public takeovers in switzerland – review 2014€¦ · reverse bookbuilding process. the tb...

Public Takeovers in Switzerland – Review 2014

October 14, 2015

* This Bulletin is the ninth prepared by the author on this topic. See Public Takeovers in Switzerland – Review 2005, dated March 16, 2006; Public Takeo-

vers in Switzerland – Review 2006, dated September 13, 2007; Public Takeovers in Switzerland – Review 2007, dated June 17, 2008; Public Takeovers in

Switzerland – Review 2008, dated October 21, 2009; Public Takeovers in Switzerland – Review 2009, dated July 16, 2010; Public Takeovers in Switzerland

– Review 2010, dated June 30, 2011; Public Takeovers in Switzerland – Review 2011, dated October 22, 2012; Public Takeovers in Switzerland – Review

2012, dated November 25, 2013; Public Takeovers in Switzerland – Review 2013, dated September 30, 2014, all available at www.homburger.ch.

Public Takeovers in Switzerland – Review 2014This Bulletin looks at selected themes and issues that have arisen between

January 1, 2014 and April 30, 2015 as a result of Swiss takeover transactions,

decisions of the Swiss Takeover Board (TB), the Swiss Financial Market Su-

pervisory Authority (FINMA) and the Federal Administrative Court (FAC)*.

Table of Contents

Overview..............................................................1

New Development in Takeover Rules .................2

Scope of Application ............................................2

Potential Offer | "Put up or Shut up" ....................4

Preliminary Announcement .................................4

Mandatory Offer...................................................4

Competing Offers.................................................9

Amendment of Offer ..........................................10

Acting in Concert ...............................................10

Minimum Price Rule...........................................12

Best Price Rule ..................................................13

Conditions..........................................................14

Equal Treatment ................................................16

Defense Measures.............................................17

Board Report .....................................................19

Content of Prospectus .......................................20

Transaction Reporting .......................................20

Type of Consideration ....................................... 21

Cost Coverage .................................................. 22

Withdrawal of Offer............................................ 22

Review Body ..................................................... 22

Rights of Qualified Shareholders ...................... 22

Repurchase of Own Shares .............................. 22

Squeeze-out ...................................................... 26

Overview

The year 2014 was a relatively calm year.

7 takeover offers were announced (including

no mandatory offer, but 7 voluntary offers,

while all offers were friendly; 4 offers were

cash offers, 2 offers were exchange offers

and one offer was a mixed consideration of-

fer);


October 14, 2015

2 | 26

22 share buy-back programs were submitted

to the TB (of which 19 were exempted via

the reporting procedure and one was ex-

empted via a decision of the TB); and

6 other procedures, 2 of which were an ex-

emption from and 2 of them were about the

non-application of the mandatory offer, were

initiated.

In total, the TB rendered 24 decisions in 2014.

New Development in Takeover Rules

There were no amendments to the takeover laws,

including the takeover ordinances, in 2014. The TB

conducted a consultation in summer 2014 regard-

ing the provisions on publications. Amongst others,

it was proposed to no longer publish takeover mat-

ters in the newspapers. The results of the consul-

tation will be implemented in the course of the

revision of the Takeover Ordinance, which will be

necessary as the new statute on financial infra-

structure (FinfraG) will enter into force on January

1, 2016 and will contain all the takeover rules cur-

rently embodied in the SESTA.

Scope of Application

Repurchase Offer on Own Shares by Foreign

Company with Main Listing in Switzerland. Ac-

cording to art. 22 para. 1 SESTA, Swiss takeover

rules apply to public offers for investments in target

companies (i) domiciled in Switzerland whose eq-

uity securities are in whole or in part listed in Swit-

zerland; and (ii) not domiciled in Switzerland

whose equity securities are in whole or in part

mainly listed in Switzerland. According to art. 53b

SESTO, the equity securities of a company not

domiciled in Switzerland are mainly listed in Swit-

zerland when the company must fulfill at least the

same duties and maintenance of a listing on a

stock exchange in Switzerland as a company dom-

iciled in Switzerland. The SIX Swiss Exchange

(SIX) publishes which equity securities of compa-

nies not domiciled in Switzerland are mainly listed

in the country.

In the decision of the TB of November 7, 2014 in

the Cosmo Pharmaceuticals SpA matter (Cosmo)1,

the TB – in a situation where Italian law obliged a

company to make a public offer to its shareholders

- waived the application of the Swiss takeover

rules because the protection offered by the foreign

law was deemed at least equivalent to the protec-

tion offered by the Swiss takeover rules.

Cosmo is a biotech company with domicile in

Lainate, Italy, with a main listing on the SIX. Cos-

mo wanted to transfer its corporate seat to Luxem-

bourg while maintaining its listing on the SIX. Ital-

ian corporate law provides an exit right to share-

holders who have voted against, have abstained

from voting or who did not take part in the vote. In

concreto, these shareholders may request from the

company that the latter buys back their shares at

the average price of the 6 months preceding im-

mediately the publication of the invitation to the

general meeting called to vote on the transfer of

the domicile. The beneficiary shareholders may put

their shares within 15 days of the publication of the

decision of the shareholders' meeting and the

company must offer such shares to the existing

shareholders who may acquire them pro rata to

their shareholdings. The remainder of the shares

may be sold into the open market or shall be kept

as own shares.

Cosmo applied to the TB to hold that the offer to

be made by the company to its shareholders ac-

cording to Italian law would not fall under art. 22 et

seq. SESTA. The TB examined whether the said

offer was a public offer in the sense of art. 2 lit. e

SESTA. A public offer according to the SESTA is a

broad concept. Any person who publicly informs

market participants that it is willing to acquire secu-

rities from an undetermined number of persons

and hence invites the shareholders of the target to

tender their shares is making a public offer in the

1Decision 582/01 of the TB dated November 7, 2014 in the matter

Cosmo Pharmaceuticals SpA.


October 14, 2015

3 | 26

sense of art. 2 lit. e SESTA2. This is also valid for

offers made for a company's own shares.3

The TB held that the repurchase offer made by

Cosmo according to Italian corporate law is similar

to a repurchase of own shares and is therefore

governed by the SESTA, albeit the offer is open to

a restricted number of shareholders only, i.e. those

shareholders who have not approved the general

meeting's decision, and the shares are to be sold

in the open market.

The TB identified a positive conflict of competence

between Italian corporate law and the SESTA. The

TB held that the application of both bodies of laws

would have led to unsolvable conflicts: Italian law

grants the exit right only to shareholders who op-

posed the transfer of domicile (while a public take-

over according to SESTA must be addressed to all

shareholders), the company may waive the trans-

fer of domicile under certain conditions (which

would not be compatible with the principle of pro-

hibition of potestative conditions under Swiss take-

over rules), and procedural discrepancies between

both applicable rules are important.4

In such a

case, if both Swiss law and a foreign law are simul-

taneously applicable to a public offer, the provi-

sions of Swiss law may be relinquished providing

that (i) the application of Swiss law would lead to a

conflict with the foreign law, and (ii) the protection

provided by the foreign law to the investors is

equivalent to that provided by Swiss law. Hence,

the TB compared the level of protection offered by

both bodies of law and came to the conclusion that

the protection offered by Italian law was superior to

the protection offered by Swiss law, which does

not provide an exit right to the shareholders in

case the company transfers its domicile abroad. As

a result, the TB waived the application of the

SESTA.

2 See also Recommendation 225/03 dated March 18, 2005 in the matter

Forbo Holding AG, c.2.4.3

See also Decision of the Federal Banking Commission dated March 4,

1998 in the matter Pharma Vision 2000 AG, BK Vision AG and Stillhalter

Vision AG, c.2.4

Decision 582/01 of the TB dated November 7, 2014 in the matter

Cosmo Pharmaceuticals SpA, c.3.1.

"Listed Securities". In the WM Technologie case,

TB reaffirmed its practice of the applicability of the

takeover laws to non-listed companies per analo-

giam, if the takeover offer relates to non-listed

shares of a newly formed target company, which

was spun-off from a listed company.5

Greentec AG

was planning to acquire a business division of

Walter Meier AG, which is a listed company, by

way of a public takeover of Walter Meier's newly

formed non-listed subsidiary WM Technologie AG,

to which certain subsidiaries of Walter Meier would

be contributed and spun-off from Walter Meier

prior to the takeover. Although technically a take-

over of a non-listed company, the TB considered

the takeover offer for the non-listed WM Technolo-

gie AG to be in substance an offer for part of the

listed Walter Meier AG and, consequently, found

the legislation on public takeovers applicable (in

casu, however, the minimum price rule of art. 32

para. 4 SESTA was not applicable since the target

had an opting-out in its articles of incorporation).

Reverse Bookbuilding as Takeover Offer? Dur-

ing the period under review, the TB issued a deci-

sion on a contemplated transaction in which a

bank intended to contact the shareholders of a

listed company in order for them to tender their

shares with a view of placing them with new inves-

tors6. The offer to the existing shareholders would

have been made with a minimum price whereas

the final price would have been set at the end of a

reverse bookbuilding process. The TB decided that

such a procedure would qualify as a public takeo-

ver offer, but would not be authorized because too

many exceptions would have been necessary to

make it compatible with SESTA and its ordinances.

Swiss takeover rules are applicable if a public

takeover offer is made (art. 22 para. 1 SESTA).

This means that the holders of equity securities

5 Decision 556/2 of the TB dated February 24, 2014 in the matter of WM

Technologie AG, No. 2 confirming the practice established in Recom-

mendation 188/01 of the TB dated March 31, 2004 in the matter Clair

Finanz AG, c.1.3.5.6

The decision has not been published as the transaction was aborted,

but is discussed in Pascal Bovey/Luc Thévenoz, Développements du

droit suisse des OPA, SZW/RSDA 3/2015, 255 ss, at 257 ss.


October 14, 2015

4 | 26

must be (publicly) invited to tender their securities

in the offer. Further, such holders must have a

choice to accept or refuse the offer7. Those condi-

tions were fulfilled by the procedure intended by

the bank, even though the bank would only have

invited the shareholders to offer their shares

(Einladung zur Offertstellung). Also, even if the

identity of the acquirer is not necessarily deter-

mined in a reverse bookbuilding procedure, the

bank contacting the shareholders effectively sub-

mits an offer in the sense of art. 2 lit. e SESTA.

Finally, if such offer is addressed to a significant or

undetermined number of shareholders8, or if a

bank conveys the offer to its clients, to other banks

or to asset managers9, such offer shall be consid-

ered as public.

However, the takeover rules are not adapted to

such procedures: it is unclear who the offeror is,

(the bank or the investors finally acquiring the

shares?) and the price will only be determined at

the end of the procedure via the bookbuilding

mechanism. Exemptions to the takeover offer rules

would have to be very broad and would deplete all

content to such rules; they would go far further

than the exceptions that the TB usually grants to

accommodate share repurchases10

. If such wide

exceptions might be justified when the issuer buys

back its own shares, they are no longer justified

when such offer is made by a third party. Hence,

the TB refused to authorize such a transaction.

Potential Offer | "Put up or Shut up"

During the period under review, no decision was

rendered relating to potential offer or the "put up or

shut up" rule.

7 Decision 547/01 of the TB dated September 23, 2013 in the matter

International Minerals Corporation, c.2. See also Decision 0013/02 of the

TB dated July 20, 1998 in the matter SGS Société générale de surveil-

lance SA, c.18

See, e.g., Recommendation 260/03 of the TB dated February 10, 2006

in the matter Berna Biotech, c. 2.4 (64 optionholders were contacted).9 See decision by Regulatory Board of March 20, 1990 in the matter

Luftseilbahn Wangs-Pizol AG, SZW/RSDA 1990, 208.10

See Circular n°1 dated June 27, 2013 regarding share repurchase

programs.

