IFLRinternational financial law review

Mergers and AcquisitionsReport 2016

Lead contributor Patrick Sarch

REPORT PARTICIPANTS

IFLRinternational financial law review

ANGOLA ARGENTINA BAHRAIN BANGLADESH

Tanjib Alam & Associates

BELGIUM BRAZIL CAYMAN ISLANDS CHINA

EGYPT GERMANY HONG KONG INDIA

INDONESIA IRELAND ITALY KUWAIT

MOZAMBIQUE NIGERIA PANAMA PERU

PORTUGAL SPAIN SWITZERLAND TAIWAN

TUNISIA UK US VIETNAM

BTG PACTUAL KOTAK INVESTMENT BANKING SUTTON VIEW CAPITAL

Section 1: GENERAL OUTLOOK

1.1 What have been the key recent M&A trends or developments inyour jurisdiction?In 2015 the Belgian public M&A market was dominated by a few landmarktransactions. These include: the announced merger between Delhaize andAhold; the acquisition of Base by Liberty Global (Telenet); and the acqui-sition of SABMiller by AB Inbev. Most of these transactions will close in2016. Most of the public offerings launched in 2015 were done voluntarilyby controlling shareholders with a view to taking the target companies pri-vate.

1.2 What is your outlook for public M&A in your jurisdiction overthe next 12 months?The legal environment for public M&A is expected to remain stable in2016. However, the impact that the speculation tax will have on market isuncertain (see section 5.1).

Section 2: REGULATORY FRAMEWORK

2.1 What legislation and regulatory bodies govern public M&Aactivity in your jurisdiction?In addition to the Belgian Companies Code, which sets out general corpo-rate principles and merger rules, public M&A activity in Belgium is mainlygoverned by the law of April 1 2007 on public takeover bids and its execut-ing royal decree of April 27 2007. The Financial Services and Markets Au-thority (FSMA) supervises and enforces the public takeover rules.

Competition law aspects of public M&A are governed by EU competi-tion laws and book IV, chapter 2 of the Belgian Economic Law Code, whichsets out Belgian rules on competition. The Belgian Competition Authoritymonitors compliance with these rules.

2.2 How, by whom, and by what measures, are takeoverregulations (or equivalent) enforced?The FSMA is primarily responsible for supervising the financial marketsand listed companies, and for monitoring companies’ compliance with pub-lic takeover rules.

If a company violates any public takeover rules, the FSMA may requireadditional information, suspend or prohibit a public offering, carry out in-spections, and impose fines. Any measure executed by the FSMA that couldlead to a public takeover or affect a public takeover may be challenged beforethe Court of Appeal of Brussels.

Section 3: STRUCTURAL CONSIDERATIONS

3.1 What are the basic structures for friendly and hostileacquisitions?A mandatory or voluntary public offering (in a friendly or hostile context)can be structured as: a tender offering whereby the consideration for the ac-quired shares is in the form of cash; an exchange offer whereby the consid-eration is in the form of securities and supplemented by a limited amountof cash (equivalent to a maximum of 10% of the shares’ value for an ex-change offering); or a merger which will lead to an exchange of shares ofthe merging companies.

3.2 What determines the choice of structure, including in the caseof a cross-border deal?The choice of structure is determined by various factors such as the availablemeans for financing the transaction, the respective weight of the relevantcompanies, and tax aspects. The hostile or friendly nature of the offeringcan also influence the structure. A merger will be based on an agreementmade by at least a three-quarter majority vote of both entities. If this ma-jority is reached, all shareholders may be forced to exchange their shares.

3.3 How quickly can a bidder complete an acquisition? How longis the deal open to competing bids?The bid period starts five business days after the FSMA has approved theprospectus. It ends in principle from two to 10 weeks after this date. A com-peting bid can always be filed up to two business days before the closing ofthe bid period.

3.4 Are there restrictions on the price offered or its form (cash orshares)?With respect to public offerings, the price of the offering can consist of cash,securities, or both. A distinction must be made between a mandatory offer-ing and a voluntary offering, however.

In a voluntary offering, the bidder is free to set the price provided thatthe proposed price enables the bidder to complete the transaction. In amandatory offering, the price must be at least equal to the higher of the fol-lowing two figures: (i) the highest price that the bidder or a person actingin concert with it paid for the securities of the target company in the 12months preceding the announcement of the bid; and (ii) the weighted av-erage of the trading prices of the securities concerned, on the most liquidmarket, over 30 calendar days before the obligation to launch a bid was trig-gered.

3.5 What level of acceptance/ownership and other conditionsdetermine whether the acquisition proceeds and can satisfactorilysqueeze out or otherwise eliminate minority shareholders?Provided certain conditions are satisfied, a natural person or legal entity mayforce the minority shareholders to transfer all their voting securities if itholds, directly or indirectly, alone or in concert with another person, 95%of the voting securities of that company.

