CMS Expert Guide to Public Takeovers in Belgium

Yes – the Companies and Associations Code (“Code”) as well as the 1 April 2007 Law on Public Takeover Bids (“Law”) and its implementing Royal Decrees of 27 April 2007 govern public takeovers of Belgian listed and certain unlisted companies.  The operation of the Code and Law is overseen by the Belgian Financial Services and Markets Authority (“FSMA”). 

The section addresses transactions relating to the acquisition of control of Belgium-incorporated listed companies only.  

• Voluntary takeover bids 
• Acquisitions which result in the acquirer and persons “acting in concert” with it holding more than 30% of the target company (mandatory takeover bids) 
• Squeeze-out bids, whereby a shareholder holding 95% of voting shares can force the other holders of voting shares to tender their shares 

If a person (together with persons “acting in concert” with it) already holding a controlling interest in the target makes a voluntary takeover bid or a squeeze-out bid, it must obtain a fairness opinion from an independent financial expert to support the valuation of the target company. In all other cases such fairness opinion is not mandatory. 

A mandatory offer, which must in certain cases include a cash only option, must be made if any person (whether alone or together with persons acting in concert with that person) increases his percentage shareholding (whether as a result of a purchase of shares or a corporate action such as a share buyback) holding in the target company to more than 30% of the voting securities. 

There are limited circumstances where the Law grants a dispensation from the requirement to make a mandatory offer, in particular where the mandatory offer is triggered by a person subscribing for new shares (as opposed to buying existing shares) through a capital increase where the other shareholders could exercise a preferential subscription right. 

Most takeovers are the result of a voluntary takeover bid (followed by a squeeze-out bid, if the 95% threshold is reached).  

A takeover can also be structured as a merger between the offeror (or a Belgian subsidiary thereof) and the target company, which must be approved by a shareholder vote of at least 75% in favour and representing 50% of shareholders eligible to vote, in each of both companies. This also requires the prior cooperation of the board of directors of the target company in drawing up a merger proposal and presenting it to the target shareholders. the cash portion of the merger consideration is limited to 10% under this structure. 

A scheme of arrangement structure does not exist under Belgian law. 

Within its own parties (advisers, funders etc), an offeror may maintain confidentiality. However, in the event of a leak (whether or not identifying the offeror) or untoward movement in the price of the target’s shares (which is indicative of a leak), an announcement naming the offeror and stating its potential interest may be required by the FSMA. 

Once the target has been approached, the target (remaining at all times subject to the general rules of disclosure and transparency, notably the duty to announce all inside information) needs to be able to justify vis-à-vis the FSMA why keeping this information confidential is in the best interest of the target and is not misleading to the public. In practice, most targets will prefer to keep discussions confidential, and confidentiality agreements between offeror and target are possible.  

Only the FSMA may formally announce a public takeover offer, which it shall do within one business day of receiving notice by offeror of its intention to launch the offer (accompanied by a draft prospectus and proof of certainty of funds to pay the offer price). Once the public announcement is made, the offeror may, as a general rule, not withdraw its offer (exceptions exist in case of a counter-offer or defensive actions by the target company, for example) and the powers of the target’s board of directors are limited. 

However, the FSMA may, whenever it is felt necessary to ensure the proper functioning of the markets, request that a person who could be involved in a takeover offer make an announcement without delay. Furthermore, if a potential offeror has made statements raising questions on the market as to its intentions, the FSMA may require such potential offeror to confirm (within a maximum of ten business days) its intention of launching a takeover offer. If the potential offeror does not confirm within the stated time period its intention to launch an offer, it is prohibited from launching an offer within the next six months. If it does confirm its intention to launch an offer, the bid must be effectively launched within the timeframe set by the FSMA (put up or shut up).  

A voluntary public takeover offer can be subject to merger control clearance (and/or other necessary regulatory approvals) and to certain other conditions precedent agreed by the FSMA. Generally, the permissible conditions are restricted to: 

• achieving a minimum acceptance level; and 
• material adverse change in the target or market. 

A mandatory public takeover offer cannot be made conditional. 