Preliminary Announcement

During the period under review, no material deci-

sion was rendered relating to the preliminary an-

nouncement.

Mandatory Offer

General. Pursuant to art. 32 para. 1 SESTA, any-

one who directly, indirectly or acting in concert with

third parties, acquires equity securities, and, as a

result of such acquisition, holds equity securities of

a listed Swiss company exceeding the threshold of

331/3% of the voting rights of such company, must

submit an offer for all listed equity securities of

such company.

No Mandatory Offer in Case of Opting-out. The

Swiss peculiar opting-out rule has again made the

TB busy during the period under review. The TB

resolved upon three cases.

In the first case, the opting-out clause permitted

the offeror Novavest Real Estate AG (Novavest) to

offer a price to the public shareholders which was

lower than the minimum price that would have

been determined if the rules on the mandatory

offer were applicable11

. The TB held that as a con-

sequence of the opting-out clause, the provisions

regarding the minimum price did not apply either.

The offer price was CHF 15.14 per share and was

paid in listed, but illiquid shares of Novavest, while

the price paid in immediately prior purchases of

shares in the target Pretium AG was CHF 28.58

per share. The opting-out clause in the article of

incorporation of Pretium had been introduced even

before the listing of Pretium; hence, the TB could

not review its validity according to the recently

settled practice in the ADB Holdings case12

. In the

Pretium case, the TB had however to review a

more relevant question, i.e. whether the offer could

11Decision 569/01 of the TB dated June 24, 2014 in the matter Pretium

AG.12

Decision 518/01 of the TB dated October 11, 2012 in the matter

Advanced Digital Broadcast Holdings SA. A more detailed review can be

found in CapLaw 5/2011 (Frank Gerhard, Takeover Board Opts-Out

From Opting-Out, p. 11ss) and CapLaw 5/2012 (Frank Gerhard, Takeo-

ver Board Opts-in Again Into the Opting-Out and Revives the Selective

Opting-Out, p. 15ss).


October 14, 2015

5 | 26

be made subject to the condition that no cash al-

ternative would have to be offered by the offeror in

application of art. 9a TOO. This question is dealt

with below in the chapter regarding conditions.

Review of Opting-up Clause: Transparent In-

formation and "Majority of the Minority". In the

Leclanché SA case13

, the TB examined for the

first time an opting-up clause introduced after the

new practice established in the ADB Holdings

case of 201214

.

First, the TB examined whether the introduction of

the opting-out was preceded by a transparent

procedure. Shareholders must be duly informed

about the situation, about the intentions of the

"controlling" shareholder(s), if any, and of the

shareholder(s) requesting the introduction of the

opting-out, including about the envisaged transac-

tion and the change of control which would be

triggered, as well as about the general conse-

quences of the adoption of the opting-out (i.e.

permanent and erga omnes validity). This infor-

mation must be disclosed in the invitation to the

general meeting. If needed, the board shall re-

quest from each "controlling" shareholder and

from the shareholder(s) requesting such introduc-

tion their intention with respect to any transaction

that would benefit from such opting-out. The TB

held that the invitation to the shareholders' meet-

ing of April 10, 2013 fulfilled these conditions; in

particular, the TB held that the investor Precept

who was requesting the TB to decide on the validi-

ty of the opting-up, was only contacted after the

general meeting that introduced the opting-up:

indeed, the confidentiality agreement was signed

on April 23, 2015.

13Decision 590/01 of the TB dated February 20, 2015 in the matter

Leclanché SA.14


Advanced Digital Broadcast Holdings SA. A more detailed review can be

found in CapLaw 5/2011 (Frank Gerhard, Takeover Board Opts-Out

From Opting-Out, p. 11ss) and CapLaw 5/2012 (Frank Gerhard, Takeo-

ver Board Opts-in Again Into the Opting-Out and Revives the Selective

Opting-Out, p. 15ss).

Second, the TB examined whether the introduc-

tion of the opting-up caused to the shareholders a

prejudice which was not justified by the company

interest (art. 22 para. 3 SESTA in connection with

art. 706 CO). There is a presumption that there is

no such prejudice if the overall majority and the

"majority of the minority" approve the introduction

of the opting-up at the general meeting. When

calculating the votes of the minority, the votes of

any shareholder holding directly, indirectly or in

concert with a third party, more than 331/3%, and

the votes of any shareholder having made the

request for the opting-up must be excluded. In

casu, when the opting-up was introduced on April

10, 2013, there was no shareholder holding more

than 331/3% of the votes in Leclanché SA and the

request for the introduction of the opting-up was

made by the board of Leclanché SA itself. Hence,

no votes had to be excluded. Since the opting-up

was introduced with the required absolute majori-

ty, it was held valid15

.

Review of Opting-out Clause Introduced Be-

fore SESTA (or during Transitional Period). In

the Sika AG case16

, the TB had to ascertain,

amongst others, an opting-out clause which was

introduced in the transitional period immediately

after the entry into force of the SESTA.

The share capital of Sika AG was divided in two

classes of shares: bearer shares with a nominal

value of CHF 0.60 per share, listed on the SIX,

which represent 83.57% of the capital but only

47.08% of the voting rights; and preferred voting

registered shares with a nominal value of CHF

0.10 per share, which represent 16.43% of the

capital, but 52.92% of the voting rights. The regis-

tered shares are all owned by Schenker-Winkler

Holding AG (SWH), which is the holding of the

founding family of Sika. The articles of incorpora-

tion of Sika have an opting-out clause, as well as

15Id., 1.1-1.3.

16 See Decision 594/01 of the TB dated March 5, 2015; Decision 594/02

of the TB dated March 9, 2015; Decision 594/03 of the TB dated April 1,

2015, all rendered in the matter Sika AG; Decision of the FINMA dated

May 4, 2015 in the matter Sika AG.


October 14, 2015

6 | 26

a clause which allows the board to refuse to regis-

ter in the share register a shareholders with more

than 5% of the voting rights (restriction to trans-

missibility clause). There is a grandfathering in

favor of the family shareholders and hence the

voting rights of SWH are not limited to 5%. In De-

cember 2014, the family members sold all their

shares in SWH to Saint-Gobain. Under the terms

of the share purchase agreement, upon closing,

the family shareholders would receive a total con-

sideration of CHF 2.75 billion, representing a pre-

mium of approximately 80% on the share price at

the time the transaction was announced. The

combination of the two classes of shares, as well

as an opting-out clause would allow Saint-Gobain

to acquire control of Sika by indirect acquisition of

only 16.43% of the share capital, without the obli-

gation to launch a public offer for the benefit of the

remaining shareholders representing 83.57% of

Sika's share capital. In fact, Saint-Gobain publicly

announced that they would not launch an offer for

the remainder of the shares of Sika, relying there-

by on the opting-out clause.

Upon request by SWH, the TB held that the opt-

ing-out clause was introduced in the two years

period after the entry into force of the SESTA, i.e.

before December 31, 2000. Hence, pursuant to

art. 53 LBVM (repealed) the TB was not compe-

tent to review its validity against the standard of

art. 706 CO since art. 22 para. 3 SESTA grants

such competence to the TB only for clauses that

were adopted after this two years transitional peri-

od17

. Indeed, the shareholders' meeting of Sika

adopted the introduction of an opting-out by unan-

imous decision on May 27, 1998. Furthermore, no

grounds for a nullity ab initio were apparent or

were alleged by Sika. In a second decision, which

was triggered by an opposition of qualified share-

holders, the TB was requested to interpret the

opting-out in connection with the restriction to

transmissibility clause in the articles of incorpora-

tion, as well as to opine on the potential abuse of

17Decision 594/01 of the TB dated March 5, 2015 in the matter Sika AG,

c.1.2.

rights which was alleged by Sika18

. The argu-

ments made by the qualified shareholders and

Sika aimed at a combined interpretation of the

opting-out and the restriction to transmissibility

with the result that these two clauses were imple-

mented to avoid any change of control which was

not vetted by the board. The TB, which was in a

subsequent appeal confirmed by the FINMA, held

that both clauses had to be interpreted separately.

Indeed, articles of incorporation of listed compa-

nies must be interpreted according to the same

principle as the interpretation of statutory law.

Therefore, the starting point for the interpretation

of the clause is its wording and only in exceptional

cases, where strong evidence suggests that the

meaning of the clause does not comply with its

wording, such rule can be altered. Without strong

evidence in the present case, the wording of the

opting-out clause is, pursuant to the TB, clear and

unambiguous and is a typical wording for such

clauses (art. 5 of the articles of incorporation of

Sika read as follows: "An acquirer of shares of the

Company is not obliged to make a public pur-

chase offer pursuant to Art. 32 and 52 of the

Swiss Law on Stock Exchanges and securities

trading"). Also, the argument that the opting-out

was selective, i.e. would only be valid for transfer

between the family shareholders, was rejected

because the clause was, again, clear and unam-

biguous19

. Finally, the TB denied any abuse of

law, as none of the behavior of Saint-Gobain or

the founding family was tantamount to an abuse of

right. The mere fact that the founding family had in

the past communicated to the public that they

intended to remain the reference shareholder did

not oblige them to remain effectively a sharehold-

er. The fact that they had changed their views had

no effect on the validity of the opting-out clause. In

both their decisions, the TB and the FINMA hinted

that Swiss law could provide for other remedies in

18Decision 598/01 of the TB dated April 1, 2015 in the matter Sika AG,

c.2.2; Decision of the FINMA dated May 4, 2015 in the matter Sika AG,

c.3.19

Decision 598/01 of the TB dated April 1, 2015 in the matter Sika AG,

c.3.


October 14, 2015

7 | 26

such a situation20

, for which they are however not

competent.

Repealing of Opting-Out Clause. In the first

decision rendered by the TB in the Sika case21

,

the TB had to determine under what circumstanc-

es a company could "opt in" for a mandatory pub-

lic offer.

Swiss law does not expressly provide for an opt-

ing-in. In addition, an opting-in clause has never

been tested in the Swiss courts and therefore no

court decision exists in this respect. Pursuant to

the TB, rules regarding the introduction of an opt-

ing-out clause are not applicable to an opting-in,

since the interests of the shareholders in case of a

subsequent opting-out and opting-in are not com-

parable. In the case of an opting-in, the risk of

discrimination against minority shareholders does

not exist; on the contrary, minority shareholders

would get back the right to receive a mandatory

offer in case of change of control. Consequently,

from a legal perspective, an opting-in provides the

minority shareholders with increased protection in

case of a takeover22

. Thus, the restrictive proce-

dural safeguards developed by the TB in the ADB

Holdings SA23

case for the introduction of an opt-

ing-out after the listing of the company are not

applicable to an opting-in.

Selective Opting-Out. In the Kaba Holding AG |

Dorma Holding GmbH + Co. KGaA combination,

the shareholders of Kaba had to vote upon the

introduction of a selective opting-out because the

overall transaction could have been considered

has a change of control of Kaba. The clause was

specific to the envisaged transaction and only

aimed at exempting the participating shareholders

in the combination from the mandatory offer obli-

20Decision 598/01 of the TB dated April 1, 2015 in the matter Sika AG,

c.2.3; Decision of the FINMA dated May 4, 2015 in the matter Sika AG,

c.4.21

Decision 594/01 of the TB dated March 5, 2015; Decision 594|02 of

the TB dated March 9, 2015.22

Id., c.2.23

See Decision 518/01 of the TB dated October 11, 2012 in the matter

Advanced Digital Broadcast Holdings SA.

gation, i.e. the family shareholders of Dorma and

the pool shareholders of Kaba would not be

obliged to launch a takeover offer in case they

would exceed 331/3% of the voting rights in the

listed Kaba shares.