3.6 Do minority shareholders enjoy protections against thepayment of control premiums, other preferential pricing forselected shareholders, and partial acquisitions, for example bymandatory offer requirements, ownership disclosure obligationsand a best price/all holders rule?All shareholders must be treated equally. If, during the bid period, the bidderor the persons acting in concert with the bidder acquire or commit to ac-quire, outside the bid, securities of the offeree company at a higher pricethan that of the bid, the price of the bid must match that higher price. Inaddition, the FSMA ensures that there is a high level of transparency in thepricing (the price of the bid and the prices being offered).

A mandatory public offering must in principle be launched if a personor entity holds more than the threshold of 30% of voting securities in alisted company following an acquisition of voting securities in that listedcompany.

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Belgium

Olivier Clevenbergh, Gisèle Rosselle and Thomas Pouppez, Strelia

www.strelia.com

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3.7 To what extent can buyers make conditional offers, for examplesubject to financing, absence of material adverse changes or truthof representations? Are bank guarantees or certain funding of thepurchase price required?A bidder may include specific conditions precedent or conditions subse-quent to its offer. The FSMA reviews the conditions imposed by the bidder.

Regardless of whether the offer is conditional or not, the bidder mustprovide sufficient guarantees regarding the price offered. If the price is tobe paid in cash, the funds needed to complete the bid must be immediatelyavailable. If the price is to be paid in the form of securities, the securitiesneeded to complete the bid must be in the possession of the buyer, or thebuyer must be entitled to issue or acquire such securities.

Section 4: TAX CONSIDERATIONS

4.1 What are the basic tax considerations and trade-offs?A roll-over regime applies to a merger, exchange of shares, and other similartransactions, whereby there are certain limitations to the transfer of tax lossesand other tax privileges. Specific anti-abuse provisions and the absence of atax consolidation system should be considered when determining pre- andpost-acquisition transactions as well as the funding structure. No stampduty applies to an acquisition of shares. Since January 1 2016 a so-calledspeculation tax of 33% has been introduced for private individuals (residentand non-resident). This is due on capital gains realised on securities wherea period of less than six months lapses between the acquisition and the saleof such securities.

4.2 Are there special considerations in cross-border deals?Close attention must be paid to the tax position of both the target and thebuyer. Notably, one must define the acquisition vehicle and take advantageof Belgian tax constraints. A similar roll-over regime applies to cross-bordermergers and other reorganisations made inside the EU.

Section 5: ANTI-TAKEOVER DEFENCES

5.1 What are the most important forms of anti-takeover defencesand are there any restrictions on their use?The articles of association of the target company can stipulate that the roleof the board of directors in a public offering must be a passive one and thatthe effects of agreements that could frustrate the bid must be suspended.However, such provisions are not compulsory.

If the target company chooses not to include such limitation in its articlesof association, it can adopt other anti-takeover defence measures. For ex-ample: (i) a pre-emption right could be granted to the target company’sshareholders or a requirement for the target company’s shareholders to ap-prove the new shareholder(s) (subject to some limitations); (ii) subject tothe prior authorisation of the shareholders’ meeting, the board of directorscould increase the share capital or decide to launch a share buy-back.

5.2 How do targets use anti-takeover defences?Most companies do not clearly set out in their articles of association thepassive role that the board of directors should take and how the effects ofagreements that could frustrate the bid should be neutralised in order toenjoy more flexibility in the adoption of anti-takeover defences.

5.3 Is a target required to provide due diligence information to apotential bidder?There is no law requiring or prohibiting a potential bidder from carryingout due diligence on a listed company. The decision on whether to authorisea company to carry out due diligence lies with the target’s board of directors.However, the target’s board intervenes twice in the bidding process:

• before the prospectus is approved by the FSMA so that it can inform theFSMA and the bidder of any misleading or missing information;

• after the prospectus is approved so that it can issue a memorandum of

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response whereby it: (i) gives its view on the contemplated bid; (ii) in-dicates whether the directors, in their capacity as holders of securities,will transfer their securities to the bidder as part of the bid; and (iii) in-dicates whether any provision of the articles of association implies a lim-itation on the possibility to sell or acquire voting securities.

5.4 How do bidders overcome anti-takeover defences?A bidder can try to overcome an anti-takeover defence by: (i) filing a com-plaint with the FSMA about anti-takeover measures; (ii) offering a higherprice; or (iii) trying to convince the board of directors to support the bid.

5.5 Are there many examples of successful hostile acquisitions?Most acquisitions are friendly takeover bids because one or several control-ling shareholders usually hold a substantial portion of the shares.

Section 6: DEAL PROTECTIONS

6.1 What are the main ways for a friendly bidder and target toprotect a friendly deal from a hostile interloper?The chance of success of any competing bid may be limited by obtainingthe support of the board of directors or of important shareholders, or bysetting break-up fees.

