NETHERLANDS Law and Practice Contributed by: Herald Jongen, Maarten de Boorder, Samuel Garcia Nelen and Jelmer Kalisvaart, Greenberg Traurig, LLP
6.8 Squeeze-Out Mechanisms Under Dutch law, a shareholder (eg, the bidder following a successful tender offer) holding 95% of the target’s issued share capital has a statutory squeeze-out mechanism at their disposal. Such shareholder can request the Enterprise Chamber to force the remaining shareholders that have not tendered following a successful tender offer to sell their shares to the majority shareholder. Similarly, a minority shareholder that is being squeezed out has the right to request a sell-out from the majority shareholder (assuming such majority shareholder holds 95% or more of the shares) – ie, to require the majority shareholder to purchase their shares. It is market practice for the bidder and the tar- get to agree that if the bidder fails to reach the acceptance level of 95%, but exceeds a certain lower acceptance level (typically 80%), the tar- get’s board will co-operate with so-called alter- native squeeze-out measures (subject to share- holder approval). These alternative possibilities allow for a squeeze-out of minority shareholders if a bidder, following a successful tender offer, holds less than 95% of the target’s issued share capital. Transaction structures that are regularly seen include: • a triangular merger of the target into a sub- sidiary of the bidder, with the subsequent liquidation of the entity in which the non-ten- dering shareholders have received securities; • the sale and transfer of all assets and liabili - ties of the target to a subsidiary of the bidder with subsequent liquidation of the target; and • a combination of an asset sale and a (triangu- lar) merger.
tender offer in a merger protocol. In a merger protocol, the target company’s boards commit to endorsing and backing the offer, as well as co-operating with it, while the bidder consents to launching the public offer. Furthermore, the merger protocol often includes provisions relat- ing to: • conditions for initiating and completing the offer; • interim operating covenants; • regulatory approvals; • break fees; The representations and warranties given by public companies are typically more limited in scope compared to those given by private com- panies. Publicly traded companies must adhere to various disclosure requirements, making a lot of information already publicly accessible. Ref- erence is often made to the public filings as the basis for the representations and warranties. 6.7 Minimum Acceptance Conditions For tender offers, there is typically a threshold for shares that are tendered under the offer of at least 95%. This threshold of 95% is a typical minimum acceptance condition for tender offers, because a bidder can subsequently initiate stat- utory squeeze-out proceedings to acquire the remaining minority shares. Furthermore, it is market practice to agree that the 95% thresh- old will be lowered (eg, to 80%) if the general meeting of the target has passed resolutions to initiate alternative squeeze-out measures. This allows the bidder to acquire full control of the business of the target company after settlement of the offer, even if they acquired less than 95% of the target’s shares. • “no-shop” provisions; and • non-financial covenants.
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