Public mergers and acquisitions in Austria: overview
A Q&A guide to public mergers and acquisitions law in Austria.
The country-specific Q&A looks at current market activity; the regulation of recommended and hostile bids; pre-bid formalities, including due diligence, stakebuilding and agreements; procedures for announcing and making an offer (including documentation and mandatory offers); consideration; post-bid considerations (including squeeze-out and de-listing procedures); defending hostile bids; tax issues; other regulatory requirements and restrictions; as well as any proposals for reform.
To compare answers across multiple jurisdictions, visit the Country Q&A tool. This Q&A is part of the global guide to mergers and acquisitions law. For a full list of jurisdictional Q&As visit www.practicallaw.com/acquisitions-guide.
Public M&A activity returned to average levels in 2015 and the first half of 2016, after substantial public M&A activity in 2014.
During Q1 through Q3 of 2016 the following four public offers were launched for Vienna Stock Exchange (VSE) listed companies:
- Vienna International Airport (Flughafen Wien AG). Airports Group Europe, an indirect subsidiary of Australian IFM Global Infrastructure Fund, which owned 29.9% in VSE listed Vienna International Airport pre-offer, launched a partial offer for an additional 10% with an offer term ending on 28 April 2016 and a total offer volume of EUR210 million. Although the 30% public takeover offer (PTO) threshold was triggered by the partial bid, no mandatory offer had to be launched, since Vienna International Airport already has a controlling syndicate with a total controlling majority exceeding 40%. At the end of the offer period, the bidder had increased its participation by 8.26% and now holds 38.16% in Vienna International Airport.
- C-Quadrat. Cubic (London) Limited, owned by SG and TR Private Foundations, who together were already 36% core-shareholders of the VSE listed asset manager C-Quadrat, acquired a 25.1% share from German Talanx at the same time as launching a full offer. Subject to regulatory clearances, the two-step transaction is aimed at a delisting of C-Quadrat. On completion of step one of the transaction in June 2016, the core shareholders and Cubic held over 64 % in the target.
- Frauenthal Holding. On 10 August 2016, Ventana Holding launched a low ball mandatory offer to the free float shareholders of the mid-market industrial company Frauenthal with a total offer volume of around EUR17 million.
- WP-AG. Cross Industries launched a voluntary offer for the remaining tiny free float of small cap WP AG. The offer related to 0.28% of the target. At the end of the offer period, 0.12% of the target shares were tendered.
In 2015 the Austrian public M&A market saw five public offers, with a total offer volume of EUR1.7 billion, primarily driven by takeover activity in listed Austrian real estate companies. The five public offers launched were as follows:
- Conwert and Eco Business. Deutsche Wohnen launched parallel voluntary offers aimed at control on VSE listed Conwert Immobilien AG and Eco-Business with offer terms ending on 15 April 2015 and 24 April 2015, respectively. The total offer volume was EUR1.2 billion. The public bids failed because the 50% mandatory law acceptance threshold was not met. Subsequently core-shareholder Haselsteiner Group sold its 24.7% stake to Israeli investor Tedi Sagi.
- MIBA. Controlling shareholder M-AG, holding 83.14% of listed industrial group MIBA launched a partial offer for preference shares corresponding to 9.33% of the share capital of MIBA. The purpose of the offer with a total offer volume of about EUR68 million was to allow an intended squeeze-out and privatisation of MIBA. On completion of the initial acceptance period on 20 August 2015 the acceptance quota was 3.1% of the free float allowing M-AG to raise its shareholding in MIBA to 86.23% and thus a controlling participation of 93.26% taking into account treasury shares of 7.54% of share capital. During September 2015 M-AG increased the offer price from EUR550 to EUR565 to achieve an even higher acceptance quota during the additional statutory tender period until 26 November 2015. Ultimately, the bidder held 89.81% of the share capital in the target and allowing for treasury shares a total of 97.13%. This allowed a squeeze-out of the remaining minorites leading to a delisting of MIBA.
- Immofinanz. CA Immo, with the backing of its core shareholder Russian 01 Group, launched a voluntary partial offer for a maximum 13.5% of Immofinanz. During the offer term which ended on 15 April 2016, the offerors achieved an increase in their shareholding in Immofinanz of 3.33%, raising the participation in Immofinanz to 6.12% voting shares taking into account treasury shares. Immofinanz considered but failed to launch a reverse voluntary partial offer for up to 29% on CA Immo. However, as part of the defence measures applied in the battle between the two real estate companies, Immofinanz lowered the mandatory offer threshold from the statutory 30% to 15% and in BUWOG, an Immofinanz group company to 20%, while CA Immo increased the majority required to remove supervisory board members to 75%.
- S Immo. Mid-market real estate company S Immo launched a partial offer for 705.882 outstanding S Immo participation certificates with a paper and cash offer and a total offer value of EUR60 million. On expiration of the offer period on 2 April 2015, 475.769 participation certificates were tendered.
In 2015/16 the Takeover Commission (ATC) (Übernahmekommission) issued a number of rulings, covering issues like parties acting in concert, syndicate agreements, creeping-in, and minimum price warranty.
Vienna International Airport (Ruling by the ATC of 10 May 2016). The two controlling shareholders of Vienna International Airport, City of Vienna and the Province of Lower Austria, which together hold over 40% in VSE listed Vienna International Airport requested a ruling that the acquisition by Vienna International Airport of 2% or more of treasury shares under an authorisation by the shareholders meeting would not trigger a mandatory offer for the two syndicated controlling shareholders. The ATC held that the creeping rules apply to the acquisition of an additional 2% in the target company by the shareholder or a syndicate of shareholders holding a participation in the target ranging from 30% to 50%. The controlling shareholders were concerned that an acquisition by the company of treasury shares would be attributed to them and fall under the creeping rules. The ATC held that the creeping rules did not apply to the acquisition by the company of treasury shares. The application of the creeping rules required the acquisition of shares which carried voting rights, yet under the mandatory law treasury shares were non-voting. The acquisition of treasury shares did not increase but instead decreased the number of voting shares in the target.