6.2 To what extent are deal protections prevented, for example byrestrictions on impediments to competing bidders, break fees orlock-up agreements?With regard to any action taken by the board of directors, the board mustalways act in the corporate interest of the target company. In addition, fromthe date it has received notification about the public offering, the board ofthe target company may not take any measure that will significantly affectthe assets or liabilities of the target company without the prior consent ofthe shareholders meeting. Entering into any lock-up agreement with thetarget’s shareholder’s can be considered a so-called action in concert if thepurpose of the agreement is to control the target company. In some cases,this triggers a mandatory public offering.

Section 7: ANTITRUST/REGULATORY REVIEW

7.1 What are the anti-trust notification thresholds in yourjurisdiction?If (i) the companies involved in the transaction have together a turnover ofmore than €100 million ($112.9 million) in Belgium, or (ii) at least twoof the companies have a turnover of at least €40 million in Belgium, thetransaction must be reported to the Belgian Competition Authority (BCA).

7.2 When will transactions falling below those thresholds beinvestigated?The BCA has no power to investigate transactions whose thresholds fallbelow those referred to in section 7.1.

7.3 Is an anti-trust notification filing mandatory or voluntary?A transaction that meets the thresholds must be notified to the BCA.

7.4 What are the deadlines for filing, and what are the penalties fornot filing?Transactions must be notified before they are completed. The transactionmay not in principle be completed before the BCA has authorised it.

7.5 How long are the antitrust review periods?If it is obvious that the contemplated transaction does not contravene an-titrust rules, a simplified review procedure will last 15 business days. If theregular review procedure applies, it could take 40 to 55 business days innormal situations, or longer if additional duties are required of the author-ity.

7.6 At what level does your antitrust authority have jurisdiction toreview and impose penalties for failure to notify deals that do nothave local competition effect?The BCA has jurisdiction over transactions that affect the Belgian marketand that fall within the thresholds referred to in section 7.1. In this respect,any failure to notify the authority can trigger fines, which are calculated prorata according to the companies’ turnover.

7.7 What other regulatory or related obstacles do bidders face,including national security or protected industry review, foreignownership restrictions, employment regulation and othergovernmental regulation?From the moment the public offering has been disclosed to the public, rep-resentatives of the employees of the bidder and the target company must beinformed of the contemplated public offering and must be given a copy theprospectus and the opinion of the board of directors. The directors will ex-plain to the Works Council the strategy of the contemplated transactionand the consequences it will have on employment.

Section 8: ANTI-CORRUPTION REGIMES

8.1 What is the applicable anti-corruption legislation in yourjurisdiction?The Belgian Criminal Code penalises public and private corruption.

8.2 What are the potential sanctions and how stringently have theybeen enforced?A person guilty of corruption can be punished by a fine of €600 to€600,000 and imprisonment of six months to three years (up to 10 yearsin extreme cases). In addition, companies whose directors or employees arefound guilty of corruption can be excluded from any right to participate inpublic offerings. Alleged corruption cases are often settled with the publicprosecutor.

Section 9: OTHER MATTERS

9.1 Are there any other material issues in your jurisdiction thatmight affect a public M&A transaction?No.

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About the authorOlivier Clevenbergh is mainly active in the field of public and privateM&A and corporate law. He deals with national and internationalacquisitions and disposals of shares or assets, private equity and venturecapital transactions, mergers and joint ventures. He combines histransactional practice with a contentious practice covering the sameareas. He therefore also represents clients in commercial and corporatelitigation before the Belgian courts and arbitration tribunals.

He was admitted to the Brussels Bar in 1989 and was admitted as asolicitor of England and Wales in 1995.

Olivier ClevenberghPartner, Strelia

Brussels, BelgiumT: +32 (0)2 627.00.90F: +32 (0)2 627.01.09E: olivier.clevenbergh@strelia.comW: www.strelia.com

About the authorGisèle Rosselle concentrates on corporate: public and private M&A,corporate finance and project finance transactions, with particularexperience in cross-border M&A, private equity, and capital markettransactions. These involve a wide variety of industries, includingbanking, chemicals, paper and pulp, technology and energy.

Rosselle was admitted to the Brussels bar in 1994.

She served as chair of the Corporate and M&A Committee of theInternational Bar Association from 2009 through 2011, after havingchaired the Private Equity Subcommittee of the International BarAssociation’s Corporate and M&A Committee.

Gisèle RossellePartner, Strelia

Brussels, BelgiumT: +32 (0)2 627.00.90F: +32 (0)2 627.01.09E: gisele.rosselle@strelia.comW: www.strelia.com

About the authorThomas Pouppez is mainly active in the field of M&A and corporatelaw.

He was admitted to the Brussels Bar in 2011. He is a teaching assistantat the Free University of Brussels (ULB) in law relating to legalpersonality matters.

Thomas PouppezAssociate, Strelia

Brussels, BelgiumT: +32 (0)2 627.00.90F: +32 (0)2 627.01.09E: thomas.pouppez@strelia.com W: www.strelia.com