CZECH REPUBLIC Law and Practice Contributed by: Petr Janů, Vladislav Klimeš and Leoš Vavřík, BADOKH
5.5 Definitive Agreements It is common for tender offers that all material terms and conditions of a takeover bid are set out in an offer document. The legal requirements for such docu - ments vary – eg, depending on whether the bid is mandatory, voluntary or supplementary. See 7.1 Mak- ing a Bid Public . 6. Structuring 6.1 Length of Process for Acquisition/Sale The duration of M&A transactions varies a lot, depend - ing on many factors such as the intensity of negotia - tions, the level of regulation or the level of involvement of third parties and/or impact of the transaction on them. Private transactions are usually closed within six months depending on whether the transaction is subject to antitrust regulation or not (see 2.4 Antitrust Regulations ). Public transactions usually take longer; the average duration lies somewhere between six and 18 months. 6.2 Mandatory Offer Threshold An obligation to launch a mandatory offer kicks in once the threshold of at least 30% shareholding (vot - ing rights) in a public company is acquired. There are some very narrowly defined exceptions to this rule. The obligation to make the offer may be fulfilled by the investor itself or any member of its group. In the latter case, both parties are jointly and severally liable for all mandatory offer obligations. The minority shareholders have the right to sell their shares to the majority shareholder once the majority shareholder acquires a 90% share in the company. This applies to both private and public companies. 6.3 Consideration Both cash and stock (in-kind) consideration may be used. This also applies to public offers. In private transactions, cash consideration is still more common but there is an upward trend towards using stock consideration as part of the consideration. The shares part of the consideration will typically be small - er than the cash part (usually somewhere between 10% and 30% of the purchase price).
Locked-box price determination is becoming more popular in comparison with cash-free, debt-free adjustments of the purchase price. This makes it easier to finance the purchase price and lowers the post-closing uncertainty for both parties relating to the total amount of the purchase price and its payment. Earn-out structures of the purchase price have become more popular during the last couple of years due to higher valuation uncertainty caused by eco - nomic developments (in particular in the context of the structural challenges, including limited economic growth, persistent inflation, elevated interest rates, and the ongoing war in Ukraine). 6.4 Common Conditions for a Takeover Offer The mandatory takeover offer shall be addressed to all shareholders. It must be unrestricted and uncon - ditional and cannot be revoked. The Czech Nation - al Bank may require the bidder to prove that it has sufficient funds to finance the entire bid. The Czech National Bank may also require the bidder to provide an appraisal to evidence the adequacy of the consid - eration and may adjust the consideration in certain circumstances. The binding period of the mandatory takeover offer is at least four weeks. There is not any specific maximum limit, but the Czech National Bank holds that the bind - ing period should generally not exceed ten weeks. If the bidder, as a result of the mandatory takeover offer, acquires shareholdings exceeding 90%, it is obliged to launch a supplemental takeover offer. Unlike the mandatory takeover offer, voluntary takeo - ver offers may be launched as a partial takeover offer (ie, an offer relating to a limited number of shares) or a conditional takeover offer (whereas the offer may only be tied to a condition which does not depend on the discretion of the bidder). The voluntary takeover offer is not subject to regulation of the consideration. As a general rule, voluntary takeover offers may not be launched within one year after the announcement of the results of a mandatory takeover offer or after a previous voluntary takeover offer.
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