Before launching a bid, take in Norway’s takeover regulations

The takeover regulations for companies listed in Norway are primarily governed by the Norwegian Securities Trading Act. Takeover recommendations are also included in the Norwegian Code of Corporate Governance, and are applicable to Norwegian listed companies and certain foreign companies listed in Norway. This column will look at what regulations apply and how they operate in practice.

Voluntary offers

A takeover typically starts with a voluntary offer. Investors should be aware, however, that mandatory offer requirements may be triggered if the threshold for such offers is exceeded by the acceptance of an offer by a sufficient percentage of shareholders of the target company.

The main difference between a mandatory and a voluntary offer is that under a voluntary bid, the offeror may make the bid conditional. The offer may also include consideration in addition to cash, for example shares in the offeror, or an affiliated company. The offeror will need to submit the offer to the supervisory authority for approval prior to publication. The validity of the offer must be for a minimum period of two weeks and a maximum 10 weeks.

The board of the target company is required to issue a statement regarding the offer, and it will need to disclose its opinion as to the effect of the offer for the target company. Normally, the target company will appoint a financial adviser to give an opinion as to the fairness of the offer. The offeror is under an obligation to treat the shareholders of the target company equally, but it may purchase shares in the target prior to launching a voluntary offer.

Mandatory offers

Any person or consolidated group that acquires more than a third of the voting rights of a Norwegian listed company must make an unconditional offer to acquire all the issued shares of the company within four weeks. This mandatory offer requirement is also triggered when a shareholder, through several acquisitions, achieves control of 40% or 50% or more of the voting rights in the company, assuming that the shares are not acquired under the initial mandatory offer. As an alternative to making a mandatory offer, the investor may choose to reduce its shareholding within four weeks.

The acquirer is required to notify the supervisory authority and the company immediately when it enters into a purchase agreement for shares that will trigger the mandatory offer requirement. The notification must state whether the acquirer intends to tender an offer, or reduce its shareholding. Until the mandatory offer has been tendered, the acquirer may not exercise rights relating to its shares exceeding one third of the shares in the company, except for the right to receive dividends and pre-emption rights in connection with share capital increases. If the acquirer breaches the mandatory offer requirement, i.e. it exceeds the four-week period, the restrictions in voting and the exercise of other shareholder’s rights will apply to the entire shareholding. In such a case, the supervisory authority may also undertake a forced sale of the shares.

The offeror is required to prepare an offer document for approval by the supervisory authority prior to publication. The offer period cannot be shorter than four weeks or longer than six weeks. Within the validity period of the offer, the offeror may choose to tender a new offer.

The offer price must be equivalent to the highest price the acquirer has paid, or agreed to pay, in the six months prior to when the obligation to make the mandatory offer is triggered. If the market price is higher than when the offer requirement obligation is triggered, the offer price should be equivalent to the market price. Settlement must be in cash, but the offeror may give shareholders of the target the option of another form of settlement. The settlement must be guaranteed by an authorised financial institution in Norway in the form of a guarantee approved by the Oslo Stock Exchange. Settlement must occur within two weeks of the lapse of the offer period.

The board of directors of the target company is required to issue a statement on the offer, disclosing its opinion on the effects of the offer. Certain restrictions apply to the board and management of the target company in the period from when they are notified that a mandatory offer will be made until the end of the offer period.

Squeezing out shareholders

An offeror acquiring more than 90% of the share capital and the equivalent voting rights may “squeeze out” the remaining shareholders. In a squeeze-out situation, the remaining minority shareholders become creditors of the offeror and cease to be shareholders of the target company. At the same time the offeror is required to pay the total redemption price offered to the minority shareholders into a separate account with a bank authorised to carry out banking activities in Norway.

If the redemption is carried out within three months of the expiry of the mandatory offer period, the redemption price is equal to the offer price, unless there are specific reasons to the contrary. Outside this period, each shareholder may object to the redemption price. Shareholders who do not file an objection are deemed to have accepted the redemption price. A Norwegian court can determine the price to be fixed by means of appraisal, in the event that it is not accepted by the minority shareholders.

Where the offeror holds more than 90% of the share capital along with equivalent voting rights under a voluntary bid, the offeror may redeem the remaining shareholders no later than four weeks from the expiry of the offer period, thereby avoiding the requirement to tender a mandatory bid. The redemption price will be at least equal to the offer price applying under the rules of the mandatory offer, and must be supported by a guarantee in the same way as is required for a mandatory offer.

Each of the minority shareholders will then have a corresponding right to require the offeror to acquire their shares.

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Arne Didrik Kjørnæs is a senior partner at Wikborg Rein in Oslo, and Tormod Ludvik Nilsen is a senior associate at Wikborg Rein in Shanghai. Geir Sviggum, a partner at Wikborg Rein in Shanghai, also contributed to this article