Pankl Racing (Ruling by the ATC of 22 March 2016. In a rare prohibition ruling, the ATC held that Pierer Industries was prohibited from publishing an exchange offer under which Pierer Industries wanted to offer Cross Industries shares. The reason was differences between the bidder and the ATC as to the valuation of the shares offered for the purposes of the nine months price warranty which secures equal treatment of the bidder. The ATC explicitly did not question the choice and the amount of the consideration, in which the bidder is free under the rules on voluntary offers. The deficiency in the draft offer document submitted to the ATC for review which led to the prohibition was the bidder´s refusal to state an explicit value of the consideration: rather the bidder had insisted on including a particular calculation method of the value in the offer document. In the ruling, the ATC held that if the bidder wanted to include a value for the purposes of the payment warranty, such reference had to be to the price per share quoted at the stock exchange at the time of the publication of the offer document under the wording and purpose of section 16 and 17 of the Austrian Takeover Act (TA). A reference to the calculation of the volume-based average calculated from the date of the announcement of the bid, which the bidder insisted on including, was not compliant resulting in the ATC´s prohibition of the publication of the offer.
Conwert (Press Release by the ATC of 18 March 2016). In March 2016 the ATC announced that it had commenced an investigation into whether or not a mandatory offer had been made which would have been legally required to be launched by Adler Real Estate, Mr Cevdet Caner and Petrus Advisers LLP and possibly others. This related in particular to possible arrangements in connection with a transaction in 2015 and in the period before the extraordinary shareholders meeting of Conwert Immeobilen Invest SE of 17 March 2016. On the request of the Vienna Commercial Court, where invalidation proceedings on resolutions adopted at the 5 May 2015 shareholders meeting of Conwert were pending, the ATC decided whether certain shareholders of Conwert had in fact been acting in concert. The ATC ruled they had not. The ruling of the ATC, adopted after evidence proceedings, was required in the context of whether a shareholder notification obligation under the Stock Exchange Act, which refers to a provision in the TA, had been violated. By a decision of the Austrian Supreme Court on 9 September 2015, the ruling of the ATC was upheld on appeal.
Bene AG (Ruling by the ATC of 27 May 2015). The ATC held that the restructuring exemption relating to distressed listed companies applied (section 25/1/2 ATA). This allowed the investors grosso holding, GmbH and Bartenstein Holding GmbH, to take control of the VSE listed mid-market furniture company BENE AG without triggering a mandatory tender offer. The ATC confirmed that the following legal requirements were met:
There was a "restructuring need", due to the distressed situation at the target given the target´s negative equity, operational losses, financial outlook and share price development.
The bidder had a "viable restructuring plan".
The restructuring plan required the consent of the financing banks to a significant hair-cut and to a substantial dilution of the Bene private foundation's controlling stake. The restructuring measures involved a massive capital reduction at the listed target with subsequent cash capital increase allowing the two investor companies to acquire more than 90% of the target post completion of the restructuring allowing a subsequent squeeze-out of the free float and taking private of the target.
Hirsch Servo AG (Ruling by the ATC of 6 May 2015). The ATC held that the suspension of the voting right of Herz Beteiligung GmbH (Herz) and the parties acting in concert with regard to the listed mid-market industrial company Hirsch Servo AG had ended on 6 May 2015. This ruling put an end to the saga, initiated by the failed acquisition attempt of a foreign investor and followed by an acquisition by another investor that triggered a mandatory offer on the listed Hirsch Servo AG which was published on 14 May 2014. On 3 December 2014 the ATC held that the price of the mandatory offer had been non-compliant with the minimum price requirements resulting in a suspension of the voting rights of the now controlling shareholder Herz et al. Subsequently, Herz committed to and made an additional payment of the difference between the offer price and the statutory minimum price of the earlier mandatory offer plus 4% per annum of interest, allowing the ATC to lift the suspension of voting rights.
Andritz AG (Ruling by the ATC of 20 March 2015). On 1 October 2014, the ATC commenced an investigation to determine whether or not a mandatory offer had been made, which was legally required to be launched by Cerberus, Certus, Custos and Wolfgang Leitner, the then controlling shareholder group, and additional shareholders following a restructuring of the participation of the controlling shareholder. Under the ruling of 20 March 2015, the ATC held that the statutory requirements to launch a mandatory offer had not been triggered. The ATC also lifted the suspension of the voting rights as to all shares between 26% and 10% in VSE listed Andritz AG, which had applied to Custos, until 30 June 2018 with various exceptions, including shareholders meetings on capital increases with the exclusion of voting rights, capital increases with in kind contributions by Custos et al, and corporate reorganisations, in particular mergers and demergers resulting in asset transfers to Custos et al. However, Custos et al could vote on the election of independent members of the supervisory board. The 20 March 2015 ruling was based on an analysis of a complex corporate restructuring in the context of the 2014 termination of a share lending arrangement which had been in place from 2004 followed by a 2014 demerger under which part of the shareholding of the previous controlling shareholder was granted to newly set up private foundations against a participation right.
A public offer, whether voluntary or mandatory or a voluntary bid aimed at control, is the most direct and common way to obtain control of a public company (see Question 16).
In 2000, before the 2006 revision of the TA, the ATC issued a landmark ruling on schemes of arrangements in the HypoVereinsbank and Bank Austria merger (ATC 12.09.2000 GZ 2000/1/4-171). The ATC applied a controlling shareholder test, holding that the TA only applies if the shareholders of the listed target face a new controlling shareholder on completion of the transaction. While this decision narrows the application of the TA to schemes of arrangements, the ATC also held that it will consider applying the TA if the equal treatment of the target's shareholders is an issue.
In certain cases, public offers under the TA can be avoided despite the change of control in the Austrian target, particularly if they are structured as cross-border reverse takeovers (for example, the Partygaming/bwin takeover in 2011 (see Question 1), which resulted in the de-listing of formerly VSE-traded bwin as a result of being merged into LSE traded Partygaming in a cross border merger.
