CMS Expert Guide to Public Takeovers in Hungary

Yes, the Hungarian Capital Markets Act (Act CXX of 2001) governs public takeover offers for Hungarian listed companies. 

Public takeover offers. 

Yes, the offeror must engage an investment service provider for the implementation of the public takeover offer.  

A mandatory offer must be launched if the offeror wishes to acquire (i) more than 25% of the voting rights in a Hungarian listed company, provided that no shareholder (other than the offeror) holds more than 10% of the voting rights in such listed company, or (ii) more than 33% of the voting rights in a Hungarian listed company. In determining the extent of an offeror’s voting rights (i.e. the shareholder’s interest), voting rights through both direct and indirect control, any interest held by persons acting in concert and the interest of close relatives are taken into account and aggregated. 

Takeover offers must be made for the acquisition of 100% of the target company’s shares. In practice, offerors usually acquire a majority shareholding in a listed company through a public takeover offer and if, within 3 months following the closing of the takeover offer, their shareholding reaches or exceeds 90% of the shares in the target company, the offeror is able to squeeze-out the minority shareholders (provided that the conditions for a squeeze out as detailed in our answer to question 22 below are met) and acquire 100% of the target company.      

During the negotiation phase, prior to launching a public takeover offer, the parties may maintain confidentiality in respect of a potential offer and delay the disclosure of inside information in accordance with the relevant provisions of the EU Market Abuse Regulation. However, if there is a leak of inside information, a public announcement must be made without delay regarding the potential offer. Once the transaction documents are signed, a public announcement must also be made and the offer must be published stating that it has not yet been approved by the Hungarian National Bank acting as supervising authority (the “Authority”) 

The takeover offer shall be made in advance if the offeror wishes to acquire (i) more than 25% of the voting rights in a Hungarian listed company, provided that no shareholder (other than the offeror) holds more than 10% of the voting rights in such listed company, or (ii) more than 33% of the voting rights in a Hungarian listed company. In this case, the takeover offer shall be launched and submitted to the Authority for approval after the signing of the share sale and purchase agreement with a significant shareholder, if any, and the share sale and purchase agreement cannot be closed until the takeover process is completed. 

If a person acquires an ownership interest in a listed company (i) by any conduct other than the direct acquisition of shares by such person, (ii) by way of exercising a call option or a repurchase option, or through a forward purchase agreement, (iii) within the framework of a regulated procedure conducted by a national asset management body or (iv) as a result of the collaboration of persons acting in concert, the takeover offer shall be made within 15 days following the date on which the Hungarian National Bank is notified of such acquisition. 

Besides the right to withdraw the offer (as detailed in our answer to Question 21 below), mandatory offers may only be subject to any necessary merger clearance. 

Details of the financing of the offer must be attached to the application to the Authority for approval. The financing may be secured by means of: (i) cash deposit; (ii) government securities issued by any Member State of the European Union or the OECD or (ii) a bank guarantee issued by a credit institution established in any Member State of the European Union or the OECD.  

No security is required for shares held by shareholders acting in concert if they submit a statement declaring that they will not accept the takeover offer, and that they will not sell or agree to sell their shares during the bid period and during the following two years. 

Yes. The offer price must be equal to the highest of the below listed amounts: 

• the volume-weighted average price for the 180-day period preceding the date on which the takeover offer was submitted to the Authority for approval, also taking into account certain specific factors; 
• the highest price contracted for the transfer of the target company shares by the offeror and its affiliated persons within the 180-day period preceding the date when the takeover offer was submitted; 
• if available, the volume-weighted average stock market price for the 360-day period preceding the date on which the takeover offer was submitted to the Authority for approval, also taking into account certain specific factors (e.g. transactions that, based on a final and binding ruling or court order, have not been concluded under lawful circumstances must be ignored for the purpose of determining the offer price); 
• the aggregate of the contracted option price and the commission for a call or put option exercised by the offeror and its affiliated persons within the 180-day period preceding the date when the takeover offer was submitted; 
• the aggregate of the contracted option price and the commission for a call or put option fixed in an agreement by the offeror and its affiliated persons concluded within the 180-day period preceding the date when the takeover offer was submitted; 
• the consideration received for exercising the voting rights fixed in an agreement by the offeror and its affiliated persons concluded within the 180-day period preceding the date when the takeover offer was submitted; and 
• the amount of equity capital per share based on the latest audited consolidated annual report of the target company. 

If the securities of the offeror are listed on more than one regulated market, the highest price from the average prices calculated for each regulated market shall be taken into consideration, provided that the official exchange rate published by the Hungarian National Bank on the day of the transaction shall be used when converting to Hungarian forints. 

No. The same offer price must be offered to all shareholders.