From the time when the offeror gives notice to the FSMA of the offer until the last possible date for the payment of the consideration if the offer is successful, the offeror must have fully committed and “certain” funds to satisfy the cash component of the consideration for the offer. In general terms, any outstanding conditions to draw down on the facilities would need to be within the sole control of the offeror as borrower and not allow discretion to the lender. Such irrevocable and unconditional credit must be granted by a credit institution within the European Economic Area.   

Proof of ‘certain funds’ is to be provided to the FSMA prior to the FSMA announcing the offer.  

In the case of a voluntary takeover bid, the offeror is free to set the price (and in general also the form of consideration) but the terms of the offer, including the price, must be such that the offer can reasonably be expected to succeed.  

In the case of a mandatory takeover bid, an offeror may not make an offer at less than the higher of (a) the highest cash price it has paid over a 12-month period preceding the offer, and (b) the weighted average trading price of the target’s shares during the last 30 calendar days preceding that date of the event having triggered the takeover offer obligation. 

No, all shareholders must be treated equally, so if there are different classes of shares, any differentiation in the price offered may only be based on the objective difference between the characteristics of each class of shares. In addition, certain accommodations can be accepted by the FSMA, e.g., in respect of management, or shareholders committing to reinvest in the target’s capital post-takeover. 

The target cannot be forced to provide information for due diligence. Subject to proper confidentiality agreements being in place, the target can agree to share confidential information with the offeror. Once a target discloses information to one potential offeror, it must disclose the same information to all potential bona fide offerors which may emerge. Also, the target must ensure that it continues to ensure that any inside information is properly disclosed to the market as a whole, e.g. via the prospectus or via a disclosure by the target itself. Thus, the disclosure of confidential information to the offeror will generally be more limited than in the case of a private acquisition. 

There is no prohibition for target companies from agreeing deal protection measures with an offeror.  Confidentiality agreements in respect of confidential information relating to the target and/or offeror (but not the offer itself) and cooperation agreements in respect of how regulatory approvals may be sought are permitted. The same is true for break fee arrangements and exclusivity undertakings, it being understood that the board of directors of the target has the obligation to act only in the interest of the target and to treat all its shareholders equally. 

Under the Law, the target board of directors is under no obligation to engage with a potential offeror or facilitate its offer (such as by providing due diligence information). However, under the Code, the target directors remain subject to their general duties to act in the company’s and shareholders’ best interests and therefore may be in a position where those duties require them to engage to some extent. 

Once the offer is launched, however, the target’s board of directors must prepare a ‘response memorandum’ giving its opinion on the takeover bid: comments on the prospectus, probable consequences for the target (including employment), strategic plans of the offeror, and whether or not the board recommends to the shareholders to accept the offer.  

The Law also restricts the target from taking any actions which may frustrate the potential offer or prevent it being put to shareholders. Certain “poison pills” such as the issuing of new shares, significant changes to assets and liabilities, or the enforcement of change of control are all subject to shareholder consent. 

However, subject to prior shareholder consent (i.e. a decision of the general meeting of shareholders taken with a 75% majority vote and a quorum of 50%), numerous anti-takeover defence mechanisms can still be operative (such as a ‘double voting right’ for shareholders having held voting shares for at least two years, limitations to the dismissal of directors, capital increase, share buy-back, sale of key assets, and limitations on voting rights).  

Any purchase of target shares by the potential offeror is subject (before and during a takeover bid) to the general rules on the disclosure of significant shareholdings.  

In the case of a mandatory takeover bid, any purchases by a potential offeror will set a floor on the minimum consideration which may be offered (see Q10 above). 

Acquiring shares leading the acquirer to hold more than 30% of the target shares will trigger a mandatory offer (subject to limited exceptions). 

Target shareholders may give irrevocable commitments or statements of intent to accept an offer if made or once made. In the case of target directors, these undertakings are limited to acceptance of the offer as a shareholder, and not to taking any action, as a director, to support the offer. 

