ITALY Law and Practice Contributed by: Alessandro Corno, Luca Magrini, Pasquale Mosella and Rocco Pugliese, Alma LED
or affiliates that are connected to the PE group are added together to see if these thresholds have been crossed. So, bidders backed by PE need to carefully look at how their control and interaction/work with third parties are organised/managed, because if they own enough shares together, they may have to launch an offer even if their individual stakes are below certain levels. Also relevant is the concept of voting power, which considers direct, indirect and potential holdings (including derivatives), with mechanisms to attribute shares held by related entities in the broader PE port - folio or affiliates. This prevents people from circum - venting mandatory offers by simply spreading shares among people who are related to them. In short, Italy’s mandatory offer system applies when a company has at least 30% of its shares (with adjustments for small and medium-sized businesses and large companies). It also combines the shares held by “related” parties and affiliated funds or portfolio companies that are important to PE players. As a result of this, PE inves - tors need to consider all of their holdings, including those held through funds and portfolio companies, to make sure they are not accidentally crossing the mandatory offer thresholds and to prepare for any mandatory offer obligations that may arise. Recent discussions in Italy suggest that the government may consider raising these thresholds, but the 30% stand - ard is still in place. 7.4 Consideration In Italy, cash-based tender offers are much more com - mon (and more obvious for PE bidders) than offers where payment of the consideration is made in kind by swapping shares of the bidder with shares of the target. The law permits shares to be used as a means of payment; however, a cash offer is usually easier to make and gives the target’s shareholders more cer - tainty and liquidity. Under Italian law, with a view to ensuring equal treat - ment among shareholders, where an MTO is launched, the minimum price rules apply so that the offer price is at least as high as the highest price that the bidder (or any person acting together with the bidder) paid for the shares in the twelve months before the offer was launched.
The minimum price rule must also be carefully con - sidered when it comes to voluntary offers as CON - SOB, the Italian financial market regulator, can require an increase in the offer price if there is evidence that shares have been acquired at a higher price prior to the launch of the offer. 7.5 Conditions in Takeovers In order to ensure certainty of closing in the interest of minority shareholders and transparency in financial markets, the law and CONSOB, the Italian financial regulator, limit the use of conditions to the effective - ness of the offer for takeover bids in Italy, especially for MTO. Indeed, MTO is, by its nature, intended to ensure that all shareholders benefit from majority premium paid to shareholders selling the stake crossing the manda - tory takeover threshold. Accordingly, conditions are not permitted. On the other hand, a voluntary offer can only be sub - ject to a few conditions, such as the following. • Minimum Acceptance Threshold – The offer may be conditional on a certain percentage of shares being tendered so as to ensure that the bidder obtains a controlling stake or a stake sufficient in size to squeeze out minority shareholders before they have to close the deal. • Approvals From Regulators – The offer may be conditional on getting the necessary approvals and clearances from regulators. • No Material Adverse Change – In a voluntary ten - der offer, there can be a condition that no material adverse change has happened in the target com - pany’s business between the offer’s announcement and its closing. This is less common in private deals. A subject to financing offer is not allowed for MTO. A financing condition is only allowed for a voluntary offer if it is a condition that must be met before the offer can be launched (ie, a tender offer pre-condition) and the bidder may demonstrate that the financing is highly likely to be secured.
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