The target company’s management is under a general obligation to keep sensitive information confidential; however, it may permit due diligence by the offeror if it deems this to be in the target company’s best interests. In practice, we often see that offerors request the target company to allow it to carry out a limited scope, red flag due diligence exercise and they will not proceed with the transaction and launch a takeover offer based on only publicly available information. If the target company’s management (at the offeror’s request) has provided any information to the offeror concerning the target company’s operations before the publication of the takeover offer, such information must be treated as confidential, in compliance with the regulations on business secrets, securities secrets and insider dealing. 

There are no express rules or established case law relating to deal protection measures that may be implemented by the offeror. Stakebuilding by the offeror in advance of announcing a takeover offer will generally be permissible under takeover law and insider regulations. Irrevocable undertakings of shareholders are generally permissible, but may constitute “acting in concert”. 

The articles of association of a target company may also stipulate that if an offeror acquires at least 75% of the shares of the target company carrying voting rights through a public takeover offer, it is entitled to convene a general meeting of the target company to initiate the amendment of the articles of association and the removal or appointment of a member of the board of directors, the management board or the supervisory board. As compensation, the minority shareholders shall have a put option right pursuant to which they may request the offeror who has acquired 75% of the shares of the target company to purchase their shares within 90 days following the date on which the extraordinary publication on the acquisition of 75% of the shares was made. The purchase price of the shares shall be equal to the offer price or, if the offeror buys shares at a higher price during such 90-dayperiod, at such higher price. 

The board neutrality rule has been implemented in the Hungarian Capital Markets Act stating that the target company’s articles of association may stipulate that the board of directors of the target company may not interfere with or carry out any action which might frustrate the takeover offer during the offer period (e.g. it may not resolve to increase the share capital of the target company or acquire the target company’s own shares) unless the decision is needed to promote the launching of a counteroffer or in order to implement a decision of a general meeting of the target company passed prior to the offer period. 

When a takeover offer is launched, it shall be communicated to the board of directors of the target company and the board shall provide its opinion on such offer prior to the commencement of the acceptance period. The opinion of the board of the target company shall be published at the same place where the operation plan and the business report is available. Upon the receipt of the offer, the board of the target company shall forward the offer to the employee representative bodies of the target company and the opinion of the employee representative bodies shall be attached to the opinion of the board of directors of the target company. 

Subject to certain exceptions, the board of directors of the target company must commission an independent financial expert to assess the takeover offer at the company’s expense. 

The offeror and persons acting in concert (for natural persons, any of their close relatives holding any controlling interest in the target company) and their affiliated companies (collectively: “affiliated persons”) cannot enter into any deal for the transfer, alienation or encumbrance of the shares to which the takeover offer relates between the day of submission of the takeover offer and the last day of the offer period, except in respect of share transfer agreements entered into by those affiliated persons and the offeror under which such persons offer their shares to the offeror. The offeror may acquire these shares under the same terms as the offer. 

As a general rule, the shareholders of the target company shall express their decision on accepting or not accepting the takeover offer during the offer period by tendering an acceptance declaration. In practice, shareholders (typically holding significant shareholdings) may enter into binding commitments (typically a sale and purchase agreement) with the potential offeror, but the closing of such agreement must be carried out within the offer by tendering an acceptance declaration. If a public takeover offer is launched, the shareholders are entitled to sell their shares to the offeror within the takeover procedure and they cannot agree to sell their shares outside the offer process. 

The target company shall arrange for the publication of the not approved and the approved public takeover offer as well as the results of the public takeover offer and the information on the payment of the offer price as an extraordinary disclosure.  

The takeover offer process, from the preparation of the offer document to the end of the acceptance period, lasts approx. 4-6 months depending on the length of the transaction preparation and the acceptance period. Statutory conditions, especially merger control proceedings, may further delay the completion of the process.  

The principal stages of the takeover offer process are set out below: 

D – 90: Negotiating the transaction, due diligence, mandating the investment service provider, preparing the offer document, arranging for security for the offer consideration.  

D: Filing of the offer document with the Authority and sending it to the target company.  

D + 1: Publication of the offer document indicating that it has not yet been approved by the Authority. 

D + 14: Approval of the offer document by the Authority. The decision of the Authority shall be passed within 10 business days following the submission of the takeover offer.  

D + 15: Publication of the approved offer document. 

D + 17: Providing the opinion of the board of directors of the target company regarding the takeover offer. 

D + 18: Commencement of the offer period, i.e. the first day on which the acceptance declarations may be made. 

D + 33: The last day of launching a potential counteroffer. 

D + 48: First possible closing date of the offer period. The offer period shall last at least 30 calendar days and may be at most 65 days. 

D + 50: Notification to the Authority of the results of the public takeover offer and publication of the results. 

D + 52: Settlement of the offer price. The deadline provided for the payment of the offer price is 5 business days following the closing of the acceptance period. 

D + 53: Transfer of the shares, updating the register of shares of the target company. 