The TB for the first time re-established its practice

regarding the formally selective opting-out24

, i.e.

which benefits a specific transaction | sharehold-

er(s) clearly and fully disclosed at the sharehold-

ers’ meeting, after such practice had been denied

by the Federal Banking Commission in the ESEC

Holding case25

. Indeed, the TB already hinted in

an obiter dictum in the ADB Holdings SA case26

that it would not be against such practice, all the

more that the impact of such a clause – duly

adopted by the "majority of the minority" by an in-

formed decision – is of lesser importance than a

general opting-out, since "minority" shareholders

(and not the board of directors) waive their right to

obtain an offer price complying at least with the

minimum price rule only in connection with a spe-

cific transaction and | or in favor of one or several

shareholder(s) that are duly known. They do not

waive their rights for a mandatory offer in any

change of control transaction.

No Mandatory Offer in Group Internal Restruc-

turing. The TB confirmed its well-established

practice that in case of a change in the controlling

group of shareholders – due to the accession of a

new member to the group, a transfer of shares

between group members or a modification to the

terms of a shareholders’ agreement among the

group members – it must be assessed whether

such change leads to a significantly different situa-

tion within the group and, thereby, creates a new

24Decision 600/01 of the TB dated April 22, 2015 in the matter Kaba

Holding AG, c.1.4.25 Recommendation 0018/02 of the TB dated June 6, 2000 in the matter

ESEC Holding AG.26


Advanced Digital Broadcast Holdings SA, c.4.1.


October 14, 2015

8 | 26

group which would be subject to the mandatory

offer27

.

In the matter Feintool International Holding AG

(Feintool), Artemis Beteiligung III AG intended to

sell its 50.038% participation in Feintool to its sis-

ter company Artemis Beteiligung I AG, both

owned by Artemis Holding AG, in turn held 100%

by Centinox Holding AG (Centinox), in turn held

100% by Michael Pieper (Pieper).

TB held that as a matter of principle, Artemis Be-

teiligung I would be subject to the mandatory

takeover offer: it held no voting rights of Feintool

before the transaction and would end up with

50.038% of the voting rights after the transaction.

However, the TB granted an exemption based on

art. 32 para. 2 lit. a SESTA, because the transfer

occurred within a group (Pieper, Centinox, Artemis

Holding, Artemis Beteiligung I and Artemis Be-

teiligung III) and no change would occur for the

minority shareholders28

.

Exemption from Mandatory Offer for Recapi-

talization (Sanierung) Purposes. In justified

cases, the TB may grant an exemption from the

obligation to make a takeover offer. In the matter

Mikron Holding AG29

(Mikron), the TB confirmed

that an exemption granted in cases where the

equity securities have been acquired for recapi-

talization purposes (see art. 32 para. 2 lit. e

SESTA) has no time limitation.

Since 2003, a shareholder agreement was binding

several shareholders of Mikron totalling at that

time 89.10% of the voting rights (today: 70.43%).

The shareholder Ammann Group Holding AG

27Decision 579/01 of the TB dated September 24, 2014 in the matter

Feintool International Holding AG. Such an exemption was granted

previously by the TB in decision 446/01 of the TB dated June 30, 2010 in

the matter Advanced Digital Broadcast Holdings SA, c.2, decision 405/01

of the TB dated March 6, 2009 in the matter Art & Fragrance AG, c.6,

confirmed by decision 423/01 of the TB dated July 24, 2009 in the matter

EFG International AG; see also recommendation 394/01 of the TB dated

December 3, 2008 in the matter Orascom Development Holding AG, c.3.28

Id., c.4.29

Decision 560/01 of the TB dated April 11, 2014 in the matter Mikron

Holding AG.

(Ammann Group) on its own held 41.63% of the

voting rights. All parties agreed to terminate the

shareholder agreement, subject to the condition

that such termination would not trigger an obliga-

tion to launch an offer for Ammann Group. As a

consequence of the termination of the sharehold-

ers' agreement, a change of control will occur over

Mikron. The Ammann Group is so far not control-

ling Mikron on its own since according to the

shareholders' agreement certain important deci-

sions require a majority of 75% of the voting

rights. After termination of the shareholders'

agreement, the Ammann Group will control Mikron

alone with its 41.63% stake. The TB held that

when it granted the exemption to the mandatory

offer in 2003, it did not only grant such an exemp-

tion for the shareholders' group, but also for the

Ammann Group on its own. Such exemption being

unlimited in time unless the TB is ordering differ-

ently, the shareholding of the Ammann Group is

still covered by such exemption30

.

The TB also granted an exemption from the man-

datory offer to the shareholders' group composed

of Recharge, Precept and Bruellan, as well as to

each shareholder individually, who together held

74% of the voting rights of Leclanché SA31

. The

TB confirmed its practice according to which the

purpose of the exemption from the obligation to

make an offer in case of an acquisition of shares

for recapitalization is to favor a rescue transaction

in situations where investors are willing to support

a company with financial problems. In such a

case, the interest of the company in recapitalizing

itself and continuing its business prevails over the

interest of the minority shareholders in a manda-

tory offer. Consequently, the TB will grant an ex-

emption if the applicant can provide evidence that

the planned recapitalization measure is necessary

and appropriate to secure the continuity of the

company in a situation in which without such

measure no investor would be willing to invest.32

It

30 Id., c.2.31

Decision 587/01 of the TB dated December 23, 2014 in the matter of

Leclanché SA.32 Id., c.2.


October 14, 2015

9 | 26

is not necessary that the recapitalization measure

guarantees a long term success of the target;

rather, such measures shall be, according to the

ordinary course of business and with a sufficient

probability of success, adequate in order to main-

tain the existence of the target.

Competing Offers

General. According to art. 30 para. 1 SESTA, if

competing offers are made for equity securities of

the same target, the shareholders of the target

must be free to choose which offer they accept.

Hence, the regulation on competing offers aims at

fostering auctions and competing offers and at

creating a level playing field for competing of-

fers33

. Indeed, the recipients of the offers must,

irrespective of the order of their publication, be

able to choose freely between the various offers

(art. 48 para. 4 TOO). This has three material

consequences:

— First, the target shareholders have with-

drawal rights: following publication of a

competing offer, the recipients may revoke

their acceptance declarations of the initial

offer at any time up to its expiry and accept

the competing offer instead (art. 51 para. 2

TOO).

— Second, the timetables of the competing

offers are automatically aligned and the re-

spective acceptance periods run in parallel

(art. 51 para. 1 TOO).

— Third, from the perspective of the offeror,

the target must treat offerors equally. In par-

ticular, it shall provide them all with the

same information. For instance, if the target

company grants (or has granted) the right to

perform a due diligence to one of the offer-

ors, it has to grant the same right to all of-

feror(s). An unequal treatment of offerors is

possible only with the prior consent of the

TB if the target demonstrates that it has an

overriding interest (art. 49 TOO).

33See Ruling of the Federal Court 133 II 232, c.3.1.2. Decision 477/04 of

the TB dated August 2, 2011 in the matter Absolute Private Equity AG,

c.3.

The Victoria-Jungfrau Case. During the period

under review, the multiple offers made for Victoria-

Jungfrau Collection AG34

(VJC) contributed to de-

velop the practice of the TB regarding competing

offers. The auction started with an offer made by

AEVIS Holding SA (AEVIS) on October 24, 2013

for CHF 250 per VJC share. Swiss Private Hotel

AG (SPH) launched a competing offer on Decem-

ber 23, 2013 for CHF 277 per VJC share. Both

offers were refused by the board of directors of

the target who had committed a fairness opinion

indicating a valuation range of CHF 300 to

CHF 325. On January 21, 2014, AEVIS signed a

transaction agreement with the target and in-

creased its – now recommended – offer to

CHF 305 per share on January 23, 2014. On Jan-

uary 30, 2014, SPH increased its offer to CHF 310

per share. Two trading days before the end of the

extended offer period, AEVIS purchased a block

of share representing 15.6% of the share capital

of the target for CHF 310 per share and hence

increased its offer, according to the best price rule

(art. 10 TOO), to CHF 310 per share as well. After

this purchase, AEVIS held 29.1% in VJC.

Amendment of Competing Offer and Best Price

Rule. The last increase of its offer by AEVIS in the

battle for VJC occurred two days before the expira-

tion of the offer and showed a conflict between the

best price rule (art. 10 TOO), which obliges the

offeror to extend to all recipients of the offer an

increased offer, and art. 52 para. 1 TOO, which

allows the increase of a public offer until the fifth

trading day before the expiration of the offer at the

latest. SPH requested the annulment of the pur-

chase of the 15.6% block because of the breach of

the five-day rule set out in art. 52 para. 1 TOO.

The TB considered both rules as being of equal

rank and hence had to find a solution to bridge this

conflict, which would take into consideration the

interest of the recipients of the offer and the overall

34 The TB rendered eight decisions in connection with this takeover offer.


October 14, 2015

10 | 26

principles of takeover rules35

. The TB decided to

extend the offer period by an additional ten-day

period as of the publication of the completed offer

prospectus and to request the board of the target

to issue a new report. The TB came to the conclu-

sion that AEVIS was entitled to purchase blocks of

shares in the target at a price higher than the offer

price. However, the TB pointed out that the appli-

cation of the best price rule in connection with

competing offers could be used to circumvent the

five-day deadline of art. 52 para. 1 TOO. Such

circumvention was not apparent here, but the TB

would particularly pay attention to this in the future.

Withdrawal Rights by Recipients of Competing

Offers. Following the publication of a competing

offer, the recipients may revoke their acceptance

declarations of the initial offer at any time up to its

expiry and accept the competing offer instead

(art. 51 para. 2 TOO). While the economics under-

lying this rule are clear when the competing offer is

higher than the initial offer, the question arises

whether this withdrawal right is also available when

the competing offer is equal to or lower than the

initial offer. This was the case in the VCJ case,

where AEVIS increased its offer to CHF 310 per

share, matching thereby exactly the offer pre-

sented by SPH. Could the shareholders who had

already accepted the offer of SPH at CHF 310 per

share withdraw their acceptance and accept

AEVIS’ offer instead? Conversely, could the

shareholders who had accepted AEVIS' offer for

CHF 305 per share and hence benefit from an

increased offer at CHF 310 switch to the SPH offer

at CHF 310 per share as well?

The TB obliged AEVIS to mention this double

withdrawal right in its amended prospectus36

. In-

deed, the withdrawal rights merely assume the

publication of a competing offer, irrespective of

such offer being more favorable or not to the

shareholders having already accepted the first

35 Decision 550/07 of the TB dated February 11, 2014 in the matter

Victoria-Jungfrau Collection AG, c. 6ss.36

Decision 550/08 of the TB dated February 11, 2014 in the matter

Victoria-Jungfrau Collection AG.

offer. This could be the case if the competing offer

is lower in price but subject to less conditions

precedent and hence more likely to succeed.

Amendment of Offer


sion was rendered relating to the amendment of

the offer.