Hostile bids are permitted. However, they are not as common as in some other jurisdictions due to the:
Two-tier board structure of Austrian stock corporations (Aktiengesellschaft) (AG); that is, an AG must have a management board (Vorstand) and a supervisory board.
Limited number of publicly held shares (free float).
Ability of companies to resist hostile bids (see Question 23).
Regulation and regulatory bodies
The Takeover Act (TA)
Public bids are regulated by the TA, as amended by the 2006 Takeover Amendment Act (ATA). The TA applies to AGs with their registered office in Austria and their shares admitted to trading on the VSE in a regulated market.
The ATC has jurisdiction to determine whether there is an obligation to launch a bid, whether exemptions from an obligation to launch a mandatory bid apply and defensive measures (among others) if:
The AG has its registered office in Austria.
The AG's shares are not admitted to trading on the VSE, but are admitted in a regulated market in another EU member state.
A public bid is launched.
The TA provisions on the content of the tender offer and the procedural rules apply if a public company has no registered office in Austria and its shares are admitted to trading on the VSE, but not in a regulated market of the country in which the AG has its registered office (if shares are admitted to trading on a different exchange within the EU, in case the first admission of trading was the VSE).
Other legislation relevant to public bids includes:
The Stock Corporation Act (SCA) with respect to equal treatment of shareholders and directors' statutory duties, among other things. The SCA applies to AGs incorporated in Austria no matter whether the AG is a public or a private company (admission to trading is therefore irrelevant).
The Stock Exchange Act 1989 (Börsegesetz) (SEA) with respect to stake building, ad hoc duty of disclosure and insider trading, among other things. The SEA only applies to public companies admitted to trading on the VSE. It is irrelevant whether the company is incorporated in or outside of Austria.
The Law on Exclusion of Shareholders 2006 (Gesellschafterausschlussgesetz) (Shareholder Exclusion Act), which regulates the squeeze-out of up to 10% of the remaining shareholders in an AG or a company with limited liability in Austria (a GmbH).
The Cartel Act 2005 (Kartellgesetz) (CA), which applies to mergers not subject to EU merger control. The applicability of the CA focuses only on the turnover generated in Austria. It is irrelevant whether the company is incorporated or admitted to trading in or outside Austria.
Foreign Trade Act (Außenwirtschaftsgesetz), as amended in December 2011 and last amended in early 2013 (Foreign Trade Act), under which the advance approval of the Austrian Minister of Economic Affairs is required for all acquisitions by foreign investors (that is, investors domiciled outside of the European Economic Area (EEA) and Switzerland) with an interest of 25% or more, or a controlling interest in an Austrian enterprise engaged in specific protected industry sectors (such as defence equipment, energy and telecoms).
Regulatory control provisions in certain sectors such as in the banking, insurance, utilities, gambling, telecommunications and aviation industries. The scope of applicability is regulated differently in the various industries. The admission to trading (either in or outside Austria) is irrelevant.
For a recommended bid, the bidder carries out due diligence using publicly available information and then asks the target for further information before proceeding with the bid. Due diligence can be extensive in takeovers of private companies, but is usually more limited when the target is listed. This is because the target's management board must carefully balance the need to disclose information to the bidder against more extensive legal and contractual secrecy obligations, and its fiduciary duties to its shareholders. The target's boards must remain neutral and objective in relation to competing bidders (see Question 23), requiring them to provide the same information to all bidders or potential bidders acting in good faith.
For a hostile bid, the bidder is limited to obtaining publicly available information, as the target does not have to disclose unpublished information to the bidder.
Certain information is recorded in a computerised public company register (Firmenbuch), and basic corporate documentation, the annual accounts and auditor reports are accessible at the district courts of first instance (Landesgerichte) with substantive jurisdiction on commercial matters.
Information on company assets, including real estate, patents and trademarks, can also be obtained from the relevant public registers.
It is difficult to access shareholder information on a stock corporation, as company law allows nominee shareholdings and does not require them to be disclosed, other than in limited circumstances such as during litigation.
Since August 2011, stock corporations can generally only acquire registered shares (Namensaktien). However, listed companies are exempted from this requirement.
Secrecy must be maintained until a bid is announced (section 5, The Takeover Act). This prevents information leaks and distortion of the market, which can cause a mandatory bid and the abuse of insider information. The bidder must notify all persons involved in the bid of their secrecy obligations and the prohibition of the abuse of insider information.
If the bidder has negotiated with the target before making a bid, the target's management board (and, if involved, the target's supervisory board) must also maintain secrecy before the bid is announced.
If secrecy is not maintained before the bid is announced, the bid is prohibited and the bidder must notify the ATC of sales and purchases of shares and share options in the target by the bidder (alone or in concert).
Agreements with shareholders
Before a public offer, there are no restrictions on a bidder seeking irrevocable undertakings from the target's shareholders to accept its offer for their shares. However, shareholders may be reluctant to give an irrevocable offer if a higher competing bid is made.
A shareholder can revoke his acceptance if a higher competing bid is made (section 17, TA).
To increase its chances of success, a bidder can take an initial stake in the target. However, the following factors must be considered.
Before announcement of the bid
To increase its chances of success, a bidder can take an initial stake in the target. If the bidder exceeds certain thresholds in stakebuilding, it must disclose its shareholding (see below).
A key question is whether building a stake will breach insider dealing rules. A bidder must comply with:
The general rules on insider dealing (SEA). If and when due diligence enquiries with the target are started, the bidder is considered an insider, and if it acquires target shares in the market it commits an offence under the insider dealing rules.
Compliance rules in the Banking Act (BGBl 1993/532, as amended).
The notification and disclosure requirements of the stock exchange, the target and the Financial Market Authority (FMA).
Generally, shareholder approval is not required to transfer shares in listed companies, unless the articles of association (articles) state otherwise.
