Unlike the legislation in most other European jurisdictions, the
Swedish Companies Act or any other similar piece of Swedish
legislation does not specifically address public offers and other
forms of corporate takeovers. Even though the regulation on
takeovers in Sweden underlies statutory law, the Swedish securities
market is highly influenced by self-regulatory recommendations. The
main source of information regarding takeovers is the
Recommendation concerning Public Offers for the Acquisition of
Shares issued by the Swedish Industry and Commerce Stock Exchange
Committee (NBK). Stock market companies that are listed on the
Stockholm Exchange are obliged to enter into a listing agreement
with the Stockholm Exchange, of which a number of
NBK-recommendations are made part. Consequently, non-listed
companies are not contractually bound by the recommendations.
Failure to comply with the requirements in the takeover regulation
would result in bad feeling and criticism from the Swedish
securities Council (Sw. Aktiemarknadsnämnden) and Swedish media
and, in the case of a listed company, the Stockholm Exchange might
decide to de-list the company's shares from the exchange.
The Swedish Securities Council has the right to interpret the
takeover recommendation and to grant dispensations from its
requirements.
Scope of the new recommendation
In 1971, the first recommendation on takeovers in Sweden was
issued. Its essential features were based on the London City Code
on Takeovers and Mergers. Revised and updated versions of the first
recommendation were issued in 1988 and 1999. At the beginning of
2003, the NBK issued a new takeover-recommendation, applicable on
takeover bids that are made public on or after March 1 2003. The
most substantial changes that this recommendation will introduce
are the following:
- the field of application is extended;
- further requirements regarding preparations of takeover
bids and a new time frame for preparing a prospectus;
- rules regarding the execution of due diligence
investigations;
- further disclosure requirements;
- stricter requirements on the conditions for the
implementation of takeover bids;
- requirements regarding the financial conditions of the
bidder;
- restrictions on the bidder withdrawing an announced
takeover bid;
- the main principle as to the equal treatment of
shareholders made more stringent; and
- fundamental general principles as guidance.
Comments
The recommendation will have an impact on takeover bids not only
made on or by Swedish listed companies but also on foreign target
companies listed in Sweden. Because a foreign target company may
have to comply with regulations in more than one jurisdiction and
this might be considered unreasonable, the Swedish Securities
Council can grant a dispensation from the recommendation. This
dispensation is more likely to be granted if the trading in the
shares in Sweden is less substantial.
The recommendation stipulates that the bidder must make due
preparations regarding the implementation of the takeover bid,
meaning that it must be able to show that it has got the ability to
implement the bid and that its intentions are sincere. However, the
takeover bid may be subject to conditions relating to shareholder
or regulatory approval.
The decision to implement a takeover bid must be followed by an
immediate press release containing certain details relating to the
takeover. The scope of the information to be disclosed has been
extended in the recommendation. Furthermore, unless a despensation
is granted by the Swedish Securities Council, it is now required
that a prospectus must be presented within five weeks from the date
of the press release containing the takeover bid.
Restrictions have been introduced regarding the bidder´s trading
in shares of the target company following a due diligence
investigation, which are stricter than those found in the Swedish
Insider Penal Act. A due diligence investigation should be limited
to verifying facts related to the takeover bid. Competing bidders
will normally be provided with equivalent information. It is
recommended that the target company and the bidder enter into a
confidentiality agreement to prevent leakage of information and
insider trading. Should the target company provide the bidder with
non-public and price sensitive information, the target company must
ascertain that the shareholders of the target company are provided
with the same information before they decide to accept or reject
the takeover bid.
If the implementation of a takeover bid is conditioned by
certain circumstances, the recommendation prescribes that such
conditions must be made precise and clear in order to establish
objectively whether the conditions have been fulfilled or not.
Arbitrarily designed conditions are consequently not accepted.
Requirements have been introduced regarding takeover bids that
are subject to external financing. Such bids must be made
conditional on the external financing being paid out. The specific
conditions relating to this must be reflected in the press release
as well as in the prospectus.
Rules related to the bidder´s ability to withdraw an announced
takeover bid are made more restrictive. After a takeover bid has
been publicly announced, withdrawal is only permitted in the
following cases:
- if the bid is conditional to shareholder approval on a
general meeting of the bidder or the target company;
- if there are competing offers and the bid is conditional on
the fact that such competing offers do not exist; or
- if it is clear that conditions of material significance
will not be fulfilled.
To strengthen the main principle regarding equal treatment of
shareholders, the Recommendation stipulates that the minimum offer
price should be determined by reference to the highest price paid
by the bidder for shares in the target company in the six months
before and the nine months after the offer. Furthermore, it is now
stipulated that if more than 10% of the shares of the target
company are acquired by the bidder for consideration in cash six
months before the announcement of the takeover bid, the
shareholders of the target company will also be entitled to a cash
alternative.
Finally, a number of general principles are introduced as
guidance in the recommendation. Apart from the main principle of
equal treatment of shareholders and respect for the confidence that
has to be put into the capital markets, the recommendation puts
emphasis on speed, simplicity and clarity, when handling and
implementing takeover bids. Furthermore, the recommendation now
stipulates that the board of the target company cannot take any
action that is likely to put a takeover bid at risk, unless
approved by the shareholders of the target company at a general
meeting of shareholders or a dispensation to that effect is granted
by the Swedish Securities Council.
Klaes Edhall and Charlotta Grähs