Acting in Concert

General. Pursuant to art. 32 para. 1 SESTA, any-

one who directly, indirectly or acting in concert

with third parties, acquires equity securities, and,

as a result of such acquisition, holds equity secu-

rities of a Swiss listed company exceeding the

threshold of 331/3% of the voting rights of such

company, must submit an offer for all listed equity

securities of such company. In connection with the

mandatory offer, the definition of "acting in con-

cert" is set forth in art. 31 SESTO-FINMA, which

states that art. 10 para. 1 and 2 SESTO-FINMA

(which states the general definition of acting in

concert for mere disclosure purpose) applies by

analogy to acquirers of shares of the target. Ac-

cording to art. 11 para. 1 TOO in connection with

art. 10 para. 1 and 2 SESTO-FINMA, and pursu-

ant to the practice of the TB, a third party who

coordinates with the offeror in view of a takeover

offer and its terms, or who has reached an

agreement (in writing or otherwise) with the offeror

regarding the takeover offer or its terms, is consid-

ered to be acting in concert with such offeror as of

the date of such agreement. In particular, such a

coordination of conduct exists, inter alia, in the

event of (i) legal relationships for the acquisition or

sale of equity securities, (ii) legal relationships

regarding the exercise of voting rights (sharehold-

ers’ voting agreement), or (iii) the constitution by

individuals and | or legal entities of a group of

companies or other type of firm controlled through

possession of the majority of voting rights or capi-

tal or in any other way (see art. 10 para. 2

SESTO-FINMA). However, for the purpose of the

triggering of the mandatory offer, it is decisive

whether the coordinated action is performed "in


October 14, 2015

11 | 26

view of the control of the target" pursuant to

art. 31 SESTO-FINMA.

All parties acting in concert with the offeror have

to abide by certain rules: (i) those governing trans-

parency (art. 23 TOO) principally mean that they

have to be listed in the prospectus as acting in

concert with the offeror; (ii) the rules governing

equal treatment, and in particular the best price

rule (art. 10 TOO), require that if they buy shares

at a higher price than the bid price, the offeror has

to increase the price offered; (iii) the rules gov-

erning fairness require that all parties "acting in

concert" have to behave fairly within the meaning

of art. 1 TOO; (iv) the rules governing the obliga-

tion to give notice of any transaction (chapter 8

TOO) oblige them to disclose every transaction

which they make involving shares of the target

company from the publication of the offer until the

end of the supplementary acceptance period

(art. 38 para. 1 and 2 TOO).

"In View of a Successful Offer". In the matter

PubliGroupe S.A., the TB held that for a behavior

to qualify as an acting in concert pursuant to the

takeover rules, such behavior must favor the suc-

cess of the offer37

. In this takeover, both Tamedia

and Swisscom were competing offerors until they

coordinated their behaviors: Tamedia agreed not

to increase its offer price (CHF 190) and to con-

tribute to Swisscom the PubliGroupe shares they

already held in case the Swisscom offer was suc-

cessful. Hence, while both parties were coordinat-

ing their behaviors, they did it in view of the suc-

cess of the offer of Swisscom and not in view of

the success of the offer of Tamedia. They were

acting in concert in the Swisscom offer, but not in

the Tamedia offer.

Group of Companies. As for groups of compa-

nies (including their controlling shareholder[s]),

they are deemed to act in concert if control de-

rives from (i) the majority of the capital or of the

37Decision 562/01 of the TB dated June 11, 2014 in the matter

PubliGroupe S.A., c.3.2.

voting rights or (ii) in any other way (art. 10 para. 2

lit. c SESTO-FINMA). In other words, an offeror is

deemed to act in concert with all members of the

group of companies to which it belongs as well as

with the controlling shareholder(s) of such a

group. This control can emanate from the majority

of the shares or voting rights (more than 50%) or

"in any other way", which means that even a

shareholding of less than 50% can be considered

as controlling for other reasons.

So far, the TB always considered a shareholder

holding more than 50% percent of the offeror as

acting in concert with the latter. The sole excep-

tion was the case when such shareholder was a

foreign State and such State confirmed it would

not conduct any transactions38

. Whenever such

owner was, e.g., a Swiss canton or community,

the 50% rule was strictly followed39

. In the Pub-

liGroupe case, the TB changed this practice when

it had to assess the situation of the Swiss Confed-

eration which owns 51.2% of the offeror Swiss-

com40

. The public governmental body must not

only own the majority of the shares or voting rights

of the offeror, but it must also effectively influence

either the acquisition of the target or the decision

leading to the acquisition of the target. The influ-

ence is measured e.g. by the position of the public

body in the board of the offeror, the intensity of the

influence of the public body otherwise, or the exis-

tence of a state guarantee. Concerning Swisscom,

the TB held that this was not the case and hence

the Swiss Confederation was not acting in concert

with Swisscom41

.

Representative in the Board. The issue whether

the mere fact that the offeror had in its board rep-

resentatives of certain of its shareholders is suffi-

cient to qualify these shareholders as acting in

38Recommendation 0301/03 of the TB dated January 4, 2007 in the

matter Bank Linth.39

See, e.g., Decision 542/01 of the TB dated July 31, 2013 in the matter

Società Elettrica Sopracenerina SA.40 Decision 562/02 of the TB dated July 3, 2014 in the matter

PubliGroupe S.A.41

Id., c.3.2. For instance, there is one member in the board (out of eight)

representing the Swiss Confederation.


October 14, 2015

12 | 26

concert with the offeror was decided in the take-

over offer for Schweizerische National-

Versicherungs-Gesellschaft AG42

.

The TB held that a mere representation in the

board of a company would not make the share-

holder who has designated such representative as

acting in concert with the company. Indeed, such

a consequence could force such representative to

vote against (even against its own interest) a

takeover offer in order to avoid the consequences

of acting in concert with the shareholder43

.

"Parallel Behaviors". In the takeover for

Schweizerische National-Versicherungs-

Gesellschaft AG by Helvetia Holding AG (Helve-

tia), certain shareholders of Helvetia, namely

Vontobel and Raiffeisen, communicated to the

offeror that they were in favor of such takeover.

Promptly, the offeror mentioned this support in the

press release related to the launch of the offer and

in various media presentations. The TB held that

this was a mere parallel behavior, since the two

shareholders were informed of the transaction

only after the board of Helvetia (which actually

had a representative of each of the two share-

holders) had decided to launch the offer and

hence could not influence in any manner such

decision and could not also coordinate their be-

havior amongst themselves and with the offeror44

.

Tender Undertaking by Target Shareholders

and Cross-Shareholdings. In the matter

Swisslog Holding AG45

, the two main shareholders

of the target (Grenzebach: 25.01% and Swoctem:

18.0358%) entered into a tender undertaking on

the day of the preliminary announcement accord-

ing to which they would tender their shares in the

takeover offer after having entered into confidenti-

ality and standstill agreement 3, respectively 6

42 Decision 573/01 of the TB dated August 8, 2014 in the matter Schwei-

zerische National-Versicherungs-Gesellschaft AG.43

Id. 3.2.2.44 Decision 573/01 of the TB dated August 8, 2014 in the matter Schwei-

zerische National-Versicherungs-Gesellschaft AG, c.3.2.2.45

Decision580/01 of the TB dated October 16, 2014 in the matter

Swisslog Holding AG.

days before the publication of the preliminary an-

nouncement. The TB confirmed that by entering

such tender agreements the target shareholders

would not be deemed to be acting in concert with

the offeror46

. However, the TB held that additional

elements were present in this situation and con-

sidered these two shareholders as acting in con-

cert with the offeror KUKA as of the date of the

signing of the tender undertaking: both were sim-

ultaneously invested in an important manner with

a strategic participation in the offeror as well

(Grenzebach: 19.8%; Swoctem: 10%) and, with

respect to Grenzebach, designated two out of

twelve supervisory board members of the offe-

ror47

.This long-term and important relationship

between KUKA, Grenzebach and Swoctem and

the importance of the support of the offer by

Grenzebach and Swoctem for the success of the

offer was an evidence of the coordinated behavior

in view of the offer. Also, the short timeframe be-

tween the signing of the confidentially and stand-

still agreements (September 19 and September

22, respectively) and the signing of the tender

undertakings (September 25) made it barely plau-

sible that the parties did not already coordinate

their behavior before the signing of the confidenti-

ality agreement.

Grenzebach and Swoctem both appealed against

this decision before the FINMA48

. The decision of

FINMA is interesting because it goes into very

much detail about the facts, in particular the per-

sonal ties between the parties and the

stakebuilding by both shareholders over the years

in KUKA and Swisslog. The FINMA concluded

that there were not enough indicia to exclude

merely a parallel behavior of Grenzebach and

Swoctem both in the stake building in KUKA and

Swisslog49

.

Minimum Price Rule

46 Id., c.3.2.47

Id., c.3.2.48

See Decision of the FINMA dated November 13, 2014.49 Id., c.3.2.


October 14, 2015

13 | 26

General. Any public takeover offer made for a

number of equity securities that would result in the

offeror holding a number of equity securities of the

target that would trigger the mandatory offer rule

(i.e., 331/3% of the voting rights of the target,

whether exercisable or not, except where the tar-

get's articles of incorporation contain an opting-up

or opting-out provision) must comply with strict

minimum price rules. Pursuant to art. 32 para. 4

SESTA, the price offered shall be at least as high

as the higher of the following two amounts: (i) the

stock exchange price (which shall be at least the

volume-weighted average price of all on-exchange

transactions executed during the sixty (60) trading

days (VWAP) prior to publication of the offer or the

pre-announcement); and (ii) the highest price that

the offeror has paid for equity securities of the tar-

get in the preceding 12 months (even if this pur-

chase was only completed after the offer's launch,

see below under Best Price Rule).

"Other Major Benefits" as Consideration.

Art. 41 para. 4 SESTO-FINMA states that if the

offeror rendered other major services or benefits

in connection with a prior acquisition (e.g., grant-

ing of assurances or material benefits), the price

of the prior acquisition must be adjusted to reflect

the value of these services.

In the takeover for PubliGroupe S.A., the compet-

ing offerors Tamedia and Swisscom finally joined

forces in favor of the Swisscom offer and were

acting in concert in that respect. They decided to

conduct the local.ch business through a joint-

venture and Swisscom agreed that they would

purchase from Tamedia the previously purchased

PubliGroupe shares at the offer price. The TB

decided to investigate whether under the perspec-

tive of equal treatment of the investors and of the

best price rule, Swisscom had offered other bene-

fits to Tamedia. Hence, the auditor of Swisscom

valued the services and counter-services, includ-

ing the reciprocal put and call option. The valua-

tion report which the TB considered as transpar-

ent, plausible and understandable concluded that

the arrangements between Swisscom and Tame-

dia had no impact on the offer price and hence the

Best Price Rule was not triggered50

.

Valuation of Non Listed Exchange Shares. If the

securities offered by the offeror in exchange are

not listed on a stock exchange, the offer prospec-

tus must contain a valuation thereof by a review

body (art. 24 para. 6 TOO and art. 44 SESTO-

FINMA). However, if the transparency of the non-

listed securities offered in exchange is guaranteed,

the TB may grant an exemption. Such exemptions

are typically available in an exchange offer aiming

at introducing a holding structure with an exchange

ratio of 1:1, as was the case in the exchange offer

conducted by UBS Group AG51

: any new share of-

fered in exchange corresponded exactly to one old

share of the target UBS AG.

Non-Application of the Minimum Price Rule. If

the offer includes equity securities whose acquisi-

tion would cross the threshold requiring the sub-

mission of a mandatory offer (change of control

offer), it must be extended to all the listed equity

securities of the target company. The price of the

offer must comply with the rules on mandatory

offers, with the exception of art. 43, para. 2

SESTO-FINMA (art. 9 para. 6 TOO).

