CMS Expert Guide to Public Takeovers in Romania

Yes, Romanian Law no. 24/2017 on issuers of financial instruments and market operations (“Law 24/2017”) and Regulation no. 5/2018 on issuers of financial instruments and market operations issued by the Romanian Financial Supervisory Authority – (“FSA”) (“Regulation 5/2018”) governs takeovers of Romanian listed companies. 

• Mandatory takeover offers; 
• Voluntarily takeover offers;  
• Acquisitions which result in the acquirer and persons “acting in concert” with it holding more than 33% of the target company.

Both the offeror and target company must engage financial advisers experienced in takeover offer transactions. For example, independent valuers must be involved in the takeover offer process for the purpose of calculating the minimum price to be offered, but only if: (a) the offeror or parties acting in concert with the offeror have not acquired shares in the target company within a 12-month period prior to the offer, or (b) even if they acquired shares within the 12 months preceding the offer, if the FSA considers that these transactions may influence the accuracy of the price.

A mandatory offer is required where a person , as a result of his/her/its acquisitions or those of the persons with whom he/she/it acts in concert, holds directly or indirectly more than 33% of the voting rights in a public company. 

Mandatory offer requirements do not apply if the holding exceeding 33% of the voting rights was obtained: 

• during a privatisation process; 
• through share acquisitions from the Ministry of Public Finance or from other competent entities carrying out an enforcement procedure for budgetary receivables (where a creditor forces the sale of the assets (including the listed shares) of its debtor to recover its receivables); 
• following the transfer of shares between a parent company and its subsidiaries or between subsidiaries of the same parent company; and 
• following a voluntary public takeover offer made to all holders of target company securities, for all their holdings. 

Where a person exceeds the threshold of 33% of the voting rights unintentionally, the shareholder must, within three months, either: (a) make a mandatory public offer; or (b) sell the portion of his shares that exceeds the 33% threshold. The following operations are considered to result in a person unintentionally exceeding of the 33% threshold: 

• a decrease in the share capital of a company by the redemption of its own shares, followed by the cancellation of such shares; 
• the exercise of pre-emptive rights, subscription or conversion of rights initially allotted, as well as the conversion of preferred shares into ordinary shares; or 
• a merger/spin-off or succession. 

Where there are shareholders who do not accept the takeover offer, the offeror will need to either continue with the shareholding in place or seek to acquire those shares under a squeeze-out procedure. 

According to Romanian law, a squeeze-out procedure may only be performed if, following a public takeover offer made to all shareholders of a target company, for all their shares (i.e., a mandatory takeover offer), the offeror: 

• owns shares representing at least 95% of the total number of shares and at least 95% of the voting rights; or 
• has acquired through the takeover offer, shares representing at least 90% of the total number of shares and at least 90% of the voting rights the subject of the offer. 

A takeover can also be structured as a merger between the offeror and the target company. 

Within its own parties (advisers, funders etc.), an offeror may maintain confidentiality. However, in the event of a leak (whether or not identifying the offeror) or untoward movement in the price of the target company’s shares (which is indicative of a leak), a public announcement naming the offeror and stating its potential interest may be required. 

Once the target company has been approached, the target company is free at any time to announce that it has received an approach from the potential offeror, naming the potential offeror. A potential offeror is not able to prevent or restrict a target company from making such an announcement (though in practice, most target companies will also prefer to keep discussions as confidential as possible under a non-disclosure agreement).  

The parties must also comply with the disclosure obligations under the Market Abuse Regulation (“MAR”) and applicable listing rules provided under Law 24/2017 and Regulation 5/2018. 

Voluntary takeover offers

• The person who intends to make a voluntary takeover offer must submit to the FSA a preliminary offer announcement for approval. The minimum content/information requirements in relation to a preliminary offer announcement is established by FSA regulations;
• After approval by the FSA, the preliminary offer announcement is sent to the target company, to the regulated market on which the relevant securities are traded and is published in at least one national and one local newspaper within the administrative-territorial of the target company;
• Within 30 days of the publication of the preliminary offer announcement, the offeror must submit to the FSA the documentation related to the public takeover offer on the same terms as set out in the preliminary offer announcement.

