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Implementation of the Takeover Directive

The current Finnish takeover regime with its unusually high threshold of two-thirds for mandatory bids has for a long time stood out as an exception from the takeover regimes of other European jurisdictions. In connection with the upcoming implementation of the EU Takeover Directive, Finland will lower the mandatory bid threshold and also otherwise modernize the current regime.

In May 2005, a working group appointed by the Ministry of Finance published a report including a recommendation for a renewed takeover regime for takeovers of Finnish companies listed in the European Union. The recommendation has since been developed into a government bill, which was submitted to the Parliament for approval on February 17 2006. The aim is to have the new regime implemented by May 20 2006, the deadline provided by the Takeover Directive.

The proposal includes, among others:

The threshold for a mandatory bid is to be lowered to 30% of the total voting participation of a listed company. In addition, a second threshold of 50% would apply to shareholders already holding in excess of 30% of the total voting participation.

New rules on the pricing of mandatory bids would be introduced. Currently, the mandatory offer price is the fair market price based on the historic performance of the shares, but under the proposed new takeover regime the fair market price would be the price paid by the bidder for the same shares during the six month period preceding the offer. This rule would also apply to voluntary bids made for all shares and other equity securities of the target company. Notably, the pricing of voluntary bids in situations where the bidder does not have previous shareholding in the target company would be free and not at all regulated.

The obligation to launch a mandatory bid would not apply in situations where the bidder has acquired its holding in the target company through a voluntary bid for all equity securities of the target company.

An obligation would be introduced to pay top-up in situations where the bidder acquires shares for a higher consideration within nine months of the bid.

The price payable in connection with forced sale of remaining shares after the bidder has achieved a 90% holding (the so called squeeze-out) is proposed to be the same as the price paid in a preceding public bid.

An express obligation would be introduced for the board of directors of the target company to publish its opinion on the bid and the reasons on which it is based.

An express obligation would be introduced for the bidder, before the bid is announced, to ensure that it can meet its obligation to settle the consideration offered.

Rules addressing competing bids would be introduced. The original bidder would be entitled to extend the offer period beyond the maximum period provided by law and otherwise amend the terms of its offer. Notably, a shareholder could withdraw his or her acceptance of a bid if a competing bid is announced during the offer period.

It is proposed that Finland would exercise the option conferred by the Takeover Directive not to require that Finnish companies comply with the so-called breakthrough rules (article 12) of the Takeover Directive. A self-regulatory body with powers to issue guidelines on corporate conduct based on articles nine, 11 and 12 of the Takeover Directive would be set up with the Finnish Central Chamber of Commerce.

Tarja Wist and Samuel Isaksson

This is an update of an article that was originally published in Corporate Counsel magazine (March 2006)

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