The TB confirmed its practice whereby the mini-

mum price rule does not apply in the case of an

exchange offer in view of the introduction of a hold-

ing structure, since no change of control occurs52

.

Best Price Rule

Application in Exchange Offers. Any purchase

of the offeror or a person acting in concert with the

offeror from the day the offer is launched until 6

months following the end of the additional ac-

ceptance period is relevant under the Best Price

50Decision 562/01 of the TB dated July 3, 2014 in the matter

PubliGroupe S.A., c.5.1.51 Decision 572/01 of the TB dated June 30, 2014 in the matter UBS AG,

c.2.52

Decision 572/01 of the TB dated June 39, 2014 in the matter UBS AG,

c.3.


October 14, 2015

14 | 26

Rule. The same holds true if the offeror acquires

shares of the target outside the takeover offer,

either via the stock exchange, a stock exchange

similar platform or on the over-the-counter market.

As a result, the price paid may not exceed the

value of the offer. In case of an exchange offer,

the price paid outside the offer must not exceed

the value of the shares offered in exchange on the

date of the purchase53. The fluctuations of the

stock price of the shares offered in exchange have

to be considered until the settlement of the ex-

change offer only. Therefore, in exchange offers,

the Best Price Rule floats until the settlement of

the offer. Fluctuations occurring thereafter must

no longer be considered54

. After the settlement of

the takeover offer, the relevant price of the shares

offered in exchange is "frozen" and corresponds to

the opening price on the day of the settlement of

the tender offer55

. The Review Body has to con-

firm that the provisions on the best price rule have

been complied with by all relevant parties (art. 28

para. 1 lit. d TOO).

In a holding exchange offer, no violation of the

Best Price Rule can occur if the shares of the

target are exchanged against shares of the offeror

in a ratio of 1:1 since the shares offered in ex-

change have constantly the same value as the

new offeror shares56

. Therefore, no “freezing” of

the relevant price is necessary at the settlement of

the offer57

.

Conditions

Conditions in Mandatory Offers. Unless im-

portant reasons can be demonstrated, a manda-

53Decision 572/01 of the TB dated June 30, 2014 in the matter UBS AG,

c.4.2, confirming Decision 469/01 of the TB dated February 15, 2011 in

the matter Schweizerische Rückversicherungs-Gesellschaft AG, c.5.2,

confirming e.g., decision 422/02 of the TB dated September 1, 2009 in

the matter LO holding Lausanne-Ouchy S.A. / JJM Participations SA,

c.2.54

Id.55 Decision 572/01 of the TB dated June 30, 2014 in the matter UBS AG,

c.4.2, confirming Decision 416/01 of the TB dated July 13, 2009 in the

matter Jelmoli Holding AG, c. 5.56 Decision 572/01 of the TB dated June 30, 2014 in the matter UBS AG,

c.4.2, confirming Decision 469/01 of the TB dated February 15, 2011 in

the matter Schweizerische Rückversicherungs-Gesellschaft AG, c.5.2.57 Id.

tory offer may not be subject to conditions (art. 36

para. 1 SESTO-FINMA).


sion was rendered relating to conditions in manda-

tory offers.

Minimum Acceptance Level. According to the

practice of the TB, a takeover offer's minimum

acceptance level must not be so high that achiev-

ing such a level would appear impossible at the

time it is set58

. As a general rule, when the offeror

does not yet own shares in the target, a minimum

threshold of 67% is deemed acceptable59

. In an

offer where the offeror already held 45.75% of the

target, the TB accepted an acceptance threshold

of 71%60

. In an exchange offer aiming at putting in

place a holding structure, the TB confirmed an

acceptance threshold of 90% was permissible. For

instance, in the UBS AG exchange offer such a

high threshold was accepted, all the more that the

US shareholders were not excluded from the offer

but rather a US exchange offer was made to them

as well61

.

No Cash Alternative as Condition Precedent?

In the takeover offer for Pretium AG, the TB –

without the condition being applied to the take-

over, since it was repealed by the offeror after the

pre-announcement – nevertheless decided volun-

tarily on the validity of a condition according to

which the offeror should not be obliged to offer a

cash alternative to the target shareholders62

.

The offeror Novavest had offered listed, but illiquid

shares, as consideration in the exchange offer

and the target Pretium AG had an opting-out in its

articles of incorporation, which actually triggered

the "disapplication" of the rules on the mandatory


Nobel Biocare Holding AG.59

Id, c.6.1.60

Decision 584/01 of the TB dated November 3, 2014 in the matter

Advanced Digital Broadcast Holdings SA, c.8.61

Decision 572/01 of the TB dated June 30, 2014 in the matter UBS AG,

c.1.62 Decision 569/01 dated June 24, 2014 in the matter Pretium AG, c.7.2.


October 14, 2015

15 | 26

offer. The obligation to offer a cash alternative

obliges the offeror in so-called "change of control"

offers in which the price consists entirely or par-

tially of securities, to offer the target shareholders

a cash alternative if it has acquired equity securi-

ties constituting 10% or more of the share or par-

ticipation capital of the target company for cash in

the 12 months preceding the publication of the

offer. This was the case in the Pretium case, but

the rule was "disapplied" by the opting-out clause

of the target. The TB held that conditions which

protects the offeror from an unexpected or unde-

sired interpretation or application of the takeover

rules, namely which would lead to an increase of

the offer price, should not – as a matter of princi-

ple – be accepted; the offeror shall not be entitled

to transfer the risk arising out of takeover law to

the recipients of the offer63

.

In their article published in SZW/RSDA 2015,

p. 255 ss, 263-267, Bovey/Thévenoz develop the

thoughts behind the decision of the TB not to al-

low – as a matter or principle – the offeror to

transfer the risk of an increase in the offer price to

the recipients of the offer. They distinguish four

situations which could lead to an increase of the

offer price against the intent of the offeror: (i) val-

uation of illiquid securities in a friendly offer64

; (ii)

valuation of illiquid securities in an unfriendly of-

fer65

; (iii) valuation of "other major services" in

connection with the acquisition according to

63Decision 569/01 dated June 24, 2014 in the matter Pretium AG, c.7.2.

64 See the Harwanne case: Decision 403/03 of the TB dated March 30,

2009 in the matter of Harwanne Compagnie de participations

industrielles et financières SA, where the TB first held that the securities

of the target were liquid (and hence the market price was relevant) and

then upon opposition by qualified shareholders changed its mind and

held that the securities of the target was not liquid. The offeror had

therefore to increase its offer from CHF 2.65 per share to CHF 3.45 per

share (which was CHF 0.02 above the valuation by the appraiser com-

mitted due to the illiquidity of the target shares).65 See Decision 550/01 of the TB dated November 7, 2013 in the matter

Victoria-Jungfrau Collection AG, where the illiquidity appraiser engaged

by the offeror valued the shares of the target at CHF 219.60 per share

and the fairness opinion provider, engaged by the target, and hence

having access to more information than the illiquidity appraiser, held that

the fair value of the target share was within a range between CHF 300

and CHF 325 per share.

art. 41 al. 4 SESTO-FINMA66

; and (iv) the behav-

ior of a person acting in concert with the offeror

that would trigger the best price rule67

.

The authors conclude that in the first three cases,

the TB, the FINMA or even the FAC only review

valuation reports as to their transparency, plausi-

bility and understandability. Hence, only cases of

willful intent or gross negligence could lead to a

modification of the valuation and the offer price;

such behavior has no merits and should not be

protected. In the fourth situation, the offeror lacks

a justified interest to have a condition, since it can

appeal against decisions of the TB. Such appeals,

(or oppositions by qualified shareholders) finally

only lead to the correct application of the law and

hence may not entitle an offeror to withdraw its

offer.

Dividend Distribution as Condition Precedent?

In the WM Technologie68

case, the TB accepted

the condition that the intended spin-off be com-

pleted, i.e. that the shares of the target be distrib-

uted to the shareholders of its parent. The TB

based its decision on its well established practice

that an exchange offer may be made subject to

the condition precedent that the offeror's share

capital increase necessary for purposes of the

exchange offer be registered in the commercial

register and that such registration would not be

hindered by a possible registry ban.69

Non Introduction of Voting or Transfer Restric-

tions in Articles of Incorporation of Target. The

takeover offer of Tamedia for PubliGroupe con-

tains a condition prohibiting the shareholders'

66See Decision 410/01 of the TB dated May 29, 2010 in the matter

Quadrant AG.67 See Decision 580/01 of the TB dated October 16 13, 2014 in the

matter Swisslog Holding AG, where the TB held that the offeror was

acting in concert with its two major shareholders. This decision was

annulled by the FINMA upon appeal by the offeror in a decision dated

November 13, 2014 which held that the indicia were not sufficient in casu

to hold an acting in concert.68 Decision 556/2 of the TB dated February 24, 2014 in the matter of WM

Technologie AG, No. 17.69

Decision 416/01 of the TB dated July 13, 2009 in the matter Jelmoli

Holding AG, c.7.10.


October 14, 2015

16 | 26

meeting of the target to introduce in the articles of

incorporation a clause restricting voting power or

the transfer of shares. The TB has confirmed that

it would accept such additional conditions and it

would uphold it until settlement of the offer70

.

Completion of the Already Announced Divest-

ment of a Business. In the takeover of Tamedia

for PubliGroupe, the offeror requested a condition

whereby the sale of the segment Media Sales

already announced by the target prior to the

launch of the offer be completed, alleging that

keeping the segment Media Sales would trigger

additional merger control issues for the offeror.

The TB held that such a condition lacks a justified

reason for the offeror: the Competition Commis-

sion had already vetted the sale and even if the

board of PubliGroupe would not pursue the sale,

the offeror could after settlement of the offer per-

form such transaction at its own conditions or

even abandon it71

.

Election in the Board of Offeror of Persons

Jointly Selected by Offeror and Target. In the

takeover offer for Schweizerische National-

Versicherungs-Gesellschaft AG,72

the offeror had

proposed a condition whereby in its own board

persons jointly selected by the offeror and the

target would be elected at an extraordinary gen-

eral meeting. The offeror had also accepted to

avail itself of this condition only with the approval

of the target.

This condition favors a merger of equals because

it enables the target to be represented in the

board of the offeror. Also, the condition is not of a

potestative nature (Helvetia cannot hinder the

fulfillment of the condition: if the general meeting

of Helvetia would not vote the representatives of

target in the board, Helvetia could only rely on the

70Decision 562/01 of the TB dated June 11, 2014 in the matter

PubliGroupe S.A., c.6.3.71 Decision 562/01 of the TB dated June 11, 2014 in the matter

PubliGroupe S.A., c.6.4.72

Decision 573/01 of the TB dated August 8, 2014 in the matter Schwei-

zerische National-Versicherungs-Gesellschaft AG.

non-fulfillment of the condition with the consent of

the target). Finally, the condition is also sufficiently

clear and not unfair, it is therefore lawful73

.

No MAC. In the Schweizerische National-

Versicherungs-Gesellschaft AG74

matter, the TB

confirmed its long-standing practice whereby "no

material adverse change" (MAC) conditions to

takeover offers are accepted, provided that the

target's losses in turnover or profit reach a certain

minimal level. In accordance with the practice of

the TB, losses may be considered material if they

reach at least 10% of the target's EBIT, EBITDA

or NAV or at least 5% of the consolidated turnover

of the target company75

. The TB also held that

when the target is an insurance company it is

acceptable to measure the annual consolidated

gross premia instead of the turnover since they

constitute the major portion of the total turnover.

