NORWAY Law and Practice Contributed by: Fredrik Lykke, Christian P. N. Fenner and Magnus Brox, Advokatfirma DLA Piper AS Norway
9. Defensive Measures 9.1 Hostile Tender Offers
8.4 Independent Outside Advice It is very common for companies to retain outside financial advisers which are mandated to assist the board in business combinations. A key part of such advice is to provide support on valuation issues and issue fairness opinions. In public-to-private transactions it is mandatory for the board of a target company to retain an independent financial adviser to provide a fairness opinion on the offer, and this is used to support the board’s recom - mendation to its shareholders with respect to the offer. If the public offer is recommended by the board in a transaction agreement, the stock exchange will further require the target company to obtain an independent fairness opinion from an independent investment bank or auditor. Legal advisers are also retained by the issuer. Some - times separate legal counsel is retained by the board. This is, however, not very common. 8.5 Conflicts of Interest The principle of conflicted directors having to with - draw from board considerations is a well-established principle and regulated in the Norwegian Companies Act. Even though, according to the law, the threshold for conflict is quite high, it seems to be fairly well estab - lished that directors who are related to a possible bid - der or acquirer withdraw from the board’s dealing with the transaction. As to shareholders, the general rule is that sharehold - ers are not conflicted, and are allowed to vote on a subject matter irrespective of commercially being in conflict. As to advisers, the general view is that advisers man - age to keep Chinese walls, but that conflict considera - tions are made prior to them being retained.
Hostile tender offers are permitted and, although not common (as the success rate typically is much lower than for friendly tender offers), they do occur in the Norwegian market. 9.2 Directors’ Use of Defensive Measures As the duty of the directors in general is to maximise value for shareholders and it is the shareholders and not the target company that decide whether to accept a tender offer, defensive measures are fairly uncom - mon in the Norwegian market. Typically, the board will implement efforts to invite other possible bidders to the table if approached. There are also restrictions under Norwegian law when it comes to defensive measures. In the Securities Trading Act there are restrictions for the target com - pany from the date on which it is notified about an offer to issue shares (also in subsidiaries), acquire or sell material assets, be a part of mergers and acquire target company shares. There are, however, excep - tions to this rule if the general meeting in advance has approved defensive measures which may be used in case of a future tender offer. 9.3 Common Defensive Measures As mentioned in 9.2 Directors’ Use of Defensive Measures , a common measure would typically be the issuing of shares to friendly shareholders or third parties (either for cash or as contribution in kind) who want to retain the company. Less common measures are to not accept the bidder to perform due diligence and/or invite other friendly possible bidders to make an offer to acquire the company’s shares. 9.4 Directors’ Duties The board’s duties when enacting defensive meas - ures is typically to have a commercial rationale for why such measures would benefit the shareholders of the company, typically because the bidder’s offer price is below the true value of the company or that it has reasons to believe that more attractive offers would appear in the future. This should be seen in the context of the company’s overall strategy.
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