MARKET OVERVIEW 1.1 Please give a brief overview of the public M&A market in your jurisdiction
The public M&A market in Ireland has been relatively quiet in 2010/2011. The last large-value completed public M&A deal in Ireland was the $1.2 billion recommended offer by scheme of arrangement (see section 2.1, below, for an explanation of this term) for SkillSoft Plc by a private equity consortium consisting of Berkshire Partners, Bain and Advent, in which Mason Hayes & Curran acted for the bidders and William Fry acted for the target, completed in June 2010. Subsequent to that, despite a number of abortive processes, the only completed public M&A transactions have been the EUR 93 million recommended offer by scheme of arrangement by US private equity firm Spectrum Equity for Trintech Plc, the EUR 217 million recommended offer by BAE Systems for Norkom Group Plc, the recommended offer by scheme of arrangement for Oglesby & Butler which was valued at only EUR 4.3 million and the recommended offer, valued at £44 million, by CR Bard for Clearstream Technologies Plc. The number of scheme of arrangement based offers has continued to exceed the number of conventional tender offers for reasons which are discussed below. There have been no hostile offers since the unsuccessful bid by Ryanair for Aer Lingus announced in December 2008. There have been few new wholly or largely domestic new entrants to either the Irish Stock Exchange or other markets and three financial institutions, Allied Irish Banks, Irish Life & Permanent (owner of the Permanent TSB Bank) and Anglo Irish Bank which were previously of substance on the Irish Stock Exchange are either almost wholly state-owned (AIB and IL&P) or wholly state-owned and de-listed and in a run-down mode (Anglo) due to state recapitalisation measures rather than conventional M&A activity. The other main Irish listed bank, Bank of Ireland, has escaped outright state-ownership due to a substantial private equity investment.
1.2 What are the main laws and regulations which govern the conduct of public M&A activity in your jurisdiction?
The key laws and regulations governing takeover offers for public companies in Ireland (which for these purposes are companies that have securities admitted to listing and trading on a market, rather than companies that are simply incorporated or registered as public companies) are as follows:
the Irish Takeover Panel Act 1997; and the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006 (the Takeover Bids Regulations). Further detailed rules are made under the Irish Takeover Panel Act 1997 for the conduct of takeovers and substantial acquisitions of securities:
the Irish Takeover Panel Act, 1997, Takeover Rules, 2007 (the Irish Takeover Rules or the Rules); and Irish Takeover Panel Act 1997, Substantial Acquisition Rules, 2007 (the Substantial Acquisition Rules). 1.2.1 What entities are covered?
In summary, the Irish Takeover Rules apply to the following companies:
any Irish-incorporated public limited company or other Irish-incorporated body corporate, any of whose securities are authorised for trading (or have been so authorised within ifve years prior to the relevant takeover proposal) on a market regulated by a 'recognised stock exchange' - in this case, the Irish Stock Exchange; and any Irish-incorporated public limited public limited company, any securities of which are authorised to be traded, or have been so authorised within five years prior to the relevant takeover proposal, on the London Stock Exchange (eg, the Main Market or AIM), the New York Stock Exchange or NASDAQ. The rules that apply to a takeover offer may also be affected by whether or not it has securities admitted to trading on a regulated market in Ireland as deifned by EC Directive 93/22 (a 'regulated market') (in Ireland, the only such market is the Main Securities Market of the Irish Stock Exchange). 1.2.2 Who is the regulator?
The Irish Takeover Panel is the entity established to monitor and supervise takeovers so as to ensure compliance by relevant companies with the provisions of the Irish Takeover Panel Act 1997 and the Irish Takeover Rules. 1.3 Other than in relation to anti-trust, are there other applicable regulations such as exchange and investment controls?
Exchange controls were abolished in Ireland with effect from 31 December 1992. Particular regimes apply to acquisition of controlling interests in regulated ifnancial institutions and airlines, but subject to particular regulated industry provisions, as an open economy, Ireland does not impose other restrictive provisions on foreign ownership or control generally in respect of public companies.
PREPARATION AND PRE-ANNOUNCEMENT 2.1 What are the main structural means of obtaining control of a public company? If there is more than one, what are the key advantages and disadvantages of each route? Is one route more commonly used than others?
