PORTUGAL Law and Practice Contributed by: Diana Ribeiro Duarte, Pedro Capitão Barbosa and Catarina Almeida Andrade, Morais Leitão, Galvão Teles, Soares da Silva & Associados
7.5 Conditions in Takeovers Common conditions for a private equity-based take - over offer incorporated in the offer announcements include the lifting of voting limitations in the general shareholders’ meeting (when by-laws of the target include such voting limitations) and regulatory clear - ances. Effectiveness of the offer (when the offeror seeks to obtain control of the target company) is usually sub - ject to the condition of obtaining more than 50% of the voting rights therein. It is not generally allowed under Portuguese law for a takeover offer to be conditional on obtaining financ - ing, given that the buyer must have funds available to pay the full price resulting from the offer. To ensure the protection of the bidder in the offer, break fees have been used as a way for the bidder to cover its costs should the offer not be successful. While not expressly prohibited under Portuguese law, break fees carry a considerable degree of risk for the target company’s directors, given that: • the fee could be considered a breach of direc - tors’ duties (if it is proven to be a way to entrench management or to favour one shareholder over another); and/or • if sufficiently high, the fee could breach the “pas - sivity rule”, which prevents management from mak - ing material decisions that would affect the target company before the offer is completed. The law allows bidders to increase the price offered at any time, especially when a competitive bid is being submitted. 7.6 Acquiring Less Than 100% Outside of their shareholding, a person acquiring less than 100% in a tender offer can make use of the statu - tory squeeze-out procedure to acquire the entire share capital of the target. If a purchaser (by itself or through related entities whose voting rights are attributable to it) holds more than 90% of the voting rights in a Portuguese listed company up to time of the assessment of the offer
Even simple changes in the chain of attribution of vot - ing rights must also be notified to the CMVM and the target listed company. 7.3 Mandatory Offer Thresholds A person that has over 33% or 50% of the voting rights of a listed company has a duty to launch a pub - lic tender offer over the entire share capital and other securities issued by such company, granting the right for their subscription or acquisition (in accordance with Article 187 of the Portuguese Securities Code). However, if a person only has more than 33% of the voting rights of the listed company, the obligation to launch a mandatory tender offer will not arise if such person proves before the CMVM that they do not have control of the target company and are not in a group relationship therewith. The consideration offered in a mandatory squeeze-out (compulsory acquisition) must be at least the highest of the following. • The consideration offered in the preceding general mandatory offer, provided that: (a) the offer complies with Article 188 of the Portuguese Securities Code (ie, the highest of the price paid or the price that the acquirer committed to pay in the six months prior, or the volume-weighted average price over the same period); or (b) it enabled the offeror to acquire at least 90% of the voting rights covered by the offer. • The price paid by the offeror, or that the offeror committed to pay (or any person whose voting rights are attributable to the offeror), for securities in the same category between the time at which the offer results were determined and registration of the squeeze-out by the CMVM. 7.4 Consideration Consideration in public tender offers can be cash or securities. Typically, cash is the consideration of choice in tender offers, perhaps due to the relative “shallowness” of the Portuguese equity capital mar - ket.
498 CHAMBERS.COM
Powered by FlippingBook