Hence, a variation of 7.5% of the annual consoli-

dated gross premia is an acceptable condition76

.

Listing of the Exchange Shares. In the matter

UBS AG, the TB confirmed, in accordance with its

practice, that an exchange offer may be made

subject to the condition precedent that the of-

feror's share capital increase necessary for pur-

poses of the offer be registered in the commercial

register and that such registration would not be

hindered by a possible registry ban77

.

Equal Treatment

Cash Alternative. Art. 43 para. 1 SESTO-FINMA

provides that the offer price may be settled by

cash payment or in the form of an exchange of

equity securities (or a combination thereof). In

case of an exchange offer made in a mandatory

offer78

, there must be a cash alternative (art. 43

73Id., c.9.1.

74Decision 573/01 of the TB dated August 8, 2014 in the matter Schwei-

zerische National-Versicherungs-Gesellschaft AG.75

Id., c.9.2.76

Id., c.9.2.77 Decision 572/03 of the TB dated October 3, 2014 in the matter UBS

AG, c.4.2.78

This precision had been made by the TB in its Communication No. 4 of

February 9, 2009 (repealed since then). This meant that the cash alter-


October 14, 2015

17 | 26

para. 2 SESTO-FINMA). After the abolishment of

its Communication No. 4, the TB specified in art.

9a para. 1 TOO (in force since May 1, 2013) that if

the offeror in a voluntary exchange offer (without

cash alternative) acquires, against payment in

cash, equity securities or financial instruments79

to

which the offer relates, the offeror must offer the

shareholders a complete cash payment (cash

alternative). In the case of a change of control

offer in which the price consists entirely or partially

of securities, the offeror must offer the sharehold-

ers a cash alternative if it has acquired equity

securities constituting 10% or more of the share or

participation capital of the target company for cash

in the 12 months preceding the publication of the

offer (but not for the period after the settlement of

the offer)80

.

In the holding exchange offer for UBS AG, the TB

confirmed its practice applied e.g. in the Swiss Re

AG holding exchange offer and granted an ex-

emption to this rule for the time from the pre-

announcement and the settlement of the offer and

held that in a holding exchange offer, a purchase

against cash would not disadvantage the other

shareholders provided the securities offered in

exchange are liquid as any shareholder who pre-

fers cash may sell the securities received on the

stock exchange81

. Such purchase against cash is

also possible if done on a stock exchange similar

platform or on the OTC market, provided the price

paid is not higher than the price on the SIX on the

day of such transaction.

native obligation did not apply to voluntary exchange offers nor to offers

for a number of equity securities that exceed the mandatory offer thresh-

old. Indeed, as opposed to mandatory offers, target shareholders have

an opportunity to reject the voluntary exchange offer and thereby prevent

an offeror from acquiring a controlling stake.79

This could, e.g., be options granted by the management which the

offeror or a person acting in concert (e.g., the target) would repurchase

against cash.80

This is less stringent than the cash alternative rule in Communication

No. 4 repealed in 2013, which was also applicable until 6 months after

the end of the additional acceptance period, in parallel with the best price

rule. The tail period was abolished for the cash alternative in 2013 in

order to facilitate the reaching of 98%, to enable market making activities

or to serve an employee stock plan.81

Decision 572/01 of the TB dated June 30, 2014 in the matter UBS AG

c.4.1.

Takeover Coupled with a Repurchase by the

Target. The Advanced Digital Broadcast Holdings

SA (ADB) takeover82

was peculiar to the extent

that the offeror (4T SA) had launched a takeover

offer for all the shares of ADB, and the target itself,

in agreement with the offeror, had itself launched a

concurrent repurchase offer for up to 10% of its

shares. The aim of the combined offers was the

going private of ADB. The TB analyzed whether

the combined transaction was in compliance with

the principles of equal treatment of shareholders,

transparency and fairness83

. The shareholders

who would accept the takeover offer would be

treated equally with the shareholders who would

tender in the share repurchase. The price offered

was identical (CHF 15.50 per share), both offers

were open to the public shareholders (the repur-

chase offer being subject to pro rata reduction of

tenders), both offers were subject to the same

conditions and to the same timing, and both offers

were announced and disclosed in the same offer

document; also, the offer document explained why

the parallel structure had be chosen by the parties

and what were the different tax consequences of

tendering in each offer. The fact that different tax

consequences were triggered by the two offers

was unproblematic due to the pro rata acceptance.

Also, even though the offeror could tender its

shares in the repurchase offer in order to finance

the takeover offer, such tenders would only be

accepted to the extent the public shareholders did

no fill out the 10% limit of the repurchase offer.

Finally, the prospectus mentioned that any pay-

ment by the target for shares tendered in the re-

purchase would not have a dilutive effect for the

price to be paid to the shareholders tendering in

the takeover offer.

Defense Measures

General. Pursuant to art. 29 para. 2 SESTA, from

the moment an offer is published until the result is

82Decision 584/01 of the TB dated November 3, 2014 in the matter

Advanced Digital Broadcast Holdings AG, replicating the structure of the

Fortimo takeover, see Decision 530/01 of the TB dated April 9, 2013 in

the matter Fortimo Group AG.83 Id., c.1.


October 14, 2015

18 | 26

announced, the board of directors of the target

shall not enter into any legal transactions which

would have the effect of altering significantly the

assets or liabilities of the company. Decisions tak-

en by the general meeting of shareholders are not

subject to this restriction and may be implemented

irrespective of whether they were adopted before

or after publication of the offer. A catalogue of such

prohibited defense measures is set forth in art. 36

para. 2 TOO. Furthermore, art. 29 para. 3 SESTA

orders the TB to issue rules concerning any

measures which are directed, in an improper man-

ner, at frustrating an offer or preventing it from

being successful. The TB implemented this in

art. 37 TOO which states that defense measures

that clearly violate provisions of company law shall

be regarded as inadmissible.

In the Kaba | Dorma matter84

, the TB had to ascer-

tain the validity of a defense measure adopted by

the shareholders' meeting of Kaba before the

launch of any takeover offer. The overall transac-

tion was deemed to be a "merger among equals"

by contributions by each parties of their operational

companies in a subholding owned however 100%

by Kaba. The whole group was thus controlled by

Kaba, and the management of Kaba would also

manage the whole group. The family shareholder

who controlled Dorma would form an enlarged pool

in Kaba with the historical Kaba shareholders' pool.

The protection of the former Dorma family share-

holders was ensured through a poison pill at the

level of the subholding: if a third party would

launch a takeover offer on the shares of Kaba,

Kaba would be obliged to transfer a certain amount

of shares in the subholding to Dorma and thereby

transfer the majority of the shares in the

subholding to Dorma. Kaba would then be a minor-

ity shareholder in the subholding owning all the

operational companies and would also lose opera-

tional control of the group and could no longer

consolidate the operational companies. This condi-

tional transfer of shares was subject to approval of


Holding AG.

the shareholders' meeting of Kaba in the form of a

provision in the articles of incorporation. Kaba re-

quested the TB to declare such clause valid.

The TB held85

that such a poison pill, if adopted

after the launch of a takeover offer, would be illicit

according to art. 36 TOO if adopted without the

approval of the shareholders' meeting. However, in

this case, the poison pill was adopted before the

launch of the takeover. Under what conditions

could the shareholders' meeting adopt such a

clause and for what duration? The TB came to the

conclusion that such a measure with indefinite

duration may only be vetted if the shareholders'

meeting can repeal it with a new vote. The con-

templated provision in the articles of incorporation

of Kaba did foresee that the provision could be

repealed with a 75% majority of the votes repre-

sented until 2018 and a 50% majority of the votes

represented thereafter. Since the enlarged Dorma |

Kaba shareholders pool would hold 27% in Kaba

after the transaction, this would mean that the pub-

lic shareholders would only have the possibility to

accept a takeover offer without the approval of the

shareholders' pool after 2018. The TB held howev-

er that this was a reasonable transitional period to

complete the integration of both groups without the

risk of a third party takeover offer.

Finally, the TB held that the poison pill did not

qualify as an inadmissible defense measure that

clearly infringes the provisions of company law

pursuant to art. 37 TOO. When ascertaining a de-

fense measure against art. 37 TOO, such measure

must blatantly infringe company law on first sight

(prima facie), while the company interest and the

principle of equal treatment must be warranted86

.

In casu, both the board and the management of

Kaba were of the opinion that the poison pill was in

the interest of the company; further, the share-

holders of Kaba could themselves resolve on the

clause in a general meeting. Finally, it did not con-


Holding AG, c.2.2.86 Id., c.2.3


October 14, 2015

19 | 26

stitute an unjustified unequal treatment since on

the one hand, the family shareholders of Dorma

would pay a premium to Kaba for the transfer of

shares under the poison pill and on the other hand,

the conditional transfer agreement and the overall

transaction were in the interest of Kaba.

Exemption from the Prohibition of Defense

Measures. Art. 36 para. 2 lit. e TOO states that the

target shall be deemed to be acting unlawfully if,

without a resolution of the general meeting, it buys

or sells its own equity securities or securities in the

company whose securities are being offered in

exchange, or related financial instruments. The

purpose of this provision is to avoid that the board

of the target company may jeopardize the success

of a takeover offer or may influence the majority at

the general meeting. In a situation where there is a

combined takeover offer by the offeror and a re-

purchase offer which has been coordinated among

the offeror and the target company, the repurchase

offer is obviously not made to hinder the success

of the takeover offer. Hence, an exemption from

the prohibition laid down in art. 36 para. 2 lit. 2

TOO shall bewarranted87

.

Board Report

Conflict of Interests. Due to the importance of

the board report, board independence is essential.

Therefore, the report must state whether members

of the board of directors are in any way conflicted

(art. 32 para. 1 TOO). According to art. 32 para. 2

TOO, the board report must in particular state

whether any member of the board of directors:

a. has entered into an agreement with, or has

any other ties with, the bidder;

b. was elected on the proposal of the bidder;

c. is to be re-elected;

d. is a company officer or employee of the bid-

der or of a company that has significant

business relations with the bidder;

87See Decision 584/01 of the TB dated November 3, 2014 in the matter

Advanced Digital Broadcast Holdings SA, c.2.1.

e. exercises his or her mandate according to

the instructions of the bidder.

The board report shall also disclose, on an individ-

ual basis, the financial consequences of the take-

over offer on the current target board members

and senior officers, including information on the

financial consequences of employee options, irre-

spective whether they have been repurchased by

the offeror, purchased by the offeror or declared

invalid, as well as information on severance pay-

ments, in particular on their amount. In the event of

any conflict of interests, the report shall indicate

the measures taken by the target in order to pre-

vent the conflict of interests from disadvantaging

the recipients of the offer (art. 32 para. 4 TOO).

Neither SESTA nor TOO state which measure has

to be taken. In its practice, TB deems that the fol-

lowing measures are appropriate: abstention from

voting, formation of an independent committee, or

delivery of a fairness opinion.

Any target board member that has been elected

with the votes of the bidder is presumed to be

conflicted. However, the target board may provide

evidence that such board members are, in fact,

independent. This should be possible, for exam-

ple, if the target board member is neither a mem-

ber of the board or an employee of the bidder (or

a person acting in concert) nor has entered into a

mandate agreement or entertains business re-

lations with the bidder (or a person acting in con-

cert) or otherwise acts upon instruction of the bid-

der, and neither is a corporate body of a company

entertaining important business relationships with

the bidder (or a person acting in concert)88

. Con-

flicted board members may not participate in the

preparation of the board report or vote thereupon.