If the bidder acquires directly or indirectly, listed target shares so that its voting rights reach, exceed or fall below 4%, 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 75% or 90%, the shareholding must be notified to the FMA, the Stock Exchange and the target (section 91, SEA). The target's articles may provide for a percentage as low as 3% or higher percentages triggering disclosure. The implementation of Directive 2004/109/EC on transparency requirements for securities admitted to trading on a regulated market and amending Directive 2001/34/EC (Transparency Directive), among other things, into the SEA in mid-2007, led to shortened publication and disclosure terms and extended the disclosure requirements to various derivative transactions.
The disclosure obligations applicable to shareholders generally also apply to (direct or indirect) holders of certain financial instruments that entitle the holder to acquire existing shares to which voting rights are attached (section 91a, SEA).
There is a separate disclosure requirement under the ATA, if a bidder exceeds 26% of the target it must notify the ATC.
New rules on tightened disclosure requirements for significant holdings in listed companies were introduced under a 2012 amendment of the Austrian Stock Exchange Act (ASEA). They took effect as of 1 January 2013.
The broader definition of "financial instruments" under section 91a of the ASEA now includes instruments that do not grant an enforceable right to acquire voting shares but makes the acquisition of voting stock economically possible.
In addition to penalties, the new rules provide for a temporary suspension of the voting rights of the shares affected by non-disclosure until one month after the date of disclosure.
The Austrian rules on non-compliance with disclosure obligations are different from Germany as they do not provide for a suspension of dividend rights.
In 2015, the Transparency Directive was implemented into, among other things, the ASEA. The changes closed prior existing gaps on the reporting of derivatives by enlarging the instruments covered and by broadening the aggregation rules. The sanctions that the Financial Market Authority can impose for violations of disclosure obligations relating to holdings have been toughened. For example, breaches of the disclosure rules can result in:
Fines of up to EUR2 million or double the benefit of the breach (for natural persons).
Fines of up to EUR10 million, or 5% of the annual net revenue (for legal persons).
As of June 2016 the disclosure rules applying to directors' dealings were changed as required by the Directive 2003/6/EC on insider dealing and market manipulation (market abuse) (Market Abuse Directive). The changes include:
Shortening of the notification period to three business days.
The addition of participation in bonds and pledging of shares in the category of relevant transactions.
A new requirement to provide a list of closely associated persons to the issuer.
Tougher fines that can be imposed: of up to EUR500,000 for individuals and EUR1 million for the issuer. Violation of insider dealing and market manipulation rules carries even higher fines for both individuals and companies.
Acting in concert
The bidder's obligations extend to all parties acting in concert with him; in relation to acquiring voting shares or the exercise of voting rights (see Question 16).
Finally, stakebuilders must observe the trigger thresholds for mandatory offers, including:
The 30% threshold (see Question 16).
The "creeping-in" rules between 30% and 50%, which relate to the acquisition of 2% or more in a target during 12-month intervals.
Agreements in recommended bids
It is not common for the bidder and target to enter into a merger agreement (even in recommended bids). This is because restructuring an AG to implement certain takeovers requires shareholder support (by shareholder resolution). The target's board must refrain from all actions, which could impair the free and informed decision of the shareholders and which could prevent the success of an offer (section 12/1, TA), although a search by the board for a white knight is allowed. An agreement by the boards not to solicit or recommend other offers would violate the board's neutrality obligation under the TA.
Break fees are not common because:
The payment of a break fee must be disclosed.
The target could be deemed to be giving unlawful financial assistance for the purchase of shares in itself.
If a break fee is paid, the target pays an agreed amount to the bidder if specified events delay or prevent a successful public bid.
The bidder must appoint an independent expert to certify that the bidder can finance the intended public offer. The expert's certification and report must be submitted to the ATC before it decides whether the offer can proceed (see Question 12, Preparing and auditing the bid).
Announcing and making the offer
Making the bid public
Announcement of the intention to make a bid
The bidder must immediately inform the public and the target of its intention to make a bid if (section 5(3),TA):
Its management and supervisory boards have passed a resolution to make a bid.
Circumstances arise that trigger the obligation to make a mandatory bid (see Question 16).
At an earlier stage, if there is:
a significant shift in the target's share price or there is speculation in the market of a potential offer by the bidder; and
reasonable grounds for concluding that either of these factors results from a bid being prepared, the bidder's intention to make a bid or the bidder purchasing shares.
The target faces similar obligations if it is given confidential information in a recommended bid (section 6(2), TA).
The announcement must be made either:
By publication in a daily newspaper or information leaflet.
Through an accessible electronic medium used throughout Austria (section 11(1), TA and section 78, SEA). The announcements must also be published on the bidder's and target's websites (section 11(1a), TA).
The bidder and the target must each notify its respective works council (which are made up of employee representatives) (section 11(3), TA).
At the bidder's request, the ATC can suspend the requirement to make an announcement for a short period if this will help prevent damage to the bidder (or parties acting in concert with it) (section 5(4), TA).
No details of the intended offer (particularly the offer price) must be published with the announcement.
Restrictions on further dealings
When an intention to make a bid has been announced, the bidder (and parties acting in concert with it):
Cannot sell target shares.
Must improve the conditions of the entire public offer if they acquire target shares on more favourable terms outside the public offer during the offer period (section 16, TA). Under the post-offer improvement mechanism, the bidder must make a payment to the shareholders who accepted the public offer (section 16(7), TA). This payment must correspond to the difference between the share price received in the offer and per share consideration paid nine months after the completion of the public offer.
Must notify the ATC of any purchase and sale of target shares and share options. This duty also applies to the target's board (including group companies as well as advisers and shareholders).
Preparing and auditing the bid
After the offer has been announced, the bidder (and the target in a recommended offer) starts to work on the offer document, which must contain the bidder's formal contractual offer to the target's shareholders.
The bidder must also appoint a qualified independent expert (an auditor or bank) to (section 9, TA):
Report on the offer document, confirming its completeness and compliance with the law.
Certify that the bidder has sufficient means to finance the offer.
The expert's report is filed with the ATC and the certification must be included in the offer document.
Notification of the bid
The bidder must submit notification of its bid, together with the offer document, to the ATC within ten trading days of announcing its intention to make a bid. The ATC can extend this period to up to 40 trading days at the bidder's request.
