CMS Expert Guide to Public Takeovers in Switzerland

Yes. Switzerland's public takeover law is laid down in the Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (Financial Market Infrastructure Act, "FinMIA"), in the Ordinance on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading of 25 November 2015 (Financial Market Infrastructures Ordinance, "FMIO"), in the Ordinance of the Swiss Financial Market Supervisory Authority on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading of 3 December 2015 (FINMA Financial Market Infrastructure Ordinance, "FinMIO-FINMA") and – in particular – in the Ordinance of the Takeover Board on Public Takeover Offers of 21 August 2008 (Takeover Ordinance, "TOO").  

Public takeovers are overseen by the Swiss Takeover Board ("Takeover Board"). The Takeover Board has issued five circulars, which further detail the rules. The website of the Takeover Board (<<https://www.takeover.ch/>) contains a lot of useful information. 

Swiss takeover law applies to companies incorporated in Switzerland that have their equity securities listed in Switzerland, and companies incorporated abroad that have a main listing of their equity securities in Switzerland.  

Swiss takeover law differentiates mainly between two forms of public takeover offers: Mandatory offers and voluntary offers. A mandatory offer is required if an offeror exceeds the applicable thresholds (see Question 4), and is thus required to make an offer. A voluntary offer is an offer made by the offeror on its own initiative.  

Further relevant differentiating factors are whether an offer is friendly or unfriendly, or whether the consideration is in cash, and/or in shares (exchange offer).  

The offeror must submit its offer to a review body, to be engaged by the offeror, before the offer is published. Review bodies are companies from the private sector, such as securities or audit firms. Apart from that, the parties are legally not obliged to engage specific advisers. Nevertheless, public takeover offers usually involve a large number of advisers, such as lawyers, corporate finance advisers, or providers of fairness opinions.  

Yes. Anyone who directly, indirectly or acting in concert with third parties acquires equity securities which, added to the equity securities already owned, exceed the threshold of 33⅓% of the voting rights of a target company, whether exercisable or not, must make a mandatory offer to acquire all listed equity securities of the company. Target companies may, in their articles of incorporation, raise this threshold to 49% of voting rights (opting-up) or waive the duty to make a mandatory offer at all (opting-out). Introductions of opting ups and opting outs by listed companies are often subject to litigation (as they are deemed unfavourable by minority shareholders). 

The Takeover Board may grant exemptions from the obligation to make an offer in justified cases, in particular: 

• where the transfer of voting rights occurs within a group organised pursuant to an agreement or otherwise. In such a case, only the group as such shall be subject to the duty to make an offer; 
• where the threshold is exceeded as a result of a decrease in the total number of voting rights of the target company; 
• where the threshold is exceeded only temporarily; 
• where the securities have been acquired without consideration or upon exercise of pre-emptive rights pursuant to a share capital increase; or 
• where the securities have been acquired for restructuring purposes. 

As voluntary takeover offers are more flexible – for instance since more conditions are permissible (see Question 8) – takeovers are usually structured as voluntary takeover offers.  

Although not required by law, the offeror usually publishes a pre-announcement, which determines, in particular, the cut-off date for the calculation of the minimum price.  

Subsequently, the offeror must publish the (full) offer prospectus, and the board of directors of the target company must publish its opinion on the public takeover offer, including a potential fairness opinion. 

After a waiting period, the offer period starts. At the end of the offer period, the offeror must publish the interim result and, in particular, declare whether the public takeover offer was successful or not. If the offer was successful, the publication of the interim result is followed by a grace period, during which the shareholders have another opportunity to tender their securities. Thereupon, the offeror publishes the final result and completes the offer (settlement).  

After completion, the offeror may, under certain conditions, squeeze out the remaining shareholders (see Question 22). Ultimately, the shares of the target company are often de-listed (see Question 24). 

Swiss law does not provide for a scheme of arrangement allowing for an acquisition of 100% of the shares of the target company. 

Listed companies in Switzerland must inform the market immediately about price-sensitive facts, unless they are entitled to defer publication. Once a target company becomes aware of an offer it must, as a rule, issue an ad hoc notice. In case of friendly offers, the offeror and the target company will, however, usually enter into confidentiality undertakings, and the publication that an offer shall be made is deferred and only made with the pre-announcement of the offer (or the publication of the (full) offer prospectus). If a target company defers publication accordingly, it must take measures to maintain the secrecy of the price-sensitive facts. 

Mandatory offers must be submitted within two months after the threshold having been exceeded (33⅓% or up to 49% in case the target company's articles provide for an opting-up). The Takeover Board may grant extensions to this deadline for important reasons. 

Upon the pre-announcement (see Question 5), the (full) offer prospectus must be published within six weeks at the latest. 

The extent to which conditions are permissible depends on whether the offer is voluntary or mandatory.  

