Are there any circumstances where a minimum price may be set for the shares in a target company?
Mergers & Acquisitions (2nd edition)
Under Norwegian law, there are no statutory provisions requiring a minimum price to be set in connection with acquisitions of shares in non-listed companies. The same apply for voluntary offers for shares in companies listed on a Norwegian regulated market and the bidder is free to offer whatever price it wishes.
However, in a mandatory offer for shares in a company listed on a Norwegian regulated market (see question 25 below), the share price offered cannot be lower than the highest price paid, or agreed to be paid, by the bidder for the shares (or right to the shares) in the company during the last six months. Notwithstanding, if it is clear that the market price for such shares at the time the mandatory offer obligation was triggered exceeds the price offered, the STA provides that the Oslo Stock Exchange can demand that market price must be paid for such shares. This rule has typically been invoked in situation where the general rule has been abused, for example, where a bidder has exercised options with a low subscription price prior to exceeding the mandatory bid threshold. The STA does not provide adequate guidance on how this market price is to be calculated, and an EFTA-court ruling from 2010 found this rule to be non-compliant with the EU takeover rules.
There are generally no restrictions on the price of the shares in a target company, but schemes of arrangement are subject to court supervision.
In relation to a mandatory bid initiated for a listed company, the acquirer is obliged to offer a fair consideration in cash, which should be neither less than the average market value of the shares during the six (6) months prior to the bid, nor than the maximum price at which the acquirer had purchased shares during the twelve month period prior to the bid.
For public offers, German law provides for a minimum consideration that the bidder has to offer to the shareholders of the target of a listed corporation. The consideration, whether offered in a mandatory or a voluntary tender offer, must be at least equivalent to the higher of:
- the weighted average stock exchange price of the shares in the target during the three-month period leading up to the announcement of the offer (or of the acquisition of control in the case of a mandatory offer); and
- the highest consideration paid or agreed to be paid by the bidder or any party attributed to it within the six-month period prior to publication of the offer document.
Should the bidder purchase shares in the target during the acceptance period of the offer or through off-market transactions, within one year upon expiry of the offer period at a higher price, the bidder must increase the consideration to be paid to the shareholders who accepted the offer accordingly. As the Takeover Act requires that all shareholders shall be treated equally, the shareholders holding the same class of shares must receive the same consideration. If there are different classes of shares, the best price is to be determined separately for each class of shares.
If the offer is neither a voluntary nor a mandatory offer (i.e., aiming at a shareholding below 30% of the voting rights post-offer, or where the bidder holds a shareholding of more than 30% pre-offer) there are no rules governing the consideration, except for the equal treatment principle.
Mandatory public offers are subject to a minimum bid price. More in particular, the bid price should at least be equal to the higher of:
- the highest price paid over a period of 12 months before the announcement of the bid for the securities concerned by the bidder or a person acting in concert; and
- the weighted average of the trading prices on the most liquid market for the securities concerned over the last thirty calendar days before the event giving rise to a mandatory bid.
Further, the FSMA is entitled to impose conditions or adjustments to the price in certain circumstances.
There is no minimum bid price requirement in case of a voluntary public offer. There is, however, a general requirement that the bid price must allow the offer being successful. If a counter or higher offer would occur, the consideration must be at least 5% higher than the consideration of the latest offer.
Both for mandatory and voluntary public offers, the consideration must be equal for all shareholders. If the offer concerns securities of different categories, the prices offered for each of those categories may not contain differences other than those resulting from the respective characteristics of each category.
If, during the bidding period, the bidder or persons acting in concert with the bidder, acquire or undertake to acquire securities of the target outside the offer at a price higher than the offer price, the offer price will be adjusted to that higher price.
For a duration of one year as of the end of the bid period, the bidder or persons acting in concert with the bidder cannot acquire directly or indirectly securities that were the object of the public offer at more favorable terms than those set out in the public offer, except where the price difference is granted to all security holders who have taken part in the bid.
18.1 In the context of private target companies, there is no law which prescribes any minimum price for shares or contributed charter capital in any target company. In practical terms, however, it can often be difficult to obtain the necessary regulatory approvals for an acquisition transaction where the proposed purchase price is lower than the registered par value of the target shares (in the case of a JSC) or the actual amount of the target contributed charter capital having been paid into the target company by the vendor (in the case of LLCs). Such difficulties arise purely from the formation by licensing officials of discretionary opinions to the effect that the proposed purchase price is “unreasonable” or has been devised in order to evade tax liability. In addition, it should be noted that there is legal basis for the Vietnam tax authorities to impose capital transfer tax on the basis of the deemed actual market value of the transferred shares or contributed charter capital, as opposed to the consideration having been paid by the purchaser.
18.2 In the case of shares in listed public companies, any Direct Agreement Transactions not implemented via the normal on-market trading system are subject to “trading band” restrictions, namely, that the purchase price must not be:
- in the case of HOSE listed companies more than 7% above or below the closing price of the relevant shares on the HOSE at the end of the trading day immediately preceding the date of implementation of the proposed transaction; or
- in the case of HNX listed companies more than 10% above or below the closing price of the relevant shares on the HNX at the end of the trading day immediately preceding the date of implementation of the proposed transaction.
18.3 Direct Agreement Transactions can be implemented at purchase prices falling outside of the allowable “trading bands”, but only pursuant to specific approvals granted by the SSC on a case-by-case basis.
18.4 In the context of Mandatory Public Offer transactions, the price at which the offeror makes the public offer must not be less than:
- the average reference price of shares of the target company as announced by the [HOSE or HNX] within the 60 consecutive calendar days preceding the date of the offeror lodging the MPO registration documents with the SSC (the Offer Lodgement Date); and/or
- the highest purchase price paid by any entity which implemented any mandatory public offer to acquire shares in the target company within the 60 consecutive calendar days preceding the Offer Lodgement Date.
Under Swiss takeover law, in a mandatory offer as well as in a voluntary offer in relation to all shares of the target company the offer consideration must comply with the minimum price rule. Under the minimum price rule, the offer price must at least be equal to the market price (defined as the 60-day volume weighted average price, 60-day VWAP) or, if higher, the highest price paid by the bidder (or any affiliate or person acting in concert) in the twelve months preceding the tender offer. The minimum price rule does not apply if the target company has validly introduced an opting-out and therefore is not subject to the mandatory offer duty regime (see question 25).
Besides the minimum price rule, any public tender offer must comply with the best price rule. Under the best price rule, a bidder has to increase the offer price if, during the tender offer or within six months after completion of the offer, the bidder (or any affiliate or person acting in concert) acquires shares in the target at a price exceeding the offer price.
Non-public companies can specify the sale price of shares (interest) being purchased within the scope of implementation of pre-emptive rights in the charter. The price can be specified as a fixed amount or as a method to determine on a case-by-case basis.
Notably, pursuant to Federal law ‘On joint-stock companies,’ a court may disregard the price fixed in the charter of a non-public joint-stock company in a dispute if it is below the market price as of the date of sale.
Public companies cannot set a minimum price of their shares.
The price is subject to negotiations by the parties and, as a matter of principle, may not be set at a value which is clearly below the real value of the shares (thus generating doubts about the purpose of the transaction).