France: Tender Offers - Simplified Procedure

Last Updated: 5 June 1995
The simplified procedure is not automatic: the CBV must authorise it (CBV General Regulations, Art. 5-3-1). It can be used for either cash or exchange offers. Its purpose is the acquisition of securities representing the equity or giving access to the voting rights of a company listed on the official stock market or second market or traded over the counter. The simplified procedure is governed by the regulations for normal take-over bids except for certain details which are discussed below. (see "Tender Offers - Normal Procedure").

Scope of simplified tender offers

The simplified tender offer procedure is applicable, with prior CBV approval, in a certain number of cases of varying importance. These include offers limited to 10% of shares, offers for non-voting equity and purchases of treasury stock within the strict limits accepted under French law (CBV General Regulations, Art. 5-3-2).

The procedure also applies to the take-over of an unlisted (or private) company, such as a holding company, which has a majority interest in a company listed on the official stock market or second market or traded over the counter, as long as its interest represents " an essential part of its assets" (Art. 5-3-7).

The simplified procedure also applies to two important cases which merit more detailed discussion: going private transactions and standing offers.

Going private transactions

Going private transactions concern cases where a shareholder already holds, directly or indirectly, alone or in concert, more than one-half of the equity or voting rights of a listed company and wishes to gain complete control.

The tender offer price must be must at least equal to the weighted average share price recorded over the sixty days preceding publication of the notice of filing with the CBV (Art. 5-3-4). However, with the CBV's approval, the offer price may be lower than that obtained with the formula.

The bidder must also inform shareholders not wishing to take advantage of the tender how they may trade their securities in the future.

Standing offers

A person acting alone or in concert who directly or indirectly acquires or agrees to acquire from certain shareholders a block of shares which give such person majority control of a listed company may ask the CBV to initiate the standing offer procedure ("garantie de cours"), which is almost comparable to the simplified procedure (CBV General Regulations, Art. 5-3-2-b and 5-3-5). The standing offer procedure is mandatory, however, where a block of shares has been acquired over the counter (Art. 5-3-6).

The standing offer procedure, if chosen by the bidder and accepted by the CBV, is very similar to the simplified tender offer procedure. The bidder must buy on the market all the securities of the company concerned that are tendered during a period limited to 10 to 15 trading days (CBV General Regulations, Art. 5-3-5). The offer price must, in principle, be the same as that paid when acquiring the controlling interest. However, the CBV may accept a lower price in certain circumstances, for example if representations and warranties have been negotiated or in the event of deferred payment.

This procedure is used relatively often, more frequently in fact than the tender offer procedure. In 1993, there were 33 standing offers (involving companies listed on the official stock market, registered on the second market or whose securities are traded over the counter (see COB Annual Report 1993, p. 143).

Time limits

The simplified tender offer period is particularly short, which favours the bidder as there is little time for the target to build up a defence or for competitors to make a higher bid. If the simplified offer is a cash bid the period can be as little as ten (10) trading days, whereas for an exchange or mixed offer it is at least fifteen (15) trading days (CBV General Regulations, Art. 5-3-3).

Payment

Normally, in a cash bid, shareholders tendering their shares receive an immediate cash payment. In practice, however, deferred payment has been accepted. The new 1992 regulations officially recognise "deferred payment", though formally at least for standing offers only (CBV General Regulations, Art. 5-3-5). The regulations specify that if the bidder staggers payment over time (or defers payment), the discount rate may "not be more than the market rate at the time of the sale" (ibid.). Thus, the bidder may offer a price guarantee based on the existing difference, at a given term, between the discounted bid price and the actual price on expiry of the guarantee.

This significant increase in flexibility is not only limited to standing offers. The CBV has informed French industrialists that not only the deferred payment technique but also the deferred transfer technique were applicable to the various forms of tender offer. These are important positive developments, protecting the rights of minority shareholders while also making stockmarket acquisitions less costly.

For further information contact Herve Letreguilly on +33 1 4471 1717.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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