CMS Expert Guide to Public Takeovers in Bulgaria

Yes, the Public Offering of Securities Act (“POSA”) governs public takeovers of Bulgarian public companies.  The operation of POSA is overseen by the Bulgarian Financial Supervision Commission (the “FSC”). 

• Takeover offers;  
• Acquisitions which result in the acquirer and persons “acting in concert” with it holding (a) more than one-third of the target company (if no one else holds more than 50%) or (b) an increase in an existing holding which is more than (i) 50% or (ii) more than two-thirds; 
• Partial offers. 

The offeror is obliged to carry out the tender offer through an authorised investment firm. The investment firm will typically draft the tender offer, including justification of the price in accordance with the requirements of the POSA and the respective ordinance adopted by the FSC, and deal with the technicalities related to acceptance of the offer by the target company’s shareholders and registration of the transfer of the shares from the target company’s shareholders to the offeror. 

In addition, in some cases if a reasonable assumption can be made that the liquidation value will be higher than that determined by using the other generally accepted valuation methods (for example if the net asset value exceeds by more than 1.5 times the price offered by the offeror, or if the values of the target’s shares, obtained according to the generally accepted methods differ from each other by more than 1.5 times, or if the value of the shareholdings according to the target’s balance sheet exceeds 15 percent of the target's assets, etc.), the offer price may be required by the FSC to be the liquidation value of the shares of the target company. In this case the liquidation value must be determined by independent evaluators certified under the Independent Evaluators Act. The liquidation value of the target company is the sum of the liquidation values of its assets less its current and non-current liabilities, the costs of liquidation and any legal claims of investors having priority over holders of ordinary shares. 

A mandatory offer must be made if any person (whether alone or together with persons acting in concert with that person) increases its percentage shareholding (whether as a result of a purchase of shares or a corporate action such as a share buyback) in the target company: 

• to more than one-third if no one else holds more than 50%; or 
• to more than 50%; or 
• to more than two-thirds. 

If the above thresholds are passed simultaneously or consecutively within a 14-day period, the person may register a single mandatory offer. 

The mandatory offer obligation does not arise for a person that has already made a mandatory offer within one year before passing the next threshold. 

The mandatory offer obligation does not arise for a person holding more than 50% of the shares if that person’s holding increases and passes the two-thirds threshold as a result of a capital increase of the target company through a rights issue. 

Takeover offers are most commonly implemented by a Tender offer for all shares (although a person holding 5% of the shares may register a tender offer to acquire at least one-third of the shares ). 

Where there are shareholders who do not accept the offer, the offeror will need to either continue with the minority shareholding in place or seek to acquire at least 90% of the shares, which will entitle it to make a voluntary tender offer to the remaining shareholders under Art. 149a of the POSA. If as a result of this voluntary offer the person has acquired at least 50% of the target company’s shares, the target company can be de-listed upon a resolution of the FSC. 

A person that has acquired at least 95% of the shares as a result of a mandatory or voluntary tender offer addressed to all shareholders is entitled  within three months after the end of the tender offer to compulsory acquire the shares of the remaining shareholders (squeeze-out). Such a person is also obliged to acquire the shares of any of the remaining shareholders upon their request made within three months after the end of the tender offer. 

Schemes of arrangement are not permitted under Bulgarian law. 

Within its own parties (advisers, funders etc), an offeror may maintain confidentiality.  

On the day of registration of the offer with the FSC, the offeror is obliged to present the offer to the management body of the target company and to offeror’s employees, as well as to the regulated market on which the shares of the target company are admitted to trading. 

The management body of the target company must provide the tender offer to its employees and by the end of the business day, disclose to the public the material information about the offer received. 

Within 7 days of receipt of the offer, the management body of the target company must submit to the FSC, the offeror and the target company’s employees, its opinion on the proposed transaction, including the consequences of the acceptance of the tender offer on the target company and its employees and regarding the offeror’s strategic plans for the target company, and their potential impact on the employees and the place of operation of the target company’s business, as indicated in the tender offer. 

 The parties must also comply with the disclosure obligations under the Market Abuse Regulation (“MAR”) and applicable listing rules (such as the Bulgarian Stock Exchange’s Listing Rules).  

A person who directly or through related persons acquires more than one-third of the shares (or respectively, more than 50% or two-thirds of the shares), is obliged within 14 days from the acquisition, or within one month from the entry in the commercial register of the change in the issued shares of the target company or reduction of its capital resulting in the threshold being passed, to either register a mandatory offer with the FSC or to transfer shares so as to fall below the relevant threshold. 

Tender offers are registered with the FSC and can be published if the FSC does not issue a temporary prohibition within 20 business days. The FSC's failure to issue a decision within the  20 business day period is considered a tacit confirmation of the tender offer. 

