SEPTEMBER 2014
fact, the valuation of both companies is validated by one or more independent experts. Moreover, as far as listed companies are concerned, public information is ensured by means of a very detailed prospectus, including inter alia the pro forma accounts of the combined entity which are reviewed by the statutory auditors.
In addition, the possibility of a dual listing for the combined entity, both in Paris and in the original place of business of the absorbed entity, is another reassuring element for the shareholders.
In terms of communication, mergers also have the clear advantage to be the result of a joint and thoughtful decision of the two companies’ boards leading to the creation of a combined entity. Whereas, conversely, takeover bids will usually be viewed as the consequence of a unilateral decision intended for the acquisition of a “target”.
What were the main challenges that arose? How did you overcome them?
Needless to say, valuation is fundamental in order to convince the shareholders on both sides of the merits and balance of the transaction. As regards listed companies, the market price and the comparables methods may serve as indicators, along with other valuation methods recommended by the AMF.
In a cross-border merger scheme, management of legal timing constraints is a critical success factor. One should mention the overall timeframe, which is inherently lengthy and imposed by the applicable rules: in particular, as far as listed companies are concerned, the General Regulations of the AMF provide for a minimum time period of 2 months between filing and registration of the prospectus. Likewise, the overall merger timeframe will be extended if the companies are due to set up a “special negotiation body” in order to define the terms and conditions of the employees’ participation in the management body of the combined entity, if they must submit the merger to the approval of the relevant antitrust authorities, or obtain tax rulings.
Great challenges were also the combination of all applicable rules and regulation (namely, EU and national corporate, securities, accounting, employment, antitrust and tax rules, as well as stock exchange requirements and local regulators’ guidelines) and the preparation and the “passporting” of the merger prospectus.
An example of complexity is the right for minority shareholders of the absorbed entity to require a cash payment if they oppose the merger. Although a corporate merger normally means “paying” in shares, not in cash, the 2005 Merger Directive offered the Member States the possibility to grant such a cash-exit right to the minority shareholders, which Denmark did. There was therefore a cash risk to the transaction. However, the conditions enabling such a repurchase are much more
Jean-Nicolas Soret Partner
Email:
jnsoret@altanalaw.com
Fabien Pouchot Senior Associate
Email:
fpouchot@altanalaw.com Paris, France l Website:
www.altanalaw.com
restrictive than for a squeeze-out, in the context of a tender offer. To such extent that in the case of Onxeo, none of the 8,000 Topotarget shareholders did request such a cash payment.
Choosing the right drafting language was also crucial. If English was obviously used as the common working language, the full prospectus had to be translated into French in order to be registered by the French regulator and the summary of the prospectus also had to be translated in Danish. The merger agreement was executed in a trilingual format, too.
Is there any need for legislative change in your opinion that would help these types of deals?
Although of course perfectible, the set of European and national rules and regulations now in place for cross-border mergers is well-developed and structured.
However, the complexity of this type of transactions must not be underestimated, and the EU and national parliaments should work at further harmonizing the existing tax rules and simplifying the overly burdensome employee protection rules.
Is there anything else you would like to add?
The corporate cross-border merger transaction structure must undeniably be added to the toolbox for the creation of European champions. It is a major implementation of the principle of free movement of capital since the transfer of the registered office from one country to another is now possible without a unanimous vote of the shareholders being required.
The Onxeo corporate merger demonstrates that this type of transaction is not only possible but also constitutes a real alternative to the usual acquisition schemes, while enabling the formation of European leaders, creating high value for their shareholders. LM
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Legal Focus
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