If notification is not submitted within the deadline, the bidder is prohibited from making another bid for the target for one year, starting 40 trading days from the announcement.
For mandatory bids, the notification period is 20 trading days, which cannot be extended.
A foreign bidder must have its notification submitted by a bank, accountant or lawyer domiciled in Austria.
Publishing the offer document
On receipt of the offer document, the ATC has up to 15 trading days to either:
Prohibit the publication of the offer if the legal requirements are not met and require new bid documents.
Request additional information or amendments to the documents.
Approve the offer document by allowing this period to pass. In this case, the bidder is allowed to publish the offer document.
The bidder must publish the offer document not earlier than 12 to 15 trading days after notifying the ATC, unless the ATC has prohibited the publication of the bid. A copy of the offer document must be sent to the target before it is published.
The ATC can postpone the publication of the offer document or, following agreement with the bidder, shorten the period in which it must be published.
Publishing the offer document triggers the offer period. The offer period must be set at a minimum of two weeks and a maximum of ten weeks (section 19, TA), but can be extended by the ATC in certain circumstances (see below, Competing bids). The period for accepting the bid cannot expire less than three weeks after the target's response is published.
The target's management board must:
With supervisory board approval, appoint an independent expert, who can be an auditor or a bank, to report on the terms of the bid, particularly the consideration offered (section 13, TA).
Make a statement to its shareholders together with the supervisory board on whether to accept or reject the offer. If it is unable to do this, it must list the advantages and disadvantages of the bid and send this to its shareholders (section 14, TA).
Following this, the target's management board must:
Notify the ATC of its response, the response of the supervisory board and, if any, of the work's council, and the expert's report within ten trading days from publication of the offer document, at the latest, five trading days from the expiration of the offer term.
Publish at least five trading days before the deadline of the public offer, its response, the response of the supervisory board and of the work's council, and the expert's report.
Send details of the bid, its response and the expert's report to its works council.
If a competing bid is made during the offer period, the target's shareholders can rescind their acceptance of the first bid, regardless of whether they accept the second bid (section 17, TA). A competing bid automatically extends the offer period until the end of the competing bid period. The ATC can also extend the offer period if it considers it reasonable and necessary.
During the offer period the bidder can improve its offer (in relation to consideration and other conditions) provided that it is in the interests of the target's shareholders.
Changes to the timetable
The bidder must publish the outcome of the bid immediately after the offer period expires. The offer period can be extended at the bidder's request, unless the bidder declared that the offer period would under no circumstances be extended. In the case of mandatory and voluntary offers, the offer period is automatically extended by three months from the date of the announcement of the outcome of the bid. This mandatory statutory extension also applies if the bidder acquires more than 90% of the voting stock of the target in the course of a voluntary offer.
If the bid is subject to merger control, the need to apply to the competition authorities for clearance will delay the closing of the bid (see Question 25). To obtain merger control and other government approvals, the ATC allows the bidder, within limits, to control the timing and type of a public bid (GenRuling, ATC GZ 2001/V/1). For example, the bidder can pre-empt a subsequent mandatory offer by making a voluntary offer (section 22(11), TA) (see Question 16, Voluntary offer aimed at control).
The period to obtain regulatory approvals can be extended on application by the bidder to the ATC beyond the maximum offer period, making a total period for government approvals to be obtained of about 90 trading days. In exceptional cases, this period can be longer. For example, in the 2004 Siemens offer for VA Tech, this period was 140 trading days. In the 2005 Unicredit/Bank Austria exchange offer the term to fulfil conditions (concerning multi-jurisdictional public offers) was eight and a half months.
Recommended and hostile bids
Generally, the same procedures apply to voluntary, mandatory and voluntary offers aimed at control (see Question 16), regardless of whether they are hostile or recommended. The main difference is that in a recommended bid the target's shareholders and board are involved at an early stage and often make a joint announcement with the bidder. There is no additional prescribed structure for hostile bids, although the ATC usually imposes tight controls and intervenes more.
Only voluntary offers and voluntary offers aimed at control (see Question 16) can be subject to conditions and rights of withdrawal, provided that they are objectively justified (sections 7(7) and 8, TA). Fulfilment of the condition and withdrawal cannot be at the bidder's discretion. Conditions and rights of withdrawal are part of the offer document (section 7(7), TA), which must be approved by the ATC (see Question 12). The ATC interprets conditions and withdrawal rights narrowly.
Permitted conditions include:
Obtaining government or other regulatory authority approvals, including merger control (see Question 25).
Acceptances reaching minimum or maximum shareholding levels.
Events affecting the target company not occurring, including:
changes caused by defence measures, including changes to the capital or capital structure of the target (see Question 23); and
material adverse change events (see below).
Approval of the transaction by the bidder's shareholders' meeting.
Competing bids not occurring.
The ATC allows the bidder to include a condition defining a material adverse change in the target's economic condition if the following are met:
The material adverse change must be clearly defined in the offer document, occur during the (extended) offer period and refer to objective, measurable criteria (for example, financial data such as accounts).
The clause must not involve the bidder's discretion.
The bidder and the target must agree procedures for the following before the bid is made:
the supply and determination of financial data;
a review of the financial data; and
notification of the review results to the ATC.
An independent third party (for example, the company's auditor) must determine whether the criteria for the material adverse change event have been met.
Whether such conditions have been met must be decided within the offer period.
Following the 2003 GE/Jenbacher offer (which, among other things, introduced material adverse change conditions), the Siemens/VA Tech, the Dicom/Topcal and Lufthansa/Austrian Airlines offers contained several conditions. The ATC has allowed for a unilateral waiver of certain conditions by the bidder during the offer period provided a possible later waiver if such condition was already described in the offer document, deeming the waiver an improvement of the offer under the TA.
The ATC has viewed the later waiver of minimum acceptance conditions (other than mandatory statutory minimum acceptance conditions), for example a 75% or 90% acceptance condition, as admissible provided that waiver was foreseen in the offer document.