In the takeover offer for Swisslog Holding AG by

KUKA, a member of the board of the target was

simultaneously a member of the supervisory

88 Decision 556/2 of the TB dated February 24, 2014 in the matter of WM

Technologie AG, No. 2. In this case, the board of the target WM Tech-

nologie AG was similar to the board of its parent Walter Meier AG before

the spin-off.


October 14, 2015

20 | 26

board of the offeror and therefore such person

rightfully did not participate in any meetings of the

respective bodies of which he was a member89

.

Target Not Yet Existing When Takeover Offer

Launched. In the WM Technologie90

case, the

target – a subsidiary to be created and to be spun-

off – was not yet incorporated at the time the

board report had to be issued. Hence, the board

report had been prepared by its incorporator, i.e.

by the board of its parent. The TB ordered that the

board report had to be re-issued by the target

board once established.

Fairness Opinion. A common method employed

to neutralise any conflicts of interest of target

board members is to appoint an independent fi-

nancial adviser and require the delivery of a fair-

ness opinion. However, in an exchange offer aim-

ing at introducing a holding structure, even though

the conflict of interest is obvious as usually the

members of the board of the target are identical

with the members of the board of the offeror, no

fairness opinion is required due to the nature of

the exchange offer and the identical capital struc-

ture of the target and the bidder91

.

Such fairness opinion shall form an integral part of

the board report. The basis for the valuation, the

methods of valuation and the applied parameters

must be disclosed in a transparent, plausible and

understandable way92

. When the provider of the

fairness opinion uses the discounted cash flow

(DCF) method, it shall also disclose the key val-

ues applied, e.g., order status, turnover, EBITDA,

EBIT, capital expenditures) in its opinion93

.

89Decision 580/01 of the TB dated October 16, 2014 in the matter of

Swisslog Holding AG, c.7.1, also discussed in the Decision of the FINMA

of November 13, 2014 in the same matter, c.3.5.90

Decision 556/2 of the TB dated February 24, 2014 in the matter of WM

Technologie AG, No. 17.91

Decision 572/03 of the TB dated October 3, 2014 in the matter UBS

AG, c.9.2.92 Decision 550/02 of the TB dated December 3, 2013 in the matter

Victoria-Jungfrau Collection AG SA, c.1.93

Decision 550/02 of the TB dated December 3, 2013 in the matter

Victoria-Jungfrau Collection AG SA, c.2.

Content of Prospectus

Intentions of the Offeror. Pursuant to art. 23

para. 1 lit. a TOO, the offer prospectus shall con-

tain information regarding the basic intentions of

the offeror with regard to the target. In the Pretium

case94

, the offeror Novavest indicated that it

wanted to delist the shares of the target shortly

after the settlement of the takeover offer. So far,

the TB had always held that recipients of the offer

were not coerced to tender their shares by the

mere announcement of the offeror's intention to

delist the shares. This is also justified because the

delisting procedure foresees a certain protection of

the investors through the compliance with mini-

mum timeline; also the investors could in any event

still decide upon tendering or not their shares in

the takeover offer in the additional acceptance

period. However, in the Pretium case, the TB an-

nounced that it might in the future order further

measures in order to protect the minority share-

holders.

Disclosure of Shareholders of Offeror. Pursuant

to art. 19 para. 1 lit. b TOO, the offer prospectus

shall contain information regarding the identity of

the shareholders or shareholder groups that hold

more than 3% of the voting rights, plus the per-

centage of their holdings. Based on art. 4 TOO, the

TB granted a general exemption from the above

mentioned rule to the offeror Danaher Corporation

in the takeover offer for Nobel Biocare Holding

AG95

: the offeror was a US listed company and the

Rule 13d-1 of the Securities Exchange Act obliges

shareholders to disclose their shareholdings only

starting at a participation of 5%. Hence, the offeror

did not have reliable information about sharehold-

ers holding between 3 and 5% of its shares.

Transaction Reporting

Pursuant to art. 38 TOO, from the date of publica-

tion of the offer until the end of the additional ac-

ceptance period, all parties to the proceedings

94Decision 569/01 dated June 24, 2014 in the matter Pretium AG, c.8.


Nobel Biocare Holding AG, c.7.


October 14, 2015

21 | 26

must notify the TB and the relevant disclosure

office about (i) any transactions they have carried

out involving equity securities of the target com-

pany or related financial instruments; (ii) in the

case of a public exchange offer, any transactions

involving the securities offered in exchange and

the related financial instruments. The market

transparency reached by this disclosure obligation

ensures the enforcement of the equal treatment of

all shareholders and allows the monitoring of the

market, which may prevent in particular price ma-

nipulations. Such reporting must be made to the

TB on a daily basis (art. 41 para. 1 TOO).

In its holding exchange offer, UBS Group AG

claimed various exemptions from this disclosure

obligation96

. These exemptions were mainly re-

quested due to the nature of the business of the

offeror and the target, both in the banking busi-

ness.

First, the TB granted an exemption from reporting

for transactions on securities of the offeror and the

target, if such transactions were made as client

dealer in a professional capacity for clients in the

sense of art. 3 para. 5 SESTO, i.e. in professional

capacity in their own name but for the account of

clients and such dealer would (i) maintain accounts

for these clients themselves or through third par-

ties for the settlement of transactions; or (ii) hold

securities of these clients in safe custody them-

selves or through third parties in their own name.

In such situations, the beneficial owner of the pur-

chased shares is the client and not the bank97

.

Second, the TB granted an exemption from report-

ing for transactions made in order to fulfil contrac-

tual commitments under employee participation

programs. Such transactions would not be a risk of

a circumvention of the Best Price Rule. Not ex-

empted were however transactions to hedge the

96Decision 572/03 of the TB dated October 3, 2014 in the matter UBS

AG.97 Id., c.8.2.

obligations arising from such participations plans

(Deckungskäufe)98

.

Third, the TB did not grant an exemption from re-

porting for securities lending transactions with se-

curities of the target. There is a risk that target

shares acquired through such securities lending

could be tendered into the offer99

.

Fourth, the TB granted an exemption from report-

ing for transactions made as a consequence of the

settlement of financial instruments whose underly-

ing are securities of the target company. The Best

Price Rule is not applicable on the settlement of

transactions. However, the exercise of financial

instruments by the target or the offeror remains

subject to reporting, since it is precisely the target

or the offeror who decides upon such exercise100

.

Fifth, the TB granted an exemption from reporting

for transactions made on financial instruments

(with cash or physical settlement) whose value

was dependent for less than 331/3% from the target

share. This rule was driven from art. 4 para. 2 of

the SIX Directive regarding disclosure of manage-

ment transactions101

.

Sixth, the TB refused to grant an exemption from

the daily reporting of purchase or sales positions in

target or offeror securities. Such daily reporting

was precisely the tool to ensure transparency102

.

However, the TB extended the deadline by 24

hours, i.e. reporting had to be made until 12.00 pm

of the second day after the transactions were

made103

.

Type of Consideration

During the period under review, no decision was

rendered relating to the type of consideration.

98Id., c.8.3.

99Id., c.8.4.

100 Id., c.8.4.101

Id., c.8.5.102

Id., c.8.6.103 Id., c.8.7.


October 14, 2015

22 | 26

Cost Coverage


sion was rendered relating to the cost coverage.

Withdrawal of Offer


sion was rendered relating to the withdrawal of a

takeover offer.

Review Body


sion was rendered relating to the Review Body.

Rights of Qualified Shareholders


sion was rendered relating to the rights of qualified

shareholders.

Repurchase of Own Shares

General. Fixed-price public offers by an issuer

(offeror) to purchase its own listed equity securities

are public offers within the meaning of art. 2 let. e

SESTA. Public offers also include public buy-back

programs executed by issuing put options or at

market prices. Such transactions (collectively: buy-

back programs) are governed by the provisions of

Chapter 5 of SESTA, the SESTO-FINMA, the

SESTO-FINMA and the TOO.

Since May 1, 2013, the prohibitions of insider trad-

ing and market manipulation are governed by the

SESTA and no longer by the Criminal Code. As

the scope of the prohibitions is very broad, the

SESTO has been amended to include certain safe

harbor exemptions. Art. 55b to 55d of SESTO

specify for publicly announced buyback programs

which behaviour is accepted and constitutes nei-

ther insider trading (art. 33e SESTA) nor market

manipulation (art. 33f SESTA), even if the behav-

iour would otherwise fall under the scope of the

prohibitions. Enforcement of these prohibitions

and supervision of compliance with the safe har-

bor rules lies in the hands of FINMA.

In connection with the entry into force of the revi-

sions to the SESTO, the TB amended Circular

Nr. 1 dated February 26, 2010 with the goal of

eliminating duplications and enacted a new Circu-

lar Nr. 1 dated June 27, 2013. Today, the regula-

tory framework of buy-backs is spread across the

TB Circular Nr. 1, art. 33e to 33f SESTA, art. 55b

to 55d SESTO, as well as the related FINMA Cir-

cular 2013|08 on Market Conduct Rules dated

August 20, 2013, and enforced by different au-

thorities.

The TB is responsible for the interpretation and

application of art. 22 to 33d SESTA. In contrast,

compliance with the rules on market abuse is su-

pervised by the FINMA, not by the TB.

Buy-Back for Less Than 10% of the Share Cap-

ital: TB Reporting Procedure (Meldeverfahren).

The reporting procedure is applicable if the pro-

posed share buy-back fulfils certain requirements

(TB Circular No. 1 paras. 8 - 15):

– The volume of the buy-back does not affect

more than 10% of the share capital and the

voting rights (as per commercial register) (TB

Circular No. 1 para. 11, art. 55b ciph. 1 let. b

and ciph. 2 let. b SESTO).

In the Actelion104

case, the issuer had to ap-

ply for an exemption from the takeover rules

for a 10% repurchase program on the second

trading line; Indeed, even though the volume

of the program was lower than 10% (in con-

creto: 8.76%), when added to the remaining

volume under a still ongoing prior program,

the total aggregate volume was higher than

10% (in concreto: 10.96%) . The TB held that

such exemption shall be granted if the repur-

chase does not lead to a major shift in the

control of the company. Also, the repurchase

shall not lead to a major reduction of the free

float and the principles of takeover law must

104Decision 595/01 of the TB dated March 16, 2015 in the matter

Actelion AG, c.3.


October 14, 2015

23 | 26

be complied with. All these conditions were

fulfilled in the Actelion case and the TB

granted the exemption.

– The cancellation of the equity securities ac-

quired in the course of the buy-back program

may not lead to a significant change of con-

trol with the issuer, in particular by exceeding

the thresholds of 331/3% or 50% of the voting

rights. Any planned cancellation of equity se-

curities already held is to be considered in a

similar manner.

– The total volume of the buy-back may not

exceed 20% of the free-float. It is worth not-

ing that TB Circular No. 1 uses its own defini-

tion of free-float which is as follows: the free-

float does not include equity securities of over

5% held by an investor directly, indirectly or

in concert with third parties. The reference

date for this calculation is the day on which

the application is submitted to the TB. The

free float must be calculated separately for

each category of equity securities covered by

the buy-back program (TB Circular No 1,

para. 2). Accordingly, when it comes to com-

panies with significant shareholder groups

holding more than 5% in the shares the buy-

back volume may be limited.