The principal legal means for obtaining control of a public company in Ireland are as follows:
a public offer to acquire securities of a directive company (as defined below) under Regulation 23 of the Takeover Bids Regulations to acquire all of the equity securities of the company, by which the acquirer of 90 per cent or more can squeeze out the minority (a 'directive company offer'); or a public offer to acquire securities of a non-directive company (as deifned below) under section 204 of the Companies Act 1963, by which the acquirer of 80 per cent or more can squeeze out the minority (a 'non-directive company offer'); or a scheme of arrangement under section 201 of the Companies Act 1963 to formalise a proposal to vary the rights of shareholders by passing a 75 per cent shareholder vote in each affected class of the target company (a 'scheme of arrangement'). A company qualiifes as a 'directive company' if it is company that has securities admitted to trading on a regulated market in Ireland (the Main Market of the Irish Stock Exchange) and the circumstances speciifed in Regulation 6 of the Takeover Bids Regulations apply to it; otherwise it is a 'non-directive' company. Directive company offer and non-directive company offers are for convenience both referred to generically as 'takeover offers' below. It is also possible in theory to use either of the following legal means to obtain control of a public company, though in practice neither has ever been used for this purpose in connection with a company subject to the Irish Takeover Rules:
a merger with one or more EEA companies by acquisition or by formation of a new company under the European Communities (Cross- Border Mergers) Regulations 2008 (a 'cross-border merger'); or a merger with another Irish-incorporated public limited company under the European Communities (Mergers and Divisions of Companies) Regulations 1987 (a 'Third Directive merger'). These merger types are derived from EU law and each involves the transfer of the target company's assets and liabilities to an acquirer and the dissolution of the target company. The advantages and disadvantages of offers and schemes of arrangement can be summarised as follows:
Different levels of approval are required to obtain actual control of the target
With a takeover offer, the bidder requires more than 50 per cent acceptances to obtain control of the target company, and either 80 per cent (a directive company offer) or 90 per cent (a non-directive company offer) offer acceptances to achieve a squeeze-out.
A scheme of arrangement requires the approval of 75 per cent in value and a majority by number of the target company's shareholders who vote (whether in person or by proxy) at the relevant shareholders' meeting to approve the scheme. A single nominee shareholder with multiple accounts for beneficial owners is one shareholder for this purpose (eg, a depositary which holds shares subject to a deposit agreement in connection with traded ADRs for example). Shareholder non-responsiveness can make the required majority for a scheme relatively easier to obtain. If a large number of shareholders do not vote, the approval of substantially less than 75 per cent of all shareholders will in effect be required, and this can be a feature which is relevant in an offer for a company with a large but average small value retail shareholder base. Although it is technically possible to structure a partial takeover as a scheme of arrangement, schemes of arrangement do not typically allow the acquisition of control, followed by the squeeze-out of minorities to be completed in two steps. This is a one-stage process. An offer provides a quicker timeframe for acquiring effective control
Under the minimum timeframe for a simple agreed offer under the Irish Takeover Rules, the first closing date is 21 days from the sending of the offer document (subject to extension by application to the Irish Takeover Panel in the case of US requirements for target companies that are listed on NASDAQ or NYSE, if applicable) (Irish Takeover Rules, Rule 31.1). However, it can be longer (up to 60 days) if a competing offer is made (Irish Takeover Rules, Rule 31.4). The quickest timetable for a scheme is somewhat longer: the minimum length of time between sending the scheme document and the scheme becoming effective would be in the region of 8 weeks. In addition, even if the scheme document can be prepared at the same time as the announcement of the bid (this is the announcement of a ifrm intention to make an offer, which is known colloquially called the 'Rule 2.5 Announcement', by reason of the relevant Rule), it is less likely that the scheme document can be sent on the same day as the announcement, given the requirement to obtain the court's permission to convene the necessary shareholders' meeting. An offer document (if it is ready) can be sent on the same day as the Rule 2.5 announcement. Furthermore, scheme timetables are themselves subject to...
Merger & Acquisitions - The European Lawyer Reference Series, 1st Ed 2012
|Author:||Mr Justin McKenna|
|Profession:||Mason Hayes & Curran|
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