In the event that a temporary prohibition has been issued, the offeror has 20 business days to make any necessary changes required by the FSC and resubmit the revised tender offer to the FSC. If, within a further 10 business days, the FSC does not issue a final prohibition on publication of the offer, the offeror may publish it. 

The offer must be published within three business days after the expiration of the above period. 

The period for the shareholders to accept the tender offer cannot be shorter than 28 days or longer than 70 days after the day of the publication of the tender offer. 

A person that has passed the 90% threshold is entitled to register a voluntary tender offer pursuant to Art. 149a of the POSA. If the person does not register a tender offer within 14 days after the acquisition, it shall be obliged to notify the shareholders, the regulated market and the FSC of its intention to register a tender offer at least three months in advance. The terms for approval of the tender offer by the FSC, for publication and for acceptance are the same as those applicable to mandatory offers. 

An offer cannot be published without the necessary regulatory approval, i.e. if the FSC has issued a prohibition on its publication. 

The offer cannot be withdrawn by the offeror. Exceptions are allowed only when the offer cannot be implemented due to circumstances beyond the control of the offeror, the deadline for its acceptance has not expired and the FSC has approved the withdrawal.  

The above restrictions to withdrawal do not apply to voluntary tender offers under Art. 149b of the POSA by offerors that acquired 5% and wish to acquire more than one-third of the shares – they are allowed to withdraw their offers. The offeror under this type of voluntary offer can also provide a condition of achieving a minimum acceptance level. 

The offeror is obliged to submit to the FSC upon the registration of the offer evidence of the availability of the necessary funds for the purchase of the shares of the remaining shareholders in the target company. 

All target company shareholders must be treated equally.  

The offer price must be at least equal to the highest value between: 

• the fair price of the share specified in the justification of the share price (as calculated based on generally accepted assessment methods such as discounted cash flows, net asset value, market multiples of similar companies or of concluded transactions for the acquisition of similar companies or of large packages of shares of similar companies, including through tender offers). In some cases the price shall be based on the liquidation value as determined by independent evaluators; 
• the weighted average market price of the shares for the last six months; 
• the highest price per one share paid by the offeror or by related persons during the last six months. Where the price of the shares cannot be determined according to the previous sentence, it is determined as the higher price between the last issue value and the last price paid by the offeror. 

The price under a voluntary offer under Art. 149b of the POSA by an offeror that acquired 5% and wishes to acquire more than one-third of the shares may be based only on the second and third bullet points above. 

No. 

No. 

In general, after receiving the offer, the management body of the target company cannot perform actions which would affect the acceptance of the tender offer – see below. 

The target company’s board of directors is under no obligation to engage with a potential offeror or facilitate its offer (such as by providing due diligence information). However, the target company’s directors remain subject to their general duties to act in the company’s and shareholders’ best interests and therefore may be in a position where those duties require them to engage to some extent. 

After receiving the offer and until the publication of the results of the offer, or its termination, the management body of the target company cannot perform actions, with the exception of searching for a competing offer, the main purpose of which is to thwart the acceptance of the offer or create significant difficulties or significant additional costs for the offeror such as issuing shares or entering into transactions that would lead to a significant change in the company's property, unless the actions have been approved in a general meeting of the target company. 

The general meeting must also approve any resolution of the management body to take actions under the preceding sentence, adopted before receipt of the offer, which is not partially or fully implemented and which is not part of the company's usual business and may affect the acceptance of the offer. 

Any purchase of target company’s shares by the potential offeror will be subject to MAR. 

If, before the expiry of the offer, the offeror acquires directly, through related persons or indirectly, shares in the target company at a price higher than that offered under the offer, it shall be obliged to increase the offered price to this higher price. In this case, the purchase of the shares is carried out at the higher price in relation to all shareholders who accepted the offer before or after the increase. 

The target company’s shareholders may accept the offer by filing applications for acceptance of the offer with an authorised investment firm. The acceptance application can be withdrawn by the target company’s shareholders until expiration of the period for acceptance of the tender (closing date for acceptances). 

As noted above and subject to the limitations set out there, it is possible for potential offerors to buy shares in the target company during the offer period either on-market, by private agreement or through acquiring an option to do so from the shareholders. However, any shares acquired by the offeror outside of the offer will not count towards the thresholds for any mandatory acquisition of minority shares (squeeze-out) after the offer completes.  

The general rules of the POSA apply, according to which any shareholder is obliged to disclose if his right to vote reaches, exceeds or falls below 5% or a number multiple of 5% of the number of votes in the public company's general meeting. 

The typical timetable would be: 

D – 77: Registration of the offer with the FSC. 

D – 47: Imposing of a temporary prohibition on the publication of the offer by the FSC. 

D – 17: Submission to the FSC of the revised offer. 

D – 3: Expiration of the term for final prohibition on the publication of the offer by the FSC. 

D: Publication of formal offer. 

D + 28: First possible closing date for acceptances (extendable by the offeror up to D + 70). 