In Siemens/VA Tech, the ATC even allowed the bidder to introduce a new 90% acceptance condition during the offer period against a substantial increase in the offer price (18%), and the waiver by the bidder of a condition of the original offer (which required the maximum voting right restriction under the articles to be lifted during the offer period).
However, in its related ruling, the ATC stressed the exceptional nature of allowing this change of offer. It also invoked special circumstances in allowing such a (generally prohibited) trade-off, of an improvement against a deterioration of the terms of the offer (that is, waiving one condition against introducing a new one).
Mandatory offers must not include conditions, unless they are required by law. Permitted conditions include:
Regulatory approvals, particularly merger control (CA and Article 7, Regulation (EC) 139/2004 on the control of concentrations between undertakings).
Other government approvals, for example under banking and insurance regulations.
Approval of the bid by the bidder's shareholders, if required by the bidder's articles or the law where it is incorporated (this is likely to be allowed by the ATC as a condition).
Anticipated mandatory offers aimed at control may be conditional on acceptances reaching or exceeding certain key shareholdings, for example 75% and 90%.
On a hostile bid, the bidder and the target typically issue a series of documents, including newspaper adverts, to persuade shareholders and counter each other's arguments. On a recommended bid, the main document that the target's shareholders receive is the offer document.
The offer document
This is the formal legal document making the offer, and contains detailed information to allow the target's shareholders to decide whether they should sell their shares. It must include an expert's report (see Question 12, Preparing and auditing the bid) and contain, among other things, information about (section 7, TA):
The terms and conditions of the bid.
The securities for which the bidder is making an offer.
The consideration and the valuation method used.
The conduct of the bid, particularly relating to the agents authorised to receive acceptances and pay the consideration.
Maximum and minimum percentages of shares that the bidder undertakes to acquire (if applicable).
The bidder's existing shareholdings in the target or rights relating to target shares.
Conditions for withdrawing the bid.
The bidder's intentions and strategic planning in relation to the target's business and employees.
The period for accepting the bid and paying the consideration.
The financing of the bid.
Entities acting in concert with bidder or target.
Compensation if rights are taken as a result of breakthrough.
Law and venue applicable to sale of shares tendered under offer.
As the offer document must contain information on the bidder's intentions, it normally contains a responsibility statement from the bidder's directors.
The target's management and its supervisory board must issue their responses to the bid and an independent expert's report (see Question 11). The boards can recommend the bid or, if they remain indifferent, the boards must list the pros and cons. If they are opposing the bid, their response will be the equivalent of a defence document in other jurisdictions.
There is no obligation to consult or involve the works council in the takeover process except for the obligation on:
The bidder's and the target's boards to inform their respective works councils of announcements and publications relating to a bid or public offer, including the publication of the offer document.
The management board to publish a response, if any, by the target's works council.
A mandatory offer to the target's remaining shareholders is triggered if a person or legal entity acquires, by any means, a controlling shareholding of more than 30% in the target (section 22(1), TA). A controlling shareholding enables the bidder (alone or acting in concert (see below)) to exercise a dominant influence on the target.
Control can be acquired directly, indirectly or contractually, for example by a shareholder agreement. The TA distinguishes between direct and indirect control in the target. For direct participations in the target, a controlling holding of voting stock exceeding 30% will trigger the obligation to launch a mandatory offer. A holding of up to 30% of the voting stock does not trigger a mandatory bid (safe harbour provision). A shareholding between 26% up to and including 30% must be notified to the ATC within 20 trading days; the voting rights on stock exceeding 26% will be suspended but there is no obligation to launch a mandatory offer.
There are exceptions to this suspension of voting rights, including when:
Another shareholder (group) holds at least the same percentage of voting stock (as in the case of the 2016 partial offer by Airports Group Europe/Vienna Airport, which allowed the bidder to increase its stake in Vienna International Airport from 29.9 % (pre-offer) to above 37 % (on completion of the offer) without a mandatory bid given two other shareholders currently hold together more than 40% in the company) (see Question 1).
The articles provide for an upper limit of voting rights of 26%.
There is no change in the controlling shareholder (for example, in the case of intra-group transfers or the dissolution of a syndicate without change of control).
A shareholder who has become subject to the suspension of voting rights has the following options:
Accept the suspension.
Sell a part of the stock.
Launch a public offer. Once an offer has been launched, the bidder is free to exercise all voting rights.
The shareholder can also apply to the ATC to lift the suspension of voting rights exceeding 26% (up to a maximum of 30%) provided the shareholder is willing to accept and subsequently complies with restrictions and conditions protecting the minority shareholders that will be imposed by the ATC.
The TA provides for various exceptions to the mandatory offer regime, including if the 30% threshold was exceeded only accidentally and temporarily either:
Where the shares of a distressed target are acquired for restructuring purposes only.
In the case of a subsequent squeeze-out (provided the minimum price rules of the TA are observed).
An exception to the mandatory offer requirement applies in the case of a passive control change. This is a control change that could not reasonably be expected to occur and that happens without a contributory action by the majority shareholder. Although no obligation to launch a mandatory offer will be triggered, the voting rights exceeding 26% will be suspended (see above).
A mandatory offer is also triggered if a shareholder acquires indirect control over the target. An indirect controlling interest exists if a controlling interest (that is, more than 30%) is held by a listed company in which there is also a controlling interest. If an AG is not listed, a substantive control test applies, determining the ability to exercise influence on the target, including on the appointment and removal of directors.
Voluntary offer aimed at control
These are voluntary public offers that, if successful, may lead to acquiring control of a company listed on the stock exchange (section 25a, TA). They have the following requirements:
The bidder must not have a controlling interest when making the offer.
The bidder must receive declarations of acceptance for the offer that account for more than 50% of the shares that are the subject of the offer.
Acting in concert
Acting in concert with the bidder or target is defined as co-operating with the bidder on the basis of an agreement in an attempt to obtain or exercise control in the target company, in particular, by co-ordinating voting rights, or acting in concert with the target to prevent a successful takeover bid (section 1/6, TA). If a legal entity directly or indirectly holds a controlling stockholding in one or more other legal entities, it is assumed that all these legal entities are acting in concert. This assumption also applies if several legal entities have entered into an arrangement on the exercise of their voting rights to appoint the members of the supervisory board.
