three months after the end of the offer period, there is a rebuttable presumption that the compensation for the squeeze-out is adequate if it amounts up to the highest cash consideration paid in the offer period.
If an initial bid fails, the bidder (and parties acting in concert) cannot make a further bid for the target (or acquire shares triggering a mandatory bid) for one year from publication of the bid's failure (section 21, Takeover Act).
If the bidder has announced its intention to make a bid or stated publicly that it does not rule out a bid, and then fails to notify its bid to the Takeover Commission (see Question 12) (section 21(2-3), Takeover Act), the exclusion period will begin 40 days after the intention to make a bid was announced. If the bidder announces its intention not to proceed with a bid, or that it has triggered an obligation to make a bid when it did not intend to do so, the exclusion period starts from the date of this announcement.
The Takeover Commission can reduce the length of the exclusion period, provided that it is not detrimental to the interests of the target and its shareholders.
There is no particular de-listing procedure. However, a listing stops if the listing requirements are no longer met. One key requirement is that at least 10,000 shares must be held by the public (free float) (section 66(8), Stock Exchange Act 1989). A bidder can de-list a target by acquiring target shares so that fewer than 10,000 of them are held by the public. This is usually achieved by effecting a squeeze-out under the Shareholder Exclusion Act.
When a public bid has been announced, the target's management and supervisory boards must:
Respond to the bid (section 14, Takeover Act) (see Question 12).
Maintain confidentiality (section 6(2), Takeover Act).
Protect the interests of shareholders, employees, creditors and the public.
Maintain neutrality (section 12, Takeover Act). If they breach this, the target directors could face administrative fines (section 35, Takeover Act) of up to EUR50,000 (about US$64,085) and damages (sections 70 and 84, Stock Corporation Act and section 12, Takeover Act).
In addition, they must not take measures to deprive the target's shareholders of the opportunity to make a free and informed decision on the bid (section 12, Takeover Act), or any action likely to frustrate the bid, unless they are either:
Based on previous obligations of the boards and already partly implemented.
Approved by shareholder resolutions adopted after the bidder's intention to make a bid has been announced.
As there have been very few hostile public offers, defence strategies have rarely been tested and the Takeover Act does not specifically define what defences are allowed.
In line with international practice, the defences available can be grouped into measures affecting the target's:
Organisational structure. The two-tier board structure and the limitations of section 75 and section 87 of the Stock Corporation Act affect takeovers. Staggered terms of office for directors can delay the bidder establishing effective control, but do not hinder takeovers.
Capital structure. Possible defences (and the limitations to them) that affect the capital structure of the target include:
self tenders, where the target's boards offer to buy shares back from its shareholders, although these are subject to strict requirements (including that the shares repurchased cannot exceed 10% of the issued share capital) which can limit this defence;
employee stock ownership plans, although listed companies have only recently started to introduce these widely, and they are limited to up to 10% of the issued share capital;
maximum voting rights (section 114, Stock Corporation Act), although these are rare in listed companies;
registered shares combined with board approval being required for share transfers in the bye-laws, although it is rare to have registered shares in listed companies;
different types of shares, for example non-voting preference shares (up to one-third of the issued share capital), as a pre-bid measure;
the management board using pre-authorised capital (with the approval of the supervisory board) to increase capital; however, this will only be allowed in exceptional circumstances given the boards' obligation to remain neutral (section 12, Takeover Act).
Certain US-type poison pills, for example the flip-over, do not work in Austria because all shareholders must be treated equally (section 47a, Stock Corporation Act).
Assets. The sale of strategic assets or the acquisition of a direct competitor of the bidder (creating merger control problems for the bidder) may be effective. It will normally only require supervisory board (and not shareholder) approval but in a takeover situation, shareholder approval will most likely be required (section 12, Takeover Act). The most effective defence of the target is, however, usually soliciting a better offer from a friendly third party.
The articles of listed corporations may provide that some of its restrictive provisions will be suspended in case of public offers. This relates, among other things, to voting power restrictions and the non-transferability of the shares.
Acquiring shares in a stock corporation is not subject to transfer tax.
Real estate transfer tax at 3.5% applies to a single shareholder who acquires 100% of a company owning real estate. A nominal share in the company can be held by a trustee to prevent a single shareholder acquiring 100% of the shares, to avoid this tax.
National merger control rules (including specific rules on media mergers) are set out in the newly amended Cartel Act. Agreements subject to merger control include (section 7, Cartel Act):
Direct and indirect acquisitions of an enterprise, its assets or its shares, if a participating interest of 25% or 50% is acquired or exceeded.
Agreements between enterprises.
Agreements requiring a certain number of the directors of the management and supervisory boards of two or more companies to be the same.
Other affiliations between enterprises which cause a controlling influence over another enterprise.
National merger control does not apply if the transaction is subject to European merger control regulation.
A first stage decision (that is, a decision not requiring a second stage detailed investigation) must be made by the Cartel Court within four weeks of receipt of notification. The Cartel Court can clear the merger or prohibit it. The whole process usually takes five to six weeks.
The time limit for a final decision is five months from notification. If a decision is not given by then, the merger is deemed cleared. The closing of the transaction must be suspended until the Cartel Court has made its decision.
The acquisition or sale of a 10% or more shareholding of an Austrian bank requires the approval of the FMA (section 21, Banking Act). The approval requirement also applies where a shareholder acquires or sells shares so that certain shareholding thresholds are reached or exceeded (10%, 20%, 33% or 50%). In addition, every transaction involving a merger or a demerger of banks also needs the approval of the FMA.
Similar notification and approval requirements apply to the acquisition and sale of shareholdings in insurance companies.
Austrian law requires Austrian airlines to be controlled by European Economic Area (EEA) or EU entities. If other entities gain control, the airline's operating licence can be revoked.
Acquisition of real estate by non-EEA nationals or of control of companies owning Austrian real estate is subject to notification or approval. The Real Estate Commission in the province where the real estate is located will usually grant approval, especially if the property is used for commercial rather than residential purposes.
There are no restrictions on repatriation of profits or exchange control rules for foreign companies.
The Takeover Act also provides for a post-offer improvement. The bidder will have to make a payment to the shareholders who accepted the offer corresponding to the balance between the share price received in the offer and any higher per share consideration paid nine months after the expiry of the offer period. Additionally, the disclosure rules of the SEA apply when certain thresholds of shareholdings are reached or exceeded (see Questions 8 and 12). The target may initiate a share buyback. For security brokers, no special restrictions or disclosure requirements have to be observed.
Given the comprehensive reform of the Takeover Act as of 20 May 2006 and the introduction of the new squeeze-out regime under the 2006 Shareholder Exclusion Act, there are currently no further reform proposals.
The proposal to implement Directive 2007/36/EC on the exercise of certain rights of shareholders in listed companies, will considerably modernise the Stock Corporation Act. Key aspects of the modernisation include:
Electronic participation.
The introduction of electronic voting, with the following options:
satellite shareholders' meetings;
real-time two-way communications;
electronic voting from a remote location; and
electronic recording and transmitting of shareholders' meetings.
New rules on record date, share blocking, notice and proxies.
Head. Martin Winner (Chairman)
Address. Seilergasse 8
A-1010 Vienna
Austria
T +43 1 532 2830 613
F +43 1 532 2830 650
E uebkom@wienerboerse.at
W www.takeover.at
Main area of responsibility. The Takeover Commission is an independent body responsible for supervising public bids (see website above for a full description).
Contact for queries. Stefan Arnold (head of the Office of the Takeover Commission).
Obtaining information. Guidance notes can be obtained from the Takeover Commission.