As noted above and subject to the limitations set out there, it is possible for potential offerors to buy shares in the target during the offer process either on-market, by private agreement or through acquiring an option to do so from the shareholder.  

As of the announcement of the takeover offer, the offeror needs to announce any acquisition of shares to the market within one business day of the acquisition. 

Other shareholders need to continue to comply with the general rules on the disclosure of significant shareholdings.  

D – 1 business day: Announcement by offeror to FSMA of firm intention to make an offer, including draft prospectus and proof of ‘certain funds’ 

D: Announcement by FSMA to market of the bid; FSMA also sends draft prospectus to target 

D+5 business days; board of directors of target to inform FSMA if in its opinion the draft prospectus contains misleading information or omits relevant information 

D+ approximately 20 to 30 business days (“R”); approval by FSMA of prospectus 

R+5 business days: response memorandum by target’s board of directors 

R+ approximately 10 business days (“G”): approval by FSMA of response memorandum (note that In the case of a friendly takeover offer, the FSMA’s review of the draft prospectus and the draft response memorandum will generally take place simultaneously) 

G+1 business day: publication of prospectus and response memorandum 

G+6 business days at the earliest (“A”): start of acceptance period 

A+ two weeks minimum and 10 weeks maximum (“E”): acceptance period 

A+10 business days: hearing of the target’s works council 

E-2 calendar days: deadline for counter-offers or higher offers 

E: end of the offer period 

E+5 business days (“P”): publication by the offeror of the results of the offer 

P+10 business days: payment by offeror of consideration, and, if the offeror has acquired 90% of the voting securities, reopening of the offer for a minimum 5 and maximum 15 business days (the same applies for a squeeze-out if the offeror has acquired 95%). 

The above timetable applies to voluntary takeover offers, but that of mandatory takeover offers and (stand-alone) squeeze-out bids is similar. 

• Offeror prospectus  
• Offeror ‘certain funds’ documentation 
• A fairness opinion in case an offeror, already holding a controlling interest in the target, makes a voluntary takeover offer or a squeeze-out bid 

See Q18 in respect of counter-offers or higher offers 

Not in the case of a mandatory takeover offer. In the case of a voluntary takeover offer, an offeror is entitled to withdraw its offer if one of the few permitted conditions to its offer is not satisfied within the relevant time period.  In practice, it is difficult to invoke the material adverse change condition (if it has even been accepted by the FSMA) in order to withdraw an offer so the only practical ways for an offeror to withdraw its offer is to invoke the acceptance condition (where not enough acceptances have been received by date “E” in Q18 above) or if a regulatory clearance has not been received. 

Any person holding 95% of the voting shares can require that the other shareholders tender their voting shares, via a squeeze-out bid. The process is similar to that of a public takeover offer (but the consideration must be cash and the offeror must obtain a fairness opinion, see Q3 above). 

A squeeze-out can also be done in the framework of a mandatory public takeover offer.  In that case the offer is to be reopened within three months following the date “E” mentioned in Q18 above, and for at least 15 business days, at the same price. Securities not tendered to the offeror are considered automatically acquired by the offeror. 

The same procedure of ‘summarized squeeze-out’ can be followed after a voluntary takeover offer, but only if (in addition to the 95% threshold mentioned above) the offeror received acceptances of the offer for at least 90% of the shares to which the offer relates (i.e., excluding any shares already held by the offeror and persons acting in concert with it). If this condition is not met, a squeeze-out is still possible, but will need to abide by the rules of the first paragraph of this Q22. 

Whenever the offeror has a right to exercise a summarized squeeze-out, the remaining shareholders also have a ‘sell-out’ right to require the offeror to buy their voting securities at the offer price. This sell-out right is exercisable within three months of date “E” in Q18 above. 

Within one year of date “E” in Q18 above, the offeror (including persons acting in concert) may not acquire (directly or indirectly) target shares at more favourable than those of the takeover offer. 

The FSMA will generally not allow a delisting unless a squeeze-out procedure has been followed (there is an exception if the free float represents 0.5% or less, where delisting can be obtained without squeeze-out but subject to shareholder vote and certain additional conditions).