FRANCE Law and Practice Contributed by: Bertrand Barrier, Anne Toupenay-Schueller and Cyril Deniaud, Jeantet
6.4 Consideration and Minimum Price In France, cash is predominantly used as considera- tion in acquisitions, whether public or private and in the technology sector or other sectors, although share contributions to listed or unlisted entities may also occur. Public acquisitions tend to take the form of a cash acquisition (takeover bid), but the share exchange route (exchange tender offer) is also sometimes used. The offers can also be mixed (cash and share exchange within the same offer) or alternative (cash or share exchange). A cash alternative must be proposed if the shares offered in the framework of an exchange tender offer are not liquid shares listed on an EU regulated market, or if the bidder, alone or in concert, has purchased more than 5% of the target’s shares or voting rights in cash within the last 12 months. In addition, in the event of a squeeze-out following an exchange tender offer, French regulation requires the bidder to offer a cash alternative to the minority shareholders. All shareholders must receive the same offer terms, and tender offer pricing rules must be followed. Spe- cifically, in mandatory tender offers, the price must be at least equal to the highest price paid by the bid- der or its concert parties for shares of the issuer in the preceding 12 months. Moreover, an independent expert must confirm the fairness of the tender offer consideration for the transaction to proceed. It should be noted that under French law, the com- pletion of an acquisition through a merger or a share contribution may not trigger cash payment (subject to the exception of very small amounts, or soulte , to be paid for technical reasons). In cases where the value is uncertain, parties some- times use earn-out arrangements to address differ- ences in perceived value. These arrangements involve additional payments contingent on achieving specific performance targets, such as revenue, EBITDA, or regulatory approvals. Earn-out mechanisms can be part of an agreement or embedded in financial instru- ments like share warrants, preferred shares, or con- tingent value rights. While applicable to both public
a controlling stake through a block trade, in which case, a mandatory tender offer has to be filed with the AMF (under the “simplified” procedure if the stake represents more than 50% of the share capital and voting rights, which means in particular that the offer period will last for ten trading days only). As an alternative, the acquisition of a public company may simply occur through the filing of a voluntary ten- der offer under the “normal” procedure, which means that the offer period will last for 25 trading days. In such a case, it is recommended that the bidder should obtain irrevocable undertakings to tender from major shareholders of the target. The acquisition of a public company may also take place by way of a merger or a contribution in kind. However, such transaction structure is not widely used in France since: • under French law, mergers are subject to an extended timeline and a strict legal process, involving the appointment of appraiser(s) in charge of drafting a report on the proposed terms of the transaction, the approval of the transaction by a two-thirds majority of the shareholders of both companies (or of the company issuing shares in consideration in the case of a contribution in kind), the drafting of an information document to be reviewed by the AMF as the case may be, etc; and • as a result of a merger or a contribution in kind, the shareholders of the acquiring company are auto- matically diluted. In addition, one of the main objectives of the acqui- ror of a public company is generally to implement a squeeze-out procedure to force the minority share- holders of the public company to sell their target shares (such squeeze-out procedure being applicable if the target shares held by minority shareholders do not represent more than 10% of the share capital and voting rights of the target). However, such squeeze- out procedure is not automatically applicable in case of implementation of a merger or a contribution in kind (ie, a tender offer will have to be launched afterwards in order for the new majority shareholder to implement such squeeze-out procedure).
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