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Takeover law

This year, two amendments to securities law came into effect that bring the Slovak legislation even closer to EU directives. Both set legal guidelines to protect the interests of minority shareholders of securities that are the subject of a purchase, takeover or change in control of a majority stake.

As of January 1 2007, an amendment to Act 566/2001 on securities and investment services (the Securities Act) came into effect. Further amendments to the Securities Act specifying additional details regarding takeovers came into effect on May 1 2007. By these amendments, Directive 2004/25/EC on takeover bids was implemented into the Slovak legal system.

Takeover law applies to companies whose shares carry voting rights and are listed on a regulated market in the Slovak Republic or another member state. The regulation also applies to the acquisition of securities other than shares that replace these shares (that is, interim certificates) or that convey the right to acquire these shares (that is, convertible bonds). According to Slovak takeover law, a takeover bid is a public offer to conclude an agreement to acquire all or some of the shares of the target or the exchange of all or some of the shares for other securities that is intended for the shareholders of the company and is declared either on the basis of an obligation prescribed by law or voluntarily. It follows the acquisition of a controlling holding in the target (33% of the voting rights of the target's shares) or aims to acquire a controlling holding in the target.

The amendments extended the scope of the compulsory data to be contained in a takeover bid and changed some of the deadlines for bid-related proceedings.

Bid term: The offer must remain open for at least 30 days and no longer than 70 (originally 60) calendar days after the takeover bid has been published, unless stated otherwise by the Securities Act.

Conditions: The bid may stipulate that the bidder acquires a certain minimum threshold of shares in the course of a takeover bid for the bid to be deemed successful and binding.

Withdrawal – mandatory bid: It is not possible to withdraw a mandatory bid.

Withdrawal – voluntary bid: Under Slovak national regulation, after its announcement that it will make a bid, a bidder may walk away only if it is expressly stated in the bid that the bidder may do so and only before the first acceptance of the bid, or if a competing bid is made.

Competing bids: Under Slovak national regulation, the management of the target company is obliged to notify the person making the original bid of any competing bid without delay. The competing bid must be published no later than five working days before the deadline for acceptance of the initial offer. Its term must be as long as the term of the original bid but at least 10 working days. If the term of the competing bid is set to end later than the original bid, then the offer term of the original bid will be extended to match the offer term of the competing bid (for a maximum of 30 days).

Amendments: The bidder can amend its bid only if the bid expressly permits it. The bidder can amend its bid by: (i) offering a higher price or a more favourable conversion rate; or (ii) offering a lower threshold for the success of the bid (that is, the percentage of the target's voting shares that must be tendered). The bidder may revise its bid during the acceptance period, but no later than five working days before that period expires. For an amendment to be valid the offer must be published and it must be approved by the National Bank of Slovakia no later than five days before the deadline for acceptance of the initial offer. After an amendment, the offer must stay open for acceptance for at least five additional business days. Amendments to the offer are also valid in relation to the shareholders who accepted the initial offer.

Purchase price: The purchase price may be paid either in cash or shares, or by a combination of the two. If the bidder offers at least part of the payment in shares, it has to offer cash as an alternative. The bid price for shares in a mandatory bid must be equal to the value of the shares of the target company; the adequacy of payment must be supported by an expert appraisal.

The amendments also introduced a minority squeeze-out regime into Slovak law but this applies only to joint stock companies with listed shares.

Lubos Frolkovic and Petra Hollá

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