Editors’ Note: Christian Herbst is a partner of Schönherr and a member of XBMA’s Legal Roundtable. He is one of the leading Austrian specialists in cross-border M&A, takeovers and joint ventures, representing mostly foreign clients with respect to investments in Austria and Central Eastern Europe.
Executive Summary: Recent legislative measures affecting private and public M&A include: Effective November 2017, the scope of the Austrian merger control regime will be broadened. Effective January 3, 2018, public M&A will be affected by a change in takeover procedures as well as new delisting rules allowing voluntary de-listings from the Vienna Stock Exchange in connection with public offers or re-listings at other EU Stock Exchanges. Additionally, in implementing the Fourth EU Anti-Money Laundering Directive, the establishment of a Beneficial Ownership Register will require companies to notify the Register of their ultimate beneficial owners during H1 2018.
Scope of Austrian merger control regime broadened
For transactions which are implemented on or after 1 November 2017, an entirely new additional notification threshold will apply in the Austrian merger control regime. The new threshold is built on a combination of turnover, transaction value and the target being active in Austria and will in particular capture foreign companies which are active on the Austrian market from abroad, in particular online companies:
For merger control purposes a notifiable concentration will now also apply, if cumulatively the combined worldwide turnover of the undertakings concerned exceeds EUR 300m, the combined Austrian turnover exceeds EUR 15m, the value of the concentration (purchase price plus liabilities taken over) exceeds EUR 200m and the target undertaking has significant activity in Austria (e.g. site in Austria or in the digital context, e.g. monthly active users with Austrian nexus).
Minimum acceptance period for public offers extended
Under a 2017 Amendment Act to the Austrian Takeover Act, effective 3 January 2018, the following will apply.
The minimum acceptance period which a bidder must allow in a public offer will be increased from two weeks to four weeks. The maximum initial offer period, however, will stay at ten weeks. Also, no change applies to the statutory 3 months additional offer period following the expiration of the initial offer period of a public offer.
The reason for the change of the minimum offer period to four weeks is to allow the target board a more reasonable period to react to public offers, including calling a shareholders meeting seeking shareholder approval for defensive measures.
New voluntary delisting rules as of 3 January 2018
Currently, Austrian law only allows a delisting of listed companies by squeeze out of minorities once a shareholder reaches a 90 percent participation threshold in a target. As of 2018, an additional voluntary delisting regime will apply in addition to the delisting by squeeze out.
Delisting by Squeeze Out:
Listing stops if the listing requirements are no longer met. One key requirement is that at least 10,000 shares or a nominal value of EUR 750,000 must be held by the public (free float) (Section 66(7), Stock Exchange Act).
A bidder can de-list a target by acquiring target shares by public offer or on or off market purchases so that fewer than 10,000 of them are held by the public and then initiate the squeeze out of the minorities under the Shareholder Exclusion Act. Upon completion of the squeeze out, the target company is delisted.
Delisting under the voluntary delisting scheme of the Stock Exchange Act and Takeover Act:
August 2017 amendments of the Stock Exchange Act, Stock Corporation Act and Takeover Act will allow for a voluntary delisting from the Vienna Stock Exchange as of 3 January 2018. The Takeover Act will provide new rules for public offers to achieve a voluntary delisting under Section 38 (new as amended) Austrian Stock Exchange Act in connection with or unrelated to a corporate restructuring like change of legal form, split or demerger. Takeover offers in this context will be subject to additional minimum pricing rules.
Under the new rules, a withdrawal of the listing at the VSE may be requested provided that (i) the financial instruments have been listed for a minimum of three years and (ii) adequate investor protection is secured.
A delisting complying with adequate investor protection requires the following: First, a resolution of the shareholders meeting of the listed company with a 75% majority or a notarized joint request by stockholders controlling at least 75% of the voting capital of the listed company must be secured. Subsequently, a full public offer aimed at a delisting and supervised by the Austrian Takeover Commission needs to be launched. Such full public offer can be launched independently from or in the context of a corporate reorganization, such as a change of the statutes including change of legal form, merger, transformation or split of the target company.
In case of an offer aimed at a delisting, the following minimum pricing rules must be complied with: The price offered in a public takeover launched to delist must not be lower than (i) the weighted average price of the last six month, (ii) the highest price agreed or paid for target shares by the bidder or parties acting in concert with the bidder, in the 12 months before notification of the offer and (iii) the average price of the last 5 trading days before announcement of the intention to launch a delisting offer. If that price is apparently below the actual (market) value of the target company, an adequate offer price (based on a company valuation) must be fixed by the Austrian Takeover Commission.
No public offer is required for a delisting from the VSE in case the target company relists or stays listed (in case of a dual listing) at an EEA Exchange providing similar protection measures as the VSE; a case in point is the RHI/Magnesita merger as resolved in August 2017 where RHI will be delisted from the VSE and relisted in London.
Beneficial Ownership Disclosure
The Beneficial Ownership Register will implement the Fourth EU Anti Money Laundering Directive and require Austrian companies to take reasonable measures to determine the identity and subsequently notify the Register of defined beneficial owners by 1 June 2018 at the latest. The beneficial ownership test includes (i) a natural person holding directly more than 25% of the shares in an Austrian company; and/or (ii) more than 25% of the shares in an Austrian company are held by another legal entity which is directly or indirectly controlled by a natural person; control in this respect is indicated by directly or indirectly holding 50% of the shares; and/or (iii) a natural person directly or indirectly holding more than 25% of the voting rights of the Austrian company.
The purpose of the new law is for all EU countries to store beneficial ownership information to combat money laundering and terrorism but also to allow governmental authorities and defined others to conduct customer due diligence.
The views expressed herein are solely those of the author and have not been endorsed, confirmed, or approved by XBMA or any of the editors of XBMA Forum, nor by XBMA’s founders, members, contributors, academic partners, advisory board members, or others. No inference to the contrary should be drawn.