If a mandatory bid relates to securities other than ordinary shares (preference shares or participation rights) and the bidder (alone or in concert) has acquired ordinary shares in the 12 months before the bid is made, the price offered for those securities must be proportionate to the consideration offered for the ordinary shares. Proportionality depends on the specific rights involved in particular.
In a voluntary bid, the bidder can offer cash or securities, usually in companies owned or controlled by the bidder (or a mixture of cash and securities, but this is rare).
In a mandatory bid or a voluntary offer aimed at control (see Question 16), the bidder must offer consideration (completely in cash), payable no later than ten trading days after the offer is completed. The bidder can only offer securities (exchange offer) in addition to a cash offer. If the bidder offers securities as consideration:
It is up to the shareholder whether to accept securities instead of cash.
The securities must have at least the same value as the cash offered.
The bidder must give the target's shareholders enough information (similar to that in an offer document) to enable them to form an opinion of the securities and the bidder.
The final choice of consideration may depend on whether the bid is voluntary or mandatory (including anticipatory mandatory), as exchange offers can only be made on mandatory bids in addition to a cash offer.
Cash offers tend to be accepted more than exchange offers, but require a well-financed bidder.
In the 2005 Unicredito voluntary offer for Bank Austria shares, aimed at control, the Austrian market saw the first large-scale offer providing for a cash offer and alternatively for an exchange offer (HVB shares). The ATC:
Reviewed the price elements of both the cash and exchange offers to ensure that the paper offer complied with the minimum price requirements of the TA.
Allowed various conditions to the offer required by regulatory approvals and parallel public offers in various European countries including Germany, Italy and Poland.
In 2016, in a rare move, the ATC prohibited the publication of an exchange offer by Pierer Industries for Pankl Racing because the bidder insisted on including a certain price formula in the calculation for the purpose of ensuring the offer price warranty applied to share acquisitions during the nine-month period after expiration of the additional offer period. The ATC held that such reference had to be to the price per share quoted at the stock exchange at the time of the publication of the offer document (section 16 and 17 Austrian Takeover Act).
In a mandatory offer and a voluntary offer aimed at control (see Question 16), the consideration must be at least both:
The average quoted share price weighted according to the trade volumes of the respective security during the last six months before the day on which the intention to make a bid was disclosed.
The highest price agreed or paid for target shares by the bidder, or parties acting in concert with the bidder, in the 12 months before the notification of the mandatory offer.
There are no minimum consideration or cash requirements on straight voluntary bids.
Compulsory purchase of minority shareholdings
The majority shareholder that owns directly or indirectly 90% of the stated capital of the target can adopt a shareholders' resolution on the squeeze-out of minority shareholders with a simple majority of votes (Shareholder Exclusion Act). Minority shareholders cannot block the squeeze-out but can under certain circumstances request a review of the compensation.
If the squeeze-out takes place following a public offer, not later than three months after the end of the offer period, there is a rebuttable presumption that the compensation for the squeeze-out is adequate if it equals the offer price.
Restrictions on new offers
If a bid fails, the bidder (and parties acting in concert) is prohibited from making a further bid for the target (or acquiring shares triggering a mandatory bid) for one year from publication of the bid's failure (section 21, TA).
If the bidder has announced its intention to make a bid or stated publicly that it does not rule out a bid, and then fails to notify the ATC (see Question 12, Notification of the bid) (section 21(2-3), TA), the exclusion period will begin 40 days after the intention to make a bid was announced. If the bidder announces its intention not to proceed with a bid, or that it has triggered an obligation to make a bid when it did not intend to do so, the exclusion period starts from the date of this announcement.
The ATC can reduce the length of the exclusion period, provided that it is not detrimental to the interests of the target and its shareholders.
There is no particular de-listing procedure. However, a listing stops if the listing requirements are no longer met. One key requirement is that at least 10,000 shares or a nominal value of EUR750,000 must be held by the public (free float) (section 66(7), SEA). A bidder can de-list a target by acquiring target shares so that fewer than 10,000 of them are held by the public. This is usually achieved by effecting a squeeze-out under the Shareholder Exclusion Act.
When a public bid has been announced, the target's management and supervisory boards must:
Respond to the bid (section 14, TA) (see Question 12, Target's obligations).
Maintain confidentiality (section 6(2), TA).
Protect the interests of shareholders, employees, creditors and the public.
Maintain neutrality (section 12, TA). If they breach this, the target directors could face administrative fines (section 35, TA) of up to EUR50,000 and damages (sections 70 and 84, SCA and section 12, TA).
In addition, they must not take measures to deprive the target's shareholders of the opportunity to make a free and informed decision on the bid (section 12, TA), or any action likely to frustrate the bid, unless they are either:
Based on previous obligations of the boards and already partly implemented.
Approved by shareholder resolutions adopted after the bidder's intention to make a bid was announced.
Defences to a hostile bid
As there have been very few hostile public offers, defence strategies have rarely been tested and the TA does not specifically define what defences are allowed.
In line with international practice, the defences available can be grouped into measures affecting the target's:
Organisational structure. The two-tier board structure and the limitations of section 75 and section 87 of the SCA affect takeovers. Staggered terms of office for directors can delay the bidder establishing effective control, but do not hinder takeovers.
Capital structure. Possible defences (and the limitations to them) that affect the capital structure of the target include:
self tenders, where the target's boards offer to buy shares back from its shareholders, although these are subject to strict requirements (including that the shares repurchased cannot exceed 10% of the issued share capital), which can limit this defence;
employee stock ownership plans, although listed companies have only recently started to introduce these widely, and they are limited to up to 10% of the issued share capital;
maximum voting rights, although these are rare in listed companies;
registered shares combined with board approval being required for share transfers in the bye-laws, although it is rare to have registered shares in listed companies;
different types of shares, for example non-voting preference shares (up to one-third of the issued share capital), as a pre-bid measure;
the management board using pre-authorised capital (with the approval of the supervisory board) to increase capital; however, this will only be allowed in exceptional circumstances given the boards' obligation to remain neutral (section 12, TA).
