GERMANY Law and Practice Contributed by: Gregor von Bonin, Natascha Doll, Andreas Ruthemeyer, Stefan Schröder and Mirko Masek, Freshfields
4.7 Minimum Acceptance Conditions Minimum acceptance conditions are typical and stra- tegically important for tender offers in Germany, as they allow bidders to ensure they secure a specific level of control or ownership over the target compa- ny. The relevant control thresholds in Germany vary depending on the bidder’s strategic objectives for the post-tender offer phase. A common minimum acceptance condition is 50% plus one share, which secures a simple majority of voting rights and thus effective control over ordi- nary shareholder resolutions, such as electing the supervisory board (which appoints the members of the management board). A higher threshold, such as 75% of the share capital or voting rights, might be sought to enable key corporate actions requiring a qualified majority (eg, capital increases, mergers, or a so-called domination and profit transfer agreement; see 4.11 Additional Governance Rights ). To effect a squeeze-out of remaining minority shareholders, even higher thresholds are required (see 4.8 Squeeze-Out Mechanisms ). Setting the minimum acceptance condition allows the bidder to ensure that, if the acceptance level is reached and the offer is successful, they will possess the necessary power to implement their post-acqui- sition strategy. Regulators, primarily BaFin, generally accept clearly disclosed minimum acceptance condi- tions that are objective and aligned with these statu- tory thresholds. Conditions set to very low levels (such as 30%) are uncommon as they risk leaving the bidder without sufficient control. However, given hedge fund specu- lation around acceptance thresholds and the inabil- ity of certain passive funds to tender shares before an offer becomes unconditional, bidders sometimes choose to proceed without a formal minimum accept- ance condition. Removing this technical requirement can eliminate uncertainty and, in some cases, lead to
• AktG: This general squeeze-out requires a share- holder to hold at least 95% of the share capital of a corporation. The procedure requires a detailed report from the main shareholder justifying the squeeze-out and the compensation, including an expert determination of the fair value of the shares, and a shareholder resolution with a 75% majority of the capital represented at the meeting. Minor- ity shareholders can challenge the fairness of the compensation offered in court. • UmwG: This mechanism is used in the context of statutory mergers and group restructurings. It allows for the squeeze-out of minority sharehold- ers if the absorbing entity holds at least 90% of the share capital of the target entity being absorbed. Compensation for minority shareholders must be fair and requires the same valuation exercise as for a squeeze-out under the AktG. Here too, share- holders can demand a review of the fairness of the compensation by a court. • WpÜG: This mechanism allows a bidder to squeeze out remaining minority shareholders against fair compensation if, after a successful voluntary or mandatory takeover offer, the bidder holds at least 95% of the voting rights. No share- holder resolution is required. Instead, the squeeze- out is effected by way of a court ruling. Minority shareholders can file motions during the court proceedings and challenge the legitimacy of the request for the order. 4.9 Requirement to Have Certain Funds/ Financing to Launch a Takeover Offer The WpÜG includes stringent “certain funds” require- ments to ensure the seriousness and financial backing of a takeover offer. This means that a bidder must have secured financing before making a public takeo- ver offer. This confirmation must be backed by a bank or simi- lar financial institutions which effectively guarantees the full offer price by way of a funding confirmation letter that must be published together with the offer document. Full financing typically involves having executed financing documents (eg, loan agreements, equity commitment letters) confirming the availability of funds without any further conditions.
higher overall acceptance rates. 4.8 Squeeze-Out Mechanisms
German law squeeze-out mechanisms are codified in three main statutes, each with specific ownership thresholds and procedural requirements:
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