A mandatory offer cannot be subject to conditions unless there are important reasons. Important reasons exist, for example, if  governmental authorisations are required for the acquisition.  

In the case of voluntary offers, the offer may be made subject to conditions if there is a justified interest. The condition must be comprehensible to an average investor and must not be unfair. Usual conditions are for instance (besides the already mentioned governmental authorisations): 

• Minimum acceptance rate (of e.g. 50% or 66 2/3%); 
• No material adverse change (MAC) clauses (permissible if relating to adverse changes of at least (i) 10% of EBIT/EBITDA, (ii) 10% of equity, or (iii) 5% of sales); 
• No injunction or prohibition due to governmental measures; 
• Resignation of existing and election of new board members; 
• Registration in the share register; 
• No adverse resolutions of the shareholders. 

Yes. The offer prospectus must contain the essential information on the financing of the offer as well as the confirmation of the review body (see Question 3) that the offeror has taken the necessary measures to ensure that the necessary funds are available on the settlement date. Undertakings of banks to finance the proposed transaction, or executed facility agreements, are usually sufficient for the review body to issue its confirmation of financing if firm enough

Yes. Pursuant to the "minimum price rule", the price of the offer must be at least equal to the higher of the following amounts:  

• stock exchange price (60 days VWAP preceding the pre-announcement (or the (full) offer prospectus)); or  
• highest price paid by the offeror for equity securities of the target company in the last twelve months. 

Furthermore, there is a "best price rule". If the offeror acquires shares of the target company at a price higher than the offer price between the publication of the offer and six months after the expiry of the additional acceptance period (see Question 18), it must offer this price to all shareholders. 

The consideration may consist of cash or shares (exchange offer). In the case of a mandatory offer, a cash consideration must always be offered as alternative. 

The offeror must treat all shareholders equally. If there are different share categories or derivatives, differentiations are possible. However, the offeror must ensure that there is an adequate correlation between the considerations offered to such different categories of shareholders or derivative holders. 

The target company is not obliged to provide the offeror access to due diligence information; the target company's board of directors has discretion in this regard. In friendly takeovers, the target company board usually will agree to disclose some information; in hostile takeovers, it generally does not. 

Once the target company has granted an offeror access, it must however provide the same access also to competing offerors (which can force the target company to provide the information accordingly). 

In case of friendly offers, offerors usually seek to conclude a transaction agreement with the target company, pursuant to which the target company supports the offer (subject to a "fiduciary out" in case of a more favourable competing offer). In addition, offerors may enter into agreements with larger shareholders that they will tender their shares (see Question 16).  

The offeror may agree a break fee with the target company in the transaction agreement, at least if structured as compensation for costs and expenses incurred. It has not (yet) been conclusively clarified by the courts whether break fees of a punitive nature, to frustrate another offer, are permissible. It is however unlikely that such break fees would be upheld. 

The directors of the target company have always to act in the target company's best interests. If the target company board of directors is of the view that the offer is not in the target company’s best interests, it may refuse to engage with the offeror and also implement, to a certain extent defensive measures: 

• Defensive measures may be taken prior to the announcement of a takeover offer even if the target company’s board of directors knows that an offer is imminent, provided that such measures do not clearly violate company law. For example, the articles of association may provide for a restriction on the exercise of voting rights, whereby a shareholder may not cast more than a certain percentage of its votes (directly, indirectly or acting in concert with third parties).  
• As of the publication of a takeover offer, the target company must notify the Takeover Board in advance of any defensive measures it intends to implement. Permissible defensive measures are, for example, searching for a so-called "white knight", or launching a media campaign against the offeror. Various defensive measures are however not permissible, unless approved by the shareholders. Art. 36 para. 2 TOO contains an extensive list, including, for instance, sales or purchases of substantial assets, excessive executive compensation, or transactions in own shares of the target company. 

A potential offeror may purchase shares in advance of a takeover offer if it respects the applicable rules governing purchases of shares in listed companies, in particular concerning insider trading.  

Secret stakebuilding is only possible to a very limited extent. Anyone who directly, indirectly or in concert with third parties acquires or disposes of shares or acquisition or sale rights in respect of shares in a company whose shares are listed in Switzerland and thereby reaches, falls below or exceeds the thresholds of 3%, 5%, 10%, 15%, 20%, 25%, 33⅓%, 50% or 66⅔% of the voting rights must notify the company and the stock exchange on which the equity securities are listed. 

Yes. In fact, it is not uncommon that the offeror seeks to agree with larger shareholders of the target company that they will tender their shares ("irrevocables"). Whether such agreements are permissible depends on their specific content. Generally, this is not the case if they completely prevent free competition between the offerors. Thus such agreements are deemed permissible only if the shareholders remain free to accept a more favourable competing offer ("soft irrevocables") 

Shareholders of the target company may also sell shares to the offeror outside the public takeover offer. However, such sales should be structured such that they do not trigger the best price rule (see Question 10). 