Certain US-type poison pills, for example the flip-over, do not work in Austria because all shareholders must be treated equally (section 47a, SCA).
Assets. The sale of strategic assets or the acquisition of a direct competitor of the bidder (creating merger control problems for the bidder) may be effective. It will normally only require supervisory board (and not shareholder) approval but in a takeover situation shareholder approval will most likely be required (section 12, TA). The most effective defence of the target is, however, usually soliciting a better offer from a friendly third party.
The articles of listed corporations may provide that some of its restrictive provisions will be suspended in the event of public offers. This relates, among other things, to voting power restrictions and the non-transferability of the shares.
Acquiring shares in a stock corporation is not subject to transfer tax.
Real estate transfer tax at 3.5% applies to a single shareholder who acquires 100% of a company owning real estate. A nominal share in the company can be held by a trustee to prevent a single shareholder acquiring 100% of the shares, to avoid this tax.
Other regulatory restrictions
National merger control rules (including specific rules on media mergers) are set out in the newly amended CA. Agreements subject to merger control include (section 7, CA):
Direct and indirect acquisitions of an enterprise, its assets or its shares, if a participating interest of 25% or 50% is acquired or exceeded.
Agreements between enterprises.
Agreements requiring a certain number of the directors of the management and supervisory boards of two or more companies to be the same.
Other affiliations between enterprises that cause a controlling influence over another enterprise.
National merger control does not apply if the transaction is subject to European merger control regulation.
Effects on timetable
A first stage decision (that is, a decision not requiring a second stage detailed investigation) must be made by the Cartel Court within four weeks of receipt of notification. The Cartel Court can clear the merger or prohibit it. The whole process usually takes five to six weeks.
The time limit for a final decision is five months from notification. If a decision is not given by then, the merger is deemed cleared. The closing of the transaction must be suspended until the Cartel Court has made its decision.
Banking and insurance
The acquisition or sale of a 10% or more shareholding of an Austrian bank requires the approval of the FMA (section 21, Banking Act). The approval requirement also applies where a shareholder acquires or sells shares so that certain shareholding thresholds are reached or exceeded (10%, 20%, 33% or 50%). In addition, every transaction involving a merger or a demerger of banks also needs the approval of the FMA.
Similar notification and approval requirements apply to the acquisition and sale of shareholdings in insurance companies.
Foreign Trade Act
Austrian law requires Austrian airlines to be controlled by EEA or EU entities. If other entities gain control, the airline's operating licence can be revoked.
Acquisition of real estate by non-EEA nationals or control of companies owning Austrian real estate is subject to notification or approval. The Real Estate Commission in the province where the real estate is located will usually grant approval, especially if the property is used for commercial rather than residential purposes.
Foreign Trade Act
The acquisition by foreign investors (that is, investors domiciled outside of the EEA and Switzerland) of an interest of 25% or more, or a controlling interest in an Austrian enterprise engaged in specific protected industry sectors (including, but not limited to, defence equipment, energy and telecoms) requires advance approval by the Austrian Minister of Economic Affairs (Foreign Trade Act).
The TA also provides for a post-offer improvement. The bidder must make a payment to the shareholders who accepted the offer corresponding to the balance between the share price received in the offer and any higher per share consideration paid nine months after the expiry of the offer period. Additionally, the disclosure rules of the SEA apply when certain thresholds of shareholdings are reached or exceeded (see Questions 8 and 12). The target can initiate a share buyback. For security brokers, no special restrictions or disclosure requirements must be observed.
Given the comprehensive reform of the TA on 20 May 2006 and the introduction of the new squeeze-out regime under the Shareholder Exclusion Act, there are currently no further reform proposals.
As of 26 November 2015, Austria implemented the Transparency Directive by introducing amending legislation to the Stock Exchange Act and the Capital Markets Act (among others). The amendments to these laws have closed some of the prior gaps to the reporting of derivatives by enlarging the instruments covered and adapting the aggregation rules (among other things), thereby enlarging the share disclosure regime.
The sanctions that Austria's Financial Market Authority can impose for violations in disclosures of holdings in listed companies have been toughened: breaches of the disclosure rules can result in fines of up to EUR2 million for natural persons and up to EUR10 million for legal persons, or double benefit of breach and, in the chase of legal persons, alternatively of 5% of annual net revenue. In addition, all sanctions imposed will be made public.
The regulatory authority
Takeover Commission (ATC) (Übernahmekommission)
Main area of responsibility. The ATC is an independent body responsible for supervising public bids (see website above for a full description).
Professional qualifications. Admitted to bar, Austria, 1988
Areas of practice. M&A; public M&A; corporate; corporate finance.
- Represented Cubic (London) Limited on its successful public offer for VSE listed asset manager C-Quadrat (2016).
- Represented Carso Telecom/America Movil (NL/Mexico) on its EUR1.4 billion successful public takeover offer of Telecom Austria and subsequent EUR1 billion capital increase (2014).
- Represented DPx Fine Chemicals (US/Austria) on the sale of its ES and IM divisions to French Ardian Capital SA (2015).
- Represented General Electric (US/Austria) on its acquisition of Francesconi Technology.
- Represented Seven Mile Capital (US) on the acquisition of MP Separatoren from Polypore (EUR120 million).
- Represented Intel Corporation (US) on the acquisition of the Wireless Solutions (WLS) business of Infinion AG (US$1.3 billion, Austrian counsel).
- Represented Rasperia/Basic Element (Russia) on the acquisition of 30% and subsequent re-acquisition of a 25% stake in Vienna-listed STRABAG SE, Austria's biggest builder (total EUR1.8 billion).
- Represented Gaz de France (France), RWE (Germany), IFC (US) on the sale of a 50% shareholding in KMG (Kazakhstan) (US$1 billion).