GERMANY Law and Practice Contributed by: Gregor von Bonin, Natascha Doll, Andreas Ruthemeyer, Stefan Schröder and Mirko Masek, Freshfields
4.2 Mandatory Offer German law provides for a mandatory offer thresh- old under the Securities Acquisition and Takeover Act (WpÜG). A mandatory takeover offer is triggered when a person, acting alone or in concert with others, acquires control of a target company whose shares are admitted to trading on an organised market (ie, a regulated market) in Germany. Control is defined as holding 30% or more of the voting rights in the target company (Section 29 WpÜG). This threshold applies regardless of whether the shares are acquired directly or indirectly, and it includes voting rights attributed to the acquirer under legal or contrac- tual arrangements or held by affiliated parties. Once this threshold is crossed, the acquirer is obliged to launch without undue delay a mandatory public offer for all remaining shares in the target company at or above a minimum price. This minimum price is typi- cally determined by the average stock market price of the shares over the last three months prior to the announcement of the control acquisition, or the high- est price the acquirer has paid for shares in the target over the past six months, whichever is higher. In contrast to some other jurisdictions, the German system is rules-based and applies automatically upon the 30% threshold being crossed. There is no need for the authorities to determine whether control has been acquired on a case-by-case basis. 4.3 Transaction Structures In Germany, the typical structure for acquiring a pub- lic company is through a public takeover offer regu- lated by the WpÜG. In such transactions, the bidder acquires shares directly from existing shareholders through a tender offer (and, potentially, additional on- or off-market purchases), either in the form of a vol- untary offer or, if the 30% control threshold has been crossed, as a mandatory offer. This structure, and in particular the voluntary tender offer, is favoured for its procedural flexibility, lower legal hurdles, and align- ment with market practice. Depending on the level of acceptance, it may result in a simple controlling stake or even provide a supermajority or more in the tar- get. Given that a 100% acceptance rate is practically never achieved through the offer alone, the question of whether to set a minimum acceptance rate condi-
tion for the tender offer, and if so at what level, is a key tactical decision with a view to any subsequent integration measures (see 4.7 Minimum Acceptance Conditions ). Mergers, while legally possible under the UmwG, are considerably less common for the acquisition of public companies. The primary reasons for their infrequent use are their greater complexity and the extensive degree of shareholder involvement required (including shareholder litigation risk). Mergers demand a supermajority shareholder approval from both the acquiring and target companies, often 75% of the capital represented at the shareholder meeting. This higher approval threshold and the intricate procedural requirements provide minority shareholders with a lot of room to challenge the merger. Tender offers pro- vide a more flexible and often faster route to gaining control of a public company. However, mergers are often employed at a later stage (see 4.11 Additional Governance Rights ). 4.4 Consideration and Minimum Price In Germany, cash consideration is the most typical and widely used form of payment in public company acquisitions, including in the energy and infrastructure sector. Cash offers provide clarity and transactional certainty. While stock-for-stock transactions are legal- ly permissible and occasionally employed by listed acquirers they are less common due to valuation com- plexities, dilution concerns, and regulatory challenges. As a general rule, all-cash consideration is only pos- sible in public takeover offers (tender offers). In merger transactions under the UmwG, shares are the default consideration, though a combination of shares with up to 10% of the consideration in cash may be used. The issuance of shares can only be avoided where all shareholders of the target agree (which is practically impossible in a listed company). German takeover law mandates strict minimum price requirements to ensure shareholder protection. Under the WpÜG, the offer price must be at least the higher of (i) the volume-weighted average stock exchange price of the target shares during the three months preceding the offer announcement and (ii) the high-
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