Amendment to the Spanish takeover bid regime

July 2014 | EXPERT BRIEFING | MERGERS & ACQUISITIONS

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Spain’s mandatory takeover bid exemption for rescue operations was amended in March. Whoever acquires control of a listed company due to a conversion of debt into shares directly attributable to a court-sanctioned refinancing agreement will not have to launch a mandatory bid. This exemption will apply automatically without the need for an evaluation of the Spanish Securities and Exchange Commission (CNMV).

Mandatory bids and exemptions to the obligation to launch an offer

Obligation to launch a bid

In accordance with Directive 2004/25 of 21 April 2004, on takeover bids, Spanish regulation provides that a person acquiring control of a listed company should make an offer to the holders of all remaining voting securities.

Control is deemed to exist for the purposes of a takeover bid when: (i) 30 percent of the voting rights of a listed company is acquired directly or indirectly, individually or acting in concert; or (ii) where a lower percentage of voting rights is acquired but the offeror appoints a majority of the board members within 24 months from the acquisition date. There are also special rules for those who, as of 13 August 2007, directly or indirectly hold an interest of 30 percent or more, but less than 50 percent, of the voting rights of the listed company.

The mandatory bid must be launched at an equitable price. The price must be at least equal to the highest price paid or agreed by the offeror or whoever acts in concert with the offeror for the same securities in the 12 months before the takeover bid is announced. Where there has been no prior acquisition of shares, the equitable price must be at least equal to the price calculated under the valuation rules established in article 10 of Royal Decree 1066/2007, of 27 July (ToB Royal Decree).

There are exemptions to this mandatory bid rule: the most important are the exemption for rescue operations (analysed in this article), the voluntary bid exemption and the merger exemption.

The voluntary bid exemption

When control is acquired after launching a total voluntary bid, no mandatory bid will be required if: (i) the voluntary offer was made at an equitable price; or (ii) the voluntary offer was accepted by holders of securities representing at least 50 percent of the voting rights to which it was addressed, excluding any securities that were already held by the offeror or that correspond to any shareholders with whom the offeror has entered into an agreement relating to the bid (e.g., an irrevocable undertaking).

The merger exemption

If a person, individually or acting in concert with other parties, acquires control as a result of a merger, that person is not required to launch a mandatory offer if: (i) the person (and the parties acting in concert, if any) did not vote in favour of the merger at the relevant shareholders general meeting; and (ii) it can be shown that the main reason for the merger was not to acquire control, but there was an industrial or business objective.

Exemption for rescue operations and its recent amendment

On request, the CNMV may determine there is no obligation to launch a bid after acquiring control of a listed company due to “conversion or capitalisation of loans into shares of listed companies whose financial viability is in serious and imminent danger, even if it is not the subject of bankruptcy, provided that the transactions are intended to guarantee the company’s long-term recovery”.

This exemption applies in transactions for the exchange or conversion of loans for or into shares aimed at mitigating the debt of a listed company by converting the debt against the company into equity. In its communication published on 22 January 2014, the CNMV recalled that this exemption does not automatically apply when the company concerned undergoes financial difficulties, but an express resolution of the CNMV must exist after proving that the transaction seeks to guarantee the company’s long-term financial viability. The CNMV will grant this resolution, where appropriate, within 15 days from submitting the request.

On 7 March 2014, the Spanish government approved Royal Decree-Law 4/2014 on urgent debt refinancing and restructuring measures (RDL 4/2014) that, when amending the court approval of refinancing agreements, modifies the takeover bid exemption for rescue operations.

The new feature introduced by RDL 2/2014 is that when the conversion or capitalisation of debts into shares is directly attributable to a court-sanctioned refinancing agreement that has been the subject of a favourable report by an independent expert, the rescue operations exemption applies automatically without the need for a CNMV evaluation. Two conditions are required. First is a court sanction of the refinancing agreement. In this respect, RDL 4/2014 introduces an important change when it indicates that a refinancing agreement can be sanctioned if it has been approved by 51 percent of the ‘financial debt held by creditors’. This expression includes creditors holding any kind of financial debt, regardless of whether they are subject to financial supervision. The Spanish Insolvency Act previously required approval of 55 percent of the ‘debt held by financial institutions’.

The second condition is a favourable report relating to the refinancing agreement from an independent expert appointed by the commercial registry where the listed company has its registered office.

Coro Fdez-Rañada is a senior associate at Cuatrecasas, Gonçalves Pereira. Ms Fdez-Rañada can be contacted on 34915247146 or by email: coro.ranada@cuatrecasas.com.

Coro Fdez-Rañada

Cuatrecasas, Gonçalves Pereira