Yes. From the publication of the takeover offer until the end of the additional acceptance period (see question 18), (i) all parties to the takeover proceedings, and (ii) all direct or indirect shareholders with more than 3% of the voting rights in the target company (including parties acting in concert with them), must report to the Takeover Board and the disclosure office of the relevant stock exchange (such as the disclosure office of SIX Swiss Exchange ("SIX")) every transaction they have carried out in the shares or equity related derivatives of (a) the target company or (b) the offeror, in case of a share exchange offer. 

A typical timetable for a takeover offer is set out below. The Takeover Board may however grant extensions, and in particular in case of hostile offers or competing offers – which are often subject to takeover litigation – the proceedings can take considerably longer. 

• D: Publication of offer prospectus. Such publication may be preceded by the publication of a pre-announcement (see questions 5 and 7). If a pre-announcement is published, the (full) offer prospectus must be published within 6 weeks. 
• D + 10 trading days: End of cooling-off period / beginning of offer period. 
• D + 15 trading days: Deadline for the target company's board to publish its report (incl. fairness opinion, as the case may be). 
• D + 30/50 trading days: End of offer period. The offer period lasts, as a rule, 20 days, but can be extended to 40 days. In addition, the end of the offer period is also the deadline for publishing a competing offer. 
• D + 31/51 trading days: Publication of provisional interim result. 
• D + 34/54 trading days: Publication of final interim result. If the conditions of the offer are met, waived, or an unconditional offer has been made, a mandatory extension period of ten days for acceptance is triggered. 
• D + 43/63 trading days: End of mandatory extension period. 
• D + 44/64 trading days: Publication of provisional end result. 
• D + 47/67 trading days: Publication of final end result. 
• D + 53/73 trading days: Settlement of offer. 

As a rule, the offeror makes a pre-announcement, even if this is not required by law. The pre-announcement must stipulate the key terms of the offer, which cannot be amended to the prejudice of the recipients of the offer thereafter.  

In any case, the offeror must submit a complete and true offer prospectus so that the shareholders of the target company can make an informed decision on the offer. The offer prospectus is the crucial document, and generally contains information on the persons involved, the financing of the offer, conditions, the plans of the offeror for the target company after completion, as well as a timetable for the entire offer. 

The board of directors of the target company must publish a report to its shareholders in which it comments on the offer (and, as the case may be, provides a recommendation). The report must contain all information that the shareholders need to make an informed decision on the offer, and may – but need not – be accompanied by a fairness opinion.

Generally, competing offers are subject to the same rules as non-competing offers. However, there are a few special rules governing competing offers (see art. 48 et seq. TOO). First of all, the shareholders of the target company must be free to choose either offer, and the target company must treat all competing offerors equally. Also, the overall duration of the proceedings should not be unduly protracted as a result of competing offers. The Takeover Board may thus tighten the applicable time limits.  

A published offer may only be amended if the amendments are overall in favour of the recipients of the offer (e.g. increase of the offer price, or deletion of conditions). 

Yes, there are two possibilities.  

• an offeror who holds more than 98% of the voting rights of the target company on expiry of the offer period may, within three months, ask the court to cancel the outstanding equity securities, thereby excluding the minority shareholders from the target company against payment of the offer price (stock exchange law squeeze-out); 
• if the offeror has acquired 90% or more of the voting rights of the target company (but less than 98%), it may consider a squeeze-out merger. Through a squeeze-out merger, the offeror can force the remaining minority shareholders out of the target company against payment of an adequate cash consideration. In practice, the cash consideration is generally equal to the offer price. 

After expiry of the offer period, the offeror must declare in an interim report whether the public takeover offer was successful or not. If it was not successful, in particular because the minimum acceptance condition was not fulfilled, the offeror may withdraw from the public takeover offer and the takeover offer will be terminated.  

Swiss law does not provide for specific rules restricting an unsuccessful offeror from submitting another offer for the target company for any period. 

A resolution of a general meeting of shareholders of the target company is required for a de-listing of the target company’s shares, which must be passed by at least 2/3 of the votes represented and a majority in nominal value of the shares represented at the general meeting.  

Furthermore, the de-listing must comply with the rules of the relevant stock exchange. By far the most important Swiss stock exchange is SIX.  

The SIX will not question the de-listing application of a company (if the relevant resolution has been duly passed) but mainly decides on the time of announcement, and the last trading day of the shares to be de-listed. In doing so, it takes into account the interests of the investors and the issuer as well as the principle of fair and orderly trading. Between the announcement of the de-listing and the actual de-listing the shares will be trading at least for another three months.