New Regulatory Framework: Impact On Public Offers

Author:Mr Alexander Vogel, Andrea Sieber and Christoph Heiz

Market trends

Private M&A transactions are primarily governed by the Code of Obligations, and, to the extent that acquisition structures include mergers, demergers, asset transfers or bulk sales transactions, by the Merger Act, which provides detailed rules for each of these procedures. Acquisitions of interests in listed companies are further governed by the Act on Stock Exchanges and Securities Trading, which contains the applicable rules for both friendly and hostile public offers.

In addition, the Antitrust Statute must be taken into consideration if the turnover of each of the parties involved in the transaction is significant – that is, if:

at least two of the involved parties had a turnover of more than SFr100 million ($110 million) in the preceding business year on a standalone basis; or the parties had a combined turnover in Switzerland of more than SFr500 million (or exceeding SFr2 billion globally). The statute establishes a preventative merger control procedure led by the Merger Control Commission for transactions which exceed certain minimal thresholds.

To the extent that an acquisition is financed by the issuance of securities or the transaction structure otherwise provides for additional securities to be issued, the relevant provisions of the code must be complied with. If the issuer is listed on a Swiss stock exchange, the listing rules of the stock exchange also apply.

The sharp decline in M&A transactions experienced in 2008 and 2009 was arrested in the first two quarters of 2010, although deal volumes still dropped considerably. The third and fourth quarters brightened up the picture significantly and showed clear signs of an improvement in market confidence. This trend was underpinned by a relatively strong fourth quarter.

The reversal of the negative trend which characterised the two previous years can be interpreted as a sign of a slow recovery of the markets and reflects, on the one side, the increased confidence among industrial buyers in their own projections and those of their targets as well as in the stability of the economy as a whole, while on the other side, the (perceived) improved availability of financing even for large acquisitions. This factor has also prompted financial buyers to play a more active role in the marketplace.

With regard to cross-border transactions, the further strengthening of the Swiss franc continues to make acquisitions expensive for foreign entities, while Switzerland-based companies that are heavily dependent on exports and thus more exposed to a strong Swiss franc are increasingly looking to expand their sourcing and/or production bases to countries in the Eurozone or to US dollar-dominated areas in Asia. Even though the strong Swiss franc is likely to take a toll on the export-oriented segments of the Swiss economy, the solid domestic demand is expected to mitigate such negative impact and thus sustain the positive trend in M&A activity within Switzerland, although the levels experienced before the crisis still seem to be far out of reach.

Public takeovers

Specific regulations

Public tender offers on issuers listed on an exchange in Switzerland are governed by the Act on Stock Exchanges and Securities Trading. In certain instances – mainly in the case of a listed issuer spin-off of a non-listed company – an offer on the latter's shares is nevertheless subject to the provisions of that act (eg, the Hammer Retex transaction in 2009 or the earlier Eichhof or Mövenpick/Clair Finanz Holding transactions).

Conversely, pure merger transactions are subject not to the Act on Stock Exchanges and Securities Trading, but rather to the Merger Act.

An exception applies if, before the effective date of the merger, one of the merging companies acquires a controlling stake in the other merging company, thereby triggering the obligation to submit a public offer according to the Act on Stock Exchanges and Securities Trading.

However, in that case the Takeover Board – while requesting compliance of the merger documentation and to the...

To continue reading