D + 28: Last date on which shareholders can withdraw acceptances (coincides with the last date for acceptances).  

D + 28: The transaction related to transfer of the shares of the shareholders that accepted the offer is deemed to be concluded (coincides with the last date for acceptances). 

D + 31: Publication of the results of the offer. 

D + 38: Final date for payment of the price to the shareholders who accepted the offer. 

The key documents required are: 

• copies of the documents proving the availability of funds for financing the offer, issued not earlier than the date of the price justification contained in the offer, and in the case of a temporary prohibition issued by the FSC - on the date preceding the submission of the revised offer; 
• samples of an application for acceptance of the offer and of an application for withdrawal of the acceptance of the offer; 
• declaration by the offeror that it has notified the management body of the target company of the terms of the offer, the representatives of the offeror’s employees or, when there are no such representatives, the employees, as well as the regulated market on which the target company's shares are admitted for trading; 
• if the offeror and the persons related to it are legal entities registered outside the Republic of Bulgaria - an up-to-date certificate of their entry in the relevant register or provision of information on secured internet access to this register in a commonly accepted language in the European Union; 
• a certified copy of the agreement concluded for the general management policy of the target company (if any); 
• the offer in electronic format, enabling document search; 
• document certifying the payment of the relevant fee to the FSC, if it is not paid electronically. 

A competitive offeror must offer better conditions than those contained in the initial offer in one or more of the following directions: 

• increase in the offered price; or 
• increase of the number of the target company’s shares or removal of the restriction (where permitted); or 
• reduction of the minimum number of target company’s shares, for which the offer should be accepted for the tender offer to be valid, or removal of this condition for validity (where permitted). 

The competitive offer must be published not later than three days before the closing date for acceptances applicable to the initial offer. 

If the term for acceptance of a competitive offer expires after the term for acceptance of a previously published offer, the term for acceptance of all previously published offers is extended to the term for acceptance of the last competitive offer. 

Not later than seven days after the publication of the last competitive offer, the offeror under the initial offer, as well as any offeror under a previous competitive offer, is allowed to improve their original offer in one or more of the above aspects. The last competitive offeror shall also be entitled to improve its offer not later than seven days after the publication of the last offer.  

As specified above the offer cannot be withdrawn by the offeror after its publication. Exceptions are allowed only when the offer cannot be implemented due to circumstances beyond the control of the offeror, the deadline for its acceptance has not expired and the FSC has approved of the withdrawal. The above restrictions do not apply to voluntary tender offers under Art. 149b of the POSA by offerors that acquired 5% and wish to acquire more than one-third of the shares. 

The offeror may extend the term of the offer up to the maximum permitted term (70 days after its publication) or increase the offered price (in which case the increased price shall be applied to all shareholders who accepted the offer before or after the increase). Other changes may be made subject to the approval by the FSC. 

Under the POSA, if an offeror acquires at least 95% of the target company shares as a result of the offer, the offeror can within three months after completion of the offer compulsorily acquire the remaining shares based on a buyout offer approved by the FSC. The price under the buyout offer will be the same as the price under the mandatory offer as a result of which the offeror reached the 95% threshold.  

Until the publication of the mandatory offer (or transfer of shares so that to fall below the respective threshold) the offeror is not allowed to exercise its voting rights. 

As specified above, normally the offeror is not allowed to withdraw the offer after the publication thereof. Exceptions are allowed only when the offer cannot be implemented due to circumstances beyond the control of the offeror, the deadline for its acceptance has not expired and the FSC has approved of the withdrawal. 

If the offer is withdrawn, the offeror shall not be allowed to exercise its voting rights thereafter until the publication of a subsequent offer (whenever that may occur). 

Typically, the delisting of a target company from the regulated market (Bulgarian Stock Exchange) will follow the deregistration of the company as a public company from the register of the public companies kept by the FSC. 

The grounds for deregistration are: 

• a general meeting of the company has decided to deregister it with a majority of two-thirds of the capital represented, if the number of the shareholders and the asset value of the company falls below certain thresholds;  
• a general meeting of the company, at which 100% of the shareholders are represented, unanimously decided to deregister the company; 
• a person that acquired more than 90% of the shares carried out a tender offer under Art. 149a of the POSA and: (a) shareholders who own at least half of the total number of the remaining target company’s shares have accepted the tender offer, or (b) a general meeting of the company has decided to deregister the company with a majority of half of the capital presented (excluding any shares that the offeror acquired before the registration of the offer with the FSC - the offeror may vote only with the shares acquired as a result of the tender offer or afterwards); 
• the offeror compulsorily bought out the shares of all of the remaining shareholders; 
• initiation of bankruptcy proceedings – applicable only to public companies which are banks; 
• the company is declared bankrupt; and 
• the FSC imposed coercive administrative measures consisting of the suspension of trading in securities in cases specified in the POSA.