NETHERLANDS Law and Practice Contributed by: Jan-Willem van Rooij, Anne Brugmans and Jordy Kusters, Loyens & Loeff
4.9 Requirement to Have Certain Funds/ Financing to Launch a Takeover Offer When submitting the offer memorandum to the AFM for approval, the offeror must have obtained a so- called “certainty of funds”, meaning that binding financing arrangements are in place to ensure that the offer consideration can be paid at settlement of the offer. As a result, a takeover offer cannot be con- ditional on obtaining financing. The certainty-of-funds condition is applicable to every form of public offer. If a mandatory offer obligation is triggered, this obligation will not be lifted if the offeror cannot secure funding, since shareholder protection prevails over financing constraints. However, the offeror may change the financing arrangements that are in place after the cer- tainty of funds has been announced, provided that the alternate financing arrangements also satisfy the certainty-of-funds condition. 4.10 Types of Deal Protection Measures To safeguard the agreements made between the offer- or and the target company regarding a tender offer, the merger protocol will generally include deal protection measures, whereby the target company binds itself to the offer. Examples are break fees or a non-solicitation provision stipulating that the target company will not solicit any superior offers from third parties, and if a superior offer is made, matching rights would allow the offeror to match any such superior offers. Under Dutch law, deal protection measures that a target company may grant are not categorically pro- hibited, but their use is limited by the fiduciary duties of the management and supervisory boards to act in the interest of the company and its stakeholders and to safeguard a level playing field between competing bidders. Break fees, matching rights and non-solici- tation clauses may therefore be agreed, if they remain proportionate and do not unduly restrict competing offers. 4.11 Additional Governance Rights If an offeror is unable to obtain full ownership of the target company, the offeror and target company pre- wire certain back-end measures which would allow the offeror to obtain sole ownership of the target com- pany post-offer through a reorganisation. The back- end measures generally take the form of an asset
sale or (cross-border) legal merger. Such measures are described in the offer memorandum and put to vote in the general meeting of the target company. The adoption of such resolutions is often an offer condi- tion, as mentioned. As a result of the back-end measures, the assets and liabilities of the target company are transferred to the offeror or an affiliated company against a considera- tion which equals the offer consideration, and which is then distributed to the minority shareholders. 4.12 Irrevocable Commitments It is a common practice in Dutch public offers that offerors secure support from major shareholders through so-called irrevocable undertakings. Under these arrangements, shareholders commit to tender their shares under the offer and, where relevant, to exercise their voting rights in line with the agreement. Although such undertakings are formally required to be unconditional, in practice these are often “soft commitments” that can be terminated. Such provi- sions allow a shareholder to withdraw if a superior competing offer emerges, if it exceeds the initial offer by an agreed minimum price increase (a so-called “collar”). In this way, irrevocables provide certainty to the offeror while still allowing major shareholders an “out” in the event of a superior offer. 4.13 Securities Regulator’s or Stock Exchange Process Under Dutch law, it is prohibited to make a public offer for shares that are admitted to listing and trading on a Dutch regulated market, without an offer memoran- dum which has been approved by the AFM or a com- petent authority in another member state. Generally speaking, the AFM may approve the offer memoran- dum, if the target company has its registered seat in the Netherlands or its shares are listed on a Dutch regulated market (specifics apply). The statutory review period for the AFM is ten busi- ness days after receipt of the request for approval of the offer memorandum. In practice, this process is usually extended over several review rounds. In case of an exchange offer which would also require the approval and publication of a prospectus, the review period would be aligned with the statutory review peri-
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