The first quarter of 2005 saw two public tender offers with
substantial transaction volumes in Austria: Siemens' offer for VA
Tech had a total transaction volume of €955 million and
Österreichische Volksbanken-AG (ÖVAG)'s offer for Investkredit Bank
AG had a total transaction volume of €750 million. In Siemens/VA
Tech, a new offer condition was introduced during the offer term
against a simultaneous waiver of other conditions and in ÖVAG/
Investkredit a voluntary starting offer was converted into a
mandatory offer.
Waiver of offer condition
The Austrian Takeover Act allows conditions to voluntary
starting offers provided that the conditions are objectively
justified and their fulfilment is not at the discretion of the
bidder. The public tender offer on the 2003 GE/Jenbacher takeover
is the lead case on offer conditions because it introduced a number
of conditions, including a material adverse change condition.
A public tender offer can be changed during the offer term
provided that the change qualifies as an improvement. The Takeover
Commission has approved increases of offer price and extensions of
offer terms because they qualify as improvements within the meaning
of the Takeover Act. In the recent Dicom/Topcall and Siemens/VA
Tech offers, the Commission allowed, as a novel feature, the
possibility of a unilateral waiver of certain conditions by the
bidder during the offer term, deeming the waiver to be an
improvement of the offer under the Takeover Act.
Moreover, in Siemens/VA Tech, the Commission allowed the bidder
to introduce a new 90% acceptance condition during the offer term
against a substantial increase in the offer price (by 18%) and to
waive another condition of the original public tender offer. But
the Commission stressed the exceptional nature of admitting this
change and invoked special circumstances in allowing this generally
prohibited trade-off of an improvement against a deterioration of
the terms of a public tender offer (that is, waiver of a condition
against introduction of a new condition).
Offer conversion
If a bidder acquires a controlling stake in a target, it must
launch a mandatory offer (no conditions are permitted; no minimum
acceptance level is required). As long as it has not acquired a
controlling stake, a bidder can launch a voluntary starting offer
that, if completed, could result in control of the target
(conditions can be introduced provided they comply with the
Takeover Act). More than 50% of the target's voting stock, however,
must have been tendered into a voluntary starting offer before the
offer term expires; otherwise the offer fails (the
50%-plus-acceptance condition). Bidders often choose voluntary
starting offers if they launch a public tender offer parallel to a
yet-to-be-completed off-market acquisition of a controlling stake
in the target. Closing the off-market share acquisition is usually
still subject to conditions, including merger control
approvals.
A public tender offer must, among other things, be launched
within 40 trading days after public announcement. Because merger
control clearance has often not been received within this short
term (and so a controlling stake triggering a mandatory offer has
not yet been acquired), the statutory legal timelines of the
Takeover Act often force bidders into voluntary starting offers.
Consequently, a public tender offer could fail if the
50%-plus-acceptance condition could not be satisfied.
In ÖVAG/Investkredit, the Commission for the first time approved
an offer structure that allows a voluntary starting offer to be
converted into a mandatory offer during the offer term. The bidder,
ÖVAG, had acquired 41.5% of Investkredit from three co-shareholders
by an off-market transaction subject to, among other things, merger
control clearance. ÖVAG was forced to announce the contemplated
takeover but was not able to receive merger control clearance (and
so not able to acquire a controlling stake triggering a mandatory
offer) within the short statutory term to launch a public tender
offer under the Takeover Act. So ÖVAG launched a voluntary starting
offer subject to the 50%-plus-acceptance condition.
The public tender offer was aimed at the balance of 54.5% in the
target, and two other core-shareholders owned almost the majority
of target shares and a small free float. The two other
core-shareholders had announced pre-transaction that they intended
to stay shareholders in the target. Given those circumstances, the
Commission allowed the bidder to convert the voluntary starting
offer into a mandatory offer once the acquisition of the 41.5%
controlling stake off-market was closed, provided it was closed
during the original offer term of the voluntary starting offer. The
conversion was based on the provision of the Takeover Act allowing
a change of the offer during the offer term provided that the
change qualifies as an improvement per analogiam. In the
pertinent case the required improvement was that, after the
conversion, the public tender offer became entirely unconditional.
Also, after the conversion, the 50%-plus-acceptance condition for
voluntary starting offers no longer applies. Given this
implication, the Commission is likely to adopt a restrictive
approach to conversions in the future and to allow similar public
offer conversions in special (comparable) circumstances only.
Sascha Hödl