– The implementation of the buy-back program

may not lead to the issuer falling below the

minimum thresholds required for listing ac-

cording to the rules of the relevant stock ex-

change (e.g., 25% for a listing according to

the main standard on the SIX. The definition

of the free float according to the rules of the

SIX is actually different from the criterion of

the free float ("shares held by the public")

which is used by the SIX when assessing if

an IPO candidate fulfils all the listing condi-

tions. In the latter case, all blocks of more

than 5% do not count towards the free float,

whereas in the first case blocks of more than

5% which are held by asset managers, fidu-

ciaries, investment funds or pensions funds

do count towards the calculation of free float.

If the proposed buy-back program complies with

all requirements of chapters 1 to 4 of TB Circular

No.1, the issuer may use the reporting procedure

and report the program to the TB (see TB Circular

No. 1, para. 31 - 34). Such reporting takes place

by submitting the form provided by the TB at least

five trading days before the planned publication

date of the buy-back notice. If the conditions for

the exemption under the reporting procedure are

deemed satisfied, the TB confirms within three

trading days that it has taken note of the buy-back

program and that no formal decision by the TB is

required.

Buy-Back for More Than 10% of the Share Cap-

ital. If a buy-back program does not qualify for the

reporting procedure, e.g., because it covers more

than 10% of the capital or of the voting rights, the

issuer may, based on art. 4 para. 2 TOO, submit a

regular exemption application to the TB (TB Circu-

lar No.1, paras. 35 - 39). The application must be

submitted no later than 20 trading days prior to the

launch of the buy-back program. The TB then

decides whether or not the buy-back program has

to comply with any or all of the regular rules gov-

erning public offers for shares. The buy-back pro-

gram may be launched no earlier than 10 trading

days after the publication of the TB’s formal deci-

sion.

General Rules Applicable to Buy-Back Pro-

grams Based on the Reporting Procedure. In

addition to the general eligibility requirements for

the reporting procedure, a buy-back program

which has been cleared through the reporting

procedure must satisfy additional requirements, in

particular with regard to the principle of equal

treatment:

– The buy-back notice must state the purposes

of the buy-back precisely and completely (TB

Circular No. 1, para. 8).


October 14, 2015

24 | 26

– The buy-back program must extend to all

categories of listed equity securities of the is-

suer (TB Circular No. 1, para. 9). If the buy-

back program is executed through stock ex-

change purchases, the issuer must place si-

multaneous bids for all categories of listed

equity securities (TB Circular No. 1, para.

22).

– The issuer must ensure an adequate relation-

ship of the prices offered for different catego-

ries of equity securities (TB Circular No. 1,

para. 14). This provision will mainly be of rel-

evance in connection with a buy-back

through a tender offer or the issuance of put

options. In case of purchases over the stock

exchange, as a rule, the market price and the

5% limitation on a premium over the market

price (see below) ensure such adequate rela-

tionship.

– The issuer may not purchase equity securi-

ties for the purposes announced other than

through the buy-back program (TB Circular

No. 1, para. 15). Conversely, the bidder may

not purchase shares outside of the buy-back

program for the same purpose as the pur-

pose stated in the buy-back offer documenta-

tion. However, unlike many other jurisdic-

tions, securities purchased for other purposes

than those announced under the buy-back

program can be purchased outside the buy-

back program, but must be reported every

fifth trading day. Sales of securities to which

the buy-back program applies shall also be

reported every fifth trading day. Chapter 8 of

TOO shall otherwise apply.

Special Provisions for Fixed Price Offers and

Issuance of Put Options. Fixed price-offers and

buy-back programs implemented through the is-

suance of put options may not be conditional and

must provide for an offer period of at least 10 trad-

ing days (TB Circular No. 1, para. 16 and 17, art.

55b para. 2 let. a SESTO). Additional require-

ments apply, in particular, with regard to the prin-

ciple of equal treatment (TB Circular No. 1, para.

18 - 20):

– If the issuer is unable to satisfy all accep-

tance declarations, it must satisfy them on a

pro rata basis.

– If during the period of a buy-back program

the issuer acquires equity securities at a price

exceeding the offer price, it must offer the

higher price to all accepting shareholders

(best price rule).

If during the period of the buy-back program,

the bidder acquires securities at a price that

exceeds the offer price, it must offer this price

to all offerees. The best price rule only applies

in connection with buy-backs through a tender

offer or through the issuance of put options. If

a buy-back is effected by way of a separate

trading line, the price offered on the separate

trading line may not exceed the last price of-

fered on the regular trading line or the last

price offered prior to that by more than 5%. If

the rules of the stock exchange on which the

securities are listed permit off-exchange trans-

actions (block trades), the relevant price may

not exceed the last price paid on the ex-

change or the price last offered on the ex-

change by a person or entity other than the

bidder.

The issuer must publish the buy-backs made at

the latest on the day following the expiry of the

buy-back program (art. 55b para. 2 let. d SESTO).

No later than 3 trading days after the expiry of the

buy-back program the issuer must submit a con-

firmation to the TB regarding its compliance with

the applicable requirements (TB Circular No. 1,

para. 14 - 15, 18 - 19) as well the required re-

porting (para. 27).

Special Provisions for Buy-Back at Market

Price. The most common form of buy-back pro-


October 14, 2015

25 | 26

grams is the buy-back over the stock exchange,

i.e. “at market prices”, usually using a second

trading line (for withholding tax reasons). Buy-

back programs at market prices may not last

longer than 3 years (TB Circular No. 1, para. 21

and art. 55b para. 1 let. a SESTO). The TB Cir-

cular No.1 (para. 22 - 26) and the SESTO (art.

55b SESTO) impose the following additional re-

quirements:

– If the buy-back program extends to several

categories of equity securities, the issuer

must offer a bid price for each category at the

same time (TB Circular No. 1, para. 22).

– The scope of buy-backs on the regular trad-

ing line may not exceed 25% per day of the

average daily volume traded during the 30

days prior to the publication of the buy-back

program (art. 55b para. 1 let. c SESTO). The

TB defines the average daily volume traded

as the sum of transactions on the regular

trading line both within and outside of the or-

der book at the stock exchange divided by

the number of trading days in the 30 calendar

days before publication of the notice of buy-

back (TB Circular No. 1, para. 23a). This re-

striction can be an obstacle for companies

whose shares have a low trading volume, as

the permitted buy-back volume may result to

be insignificant. In such case, the issuer has

no other choice but to obtain an exemption

from the TB pursuant to art. 55b para. 3

SESTO. As such exemption cannot be ob-

tained in the reporting procedure, the issuer

has to obtain formal approval from the TB.

The TB used this competence in the buy-

back program of Schindler Holding AG105

,

who had applied for an increase up to 50% of

the daily volume during the 12 months pre-

ceding the filing of its application with the TB:

the volume during the 30 days prior to the

publication of the buy-back (24,122 shares

105 Decision 525/02 of the TB dated March 19, 2015, c.3.

and 79,333 participation certificates) was

considerably lower than the volume during

the 12 months prior to the publication of the

buy-back (40,353 shares and 120,681 par-

ticipation certificates).

– The offer price may not exceed the last inde-

pendently achieved closing price on the regu-

lar trading line or, if lower, the best currently

available independent offer price on the regu-

lar trading line (art. 55b para. 1 let. d

SESTO).

– Each purchase at market price must be re-

ported to the TB and the SIX Swiss Ex-

change and published on the issuer’s website

no later than on the 5th day following such

purchase (TB Circular No. 1, para. 27 - 30,

art. 55b para. 1 let. h SESTO).

Black-Out Periods. Pursuant to art. 55c para. 1

SESTO, black-out periods are defined as (i) the

duration of a postponement of ad hoc publicity of

price sensitive facts in accordance with the rules

of the relevant stock exchange, (ii) the period of

10 trading days prior the release of financial re-

sults and (iii) whenever the last published consoli-

dated accounts date back more than nine months.

Purchases are nevertheless permitted if they are

delegated to a bank or securities dealer which

executes purchases without the issuer’s further

influence within the parameters set by the issuer

or, if the issuer is itself a securities dealer, a trad-

ing unit protected by information barriers (art. 55c

para. 2 SESTO). If the issuer delegates purchases

to a bank or securities dealer, the investment pa-

rameters must be defined before the publication of

the buy-back program and may be adjusted once

a month. If the parameters are defined or adjusted

during a black-out period as defined in art. 55c

para. 1 SESTO, the buy-back may only be carried

out after a waiting period of 90 days (art. 55c para.

3 SESTO).

It should be noted that the SIX Swiss Exchange’s

regulations and practice concerning ad hoc pub-


October 14, 2015

26 | 26

licity and the FINMA Circular 2013/08 on Market

Conduct Rules are not aligned as regards the

definitions and interpretations of significantly

price-relevant fact and insider information. In par-

ticular, FINMA’s interpretation of insider informa-

tion has a significantly broader scope. Accord-

ingly, in order to be on the safe side, a buy-back

program which is not executed by delegation to a

bank or securities dealer in accordance with art.

55c para. 2 SESTO may need to be interrupted

even outside black-out periods pursuant to art.

55c para. 1 SESTO.

The issuer must submit a confirmation to the TB

attesting compliance of its buy-back program with

the applicable requirements (TB Circular No. 1,

para. 15), as well as the required reporting (TB

Circular No. 1, para. 27). In addition, the bank or

securities dealer appointed to conduct the buy-

back program must issue a separate confirmation

to the TB regarding the satisfaction of the re-

quirements regarding the adequate offer price (TB

Circular No. 1, paras. 14 and 22) and scope of the

buy-back (TB Circular No. 1, para. 23 - 23a). Both

confirmations must be reported on the third trad-

ing day after the expiry of the buy-back program

and at least once every year.

Reporting Requirements. The information on the

purchase of equity securities within and outside of

the buy-back program has to be reported to the

stock exchange and published on the issuer’s

website on the 5th trading day following the trans-

action at the latest (TB Circular No. 1, para. 27 -

30, art. 55b para. 1 let. h SESTO). The informa-

tion must be available on the website for at least

12 months after the end of the buy-back program

(TB Circular No. 1, para. 27a, art. 55b para. 1 let.

g SESTO).

A sale of equity securities during a buy-back pro-

gram other than for purposes of an employee par-

ticipation plan has to be reported to the stock ex-

change on the trading day following the transac-

tion and published by the issuer on the 5th trading

day. Such sale may per day not exceed 5% of the

average daily trading volume on the regular trad-

ing line during the 30 days prior to publication of

the buy-back program.

As a public buy-back program is deemed a public

offer for shares, in principle, the issuer’s reporting

obligations under art. 20 SESTA are suspended

for the duration of the program (art. 19 para. 1

(SESTO-FINMA)). After closure of the program a

reporting in accordance with art. 20 SESTA has to

be made (art. 19 para. 2 SESTO-FINMA). It may,

however, be advisable to continue reporting dur-

ing the program, also under art. 20 SESTA given

the difficulty of ensuring a correct application of

this exemption.

Squeeze-Out


sion was rendered relating to the squeeze-out pro-

cedure.

Dr. Frank Gerhard

Partner

[email protected]

T +41 43 222 15 30

Homburger AG

Prime Tower

Hardstrasse 201 | CH-8005 Zurich

P.O. Box 314 | CH-8037 Zurich

T +41 43 222 10 00

F +41 43 222 15 00

Legal Note

This Homburger Bulletin expresses general views of the authors at

the date of the Bulletin, without considering the facts and circum-

stances of any particular person or transaction. It does not consti-

tute legal advice. As such, this Bulletin may not be relied upon by

any person for any purpose, and any liability for the accuracy,

correctness or fairness of the contents of this Homburger Bulletin is

explicitly excluded.

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