In addition, as an optional last step, if the offeror acquires a shareholding reaching or exceeding 90% of the shares of the listed target company, it may squeeze-out / buy-out the minority shareholders within 3 months following the closing of the takeover offer. The details of the squeeze-out / sell-out processes are set out in our answer to question no. 22. 

• Public offer document; 
• Operation plan of the target company; 
• Report on the business activities of the offeror; 
• Mandate agreement with the investment service provider; 
• Joint declaration of the offeror and the investment service provider on the acceptance of liability for the authenticity of the report on the business activities of the offeror; 
• Certificate of the security for the offer consideration; 
• If the takeover offer is launched by persons acting in concert and only one person launches the takeover offer, the agreement between the persons acting in concert on the person of the offeror; 
• If the takeover offer is launched as a result of exercising an option or a repurchase option right or a performance of a forward purchase agreement, the relevant option agreement; 
• Squeeze-out declaration. 

Yes. A counteroffer may be made by another offeror until the 15th day preceding the last day of the acceptance period for which the same rules apply as to the launching of a takeover offer with the following deviations. A counteroffer may be published and approved by the Authority if it contains more favourable conditions for the shareholders than the previously launched offer or counteroffer. A counteroffer qualifies as more favourable if the offer price is higher by at least 5% than the offer price indicated in the original offer, or, if there was an earlier counteroffer, than under the previous counteroffer. If the only difference between the original offer (or the previous counteroffer) and the counteroffer is the offer price, the Authority must decide on the approval of the counteroffer within 3 days. If the counteroffer is approved by the Authority, the original offer or the previous counteroffer ceases to have effect, i.e. they lapse and do not continue alongside with the new counteroffer.  

Yes. The offeror may modify the offer price quoted in the offer upwards until the last day of the acceptance period, provided that the new price is published by the offeror and is higher than the price quoted in the original offer. The new price also applies retroactively to prior acceptances. In addition, the offeror may request one extension of the offer period from the Authority of up to a maximum of 15 calendar days; however, the total, extended acceptance period cannot be longer than 65 days. The offeror must publish the extension before the original time limit expires. 

If the offer contains a statement reserving the right to withdraw the offer if the acquired interest (based on acceptances) is less than 50%, the offeror is entitled to withdraw the takeover offer. 

A dominant shareholder may exercise a squeeze-out right in connection with the target company's remaining shares within 3 months of the closing date of a successful mandatory offer or voluntary offer if it (i) declared its intention to exercise a squeeze-out right in the offer document, (ii) has acquired shares carrying at least 90% of the voting rights in the target company as part of the offer or within three months of the closing date of the successful offer and (iii) demonstrates that it has sufficient funds to cover the purchase of all the outstanding shares (offer security). 

In addition, if the offeror’s control in the target company exceeds shares carrying at least 90% of the voting rights when closing out the offer, the offeror must purchase the remaining shares, if requested to do so by the minority shareholders, within 90 days following the day on which the notice regarding the acquisition of such control was published. The minimum share price payable is calculated in accordance with the squeeze-out price, i.e. it equals to the higher amount out of the offer price or the amount of equity capital per share. Equity means the own funds shown in the last audited annual report provided that if the target company is required to prepare consolidated annual accounts, the consolidated own funds shall be construed as equity. 

No. If the takeover offer is made and there are shareholders who accepted the offer, unless the offeror withdraws from the public takeover offer (as set out in our answer to question no. 21), the offeror must buy all shares for which an acceptance declaration was submitted after the closing of the offer period.  

The decision on the de-listing of the shares in the target company from the Budapest Stock Exchange is a matter for the shareholders of the target company to resolve on a general meeting. The general meeting deciding on the de-listing has a quorum if shareholders holding or representing more than 50% of the shares are present and for the approval  of such decision 75% majority of the votes cast is required. Once the resolution on the de-listing is passed, it shall be filed with the Authority and the Budapest Stock Exchange on the next business day, shall be sent to the registered shareholders within 5 business days and shall also be published on the website of the target company and in one national printed newspaper. The shareholders of the target company who did not vote in favour of the de-listing will have a statutory right to put their shares on the target company within a 60-day period after the publication of the de-listing resolution and if such put option is exercised, the target company must buy those shares. 

If the offeror acquires at least 90% of the shares to which the offer relates and exercises its squeeze-out right in relation to the remaining shares of the target company, it calls the minority shareholders to handover their shares by a specific deadline. If the minority shareholders do not provide their shares to the offeror within the given deadline, the target company can declare such shares invalid, issues new shares in their place to the offeror and isolate the consideration payable for such shares that is due to the minority shareholders. The shares being declared as invalid are automatically de-listed from the Budapest Stock Exchange. 

Following the de-listing of the shares, the target company may be transformed into a private company subject to the passing of a resolution by the shareholders by a majority of 75% of the votes cast. The change of the company form shall be reported to the competent court of registration for registration purposes.