Mandatory takeover offer 

• The offeror has to launch a public takeover offer addressed to all holders of securities as soon as possible, but no later than two months after reaching, directly or indirectly, more than 33% of the voting rights in the target company.

Although there are no specific legal provisions, it can be argued that a mandatory takeover offer cannot be subject to conditions, except for legal clearances (e.g., FSA approval). Generally, with respect to voluntary takeover offer, the permissible conditions (in addition to the legal clearances) are restricted to: (a) achieving a minimum acceptance level; and (b) material adverse change in the target or market.

From the time when the offeror announces a firm intention to make an offer until the last possible date for the payment of the consideration if the offer is successful, the offeror must have fully committed and “certain” funds to satisfy the cash component of the consideration payable under the takeover offer. In general terms, any outstanding conditions to draw down on the facilities would need to be within the sole control of the offeror as borrower and not allow discretion to the lender.   

Voluntary takeover offer 

According to Romanian legislation, the price in a voluntary takeover offer must be at least equal to the highest price between: 

• the highest price paid by the offeror (or the persons acting in concert with the offeror) within twelve (12) months prior to the filing of the offer documentation with the FSA; 
• the weighted average traded price during the twelve (12) months prior to the filing of the offer documentation with the FSA; 
• the amount resulting from the ratio between the net asset value of the target company and the number of shares of the target company, in accordance with its latest financial statements. 

Mandatory takeover offer 

According to Romanian legislation, the price in a mandatory takeover offer should be established according to the following formula: 

• the price must be at least equal to the highest price paid by the offeror (or the persons acting in concert with the offeror) within twelve (12) months prior to the filing of the offer documentation with the FSA; 
• the requirement above would not apply if the offeror (or the persons acting in concert with the offeror) has not acquired shares in the target company within the last twelve (12) months, or if the FSA considers on reasonable grounds, either ex officio or following a complaint in this respect, that the off-market pricing is not the correct pricing in the mandatory offer. 

The Romanian regulator may ask for the offer price to be re-valuated by an authorised valuer appointed by the offeror to be at least equal to the highest of the following: 

• the weighted average traded price during the twelve (12) months prior to the filing of the offer documentation with the FSA; 
• the amount resulting from the ratio between the net asset value of the target company and the number of shares of the target company, in accordance with its latest financial statements; 
• the value of the shares, as resulting from the valuation made in accordance with international valuation standards. 

In case the highest price calculated by the authorised valuer is based on the value of shares, the valuer may apply 3 methods in order to make the valuation in accordance with international valuation standards: 

• the income approach (Discounted Cashflows Method - DCF); 
• the market approach; 
• Cost approach. 

One of the overriding principles of the Romanian Capital Markets legislation is that all shareholders must be treated equally. 

Romanian legislation has no specific provisions in this respect. Consequently, the legal provisions regarding inside information and related restrictions apply. 

Therefore, inside information should not be disclosed during a due diligence and should not be used to acquire or sell (directly or indirectly) shares in the target company. 

There are no specific legal provisions or established case law relating to deal protection measures in a takeover offer.

According to the Romanian Capital Markets legislation, the target company 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 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. 

According to Law 24/2017, the board of directors of the target company must send to the FSA, the offeror and the regulated market on which the relevant  securities are traded, within 5 days of receiving the preliminary offer announcement, a document containing its opinion regarding the offer, including its  view with respect to the consequences of the offer for the target company, as well as its views on the strategic plans of the offeror for the target company and their likely consequences on the conditions of employment and on the location of the registered office from which the company operates. 

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

After the submission of the offer documents to the FSA and until the making of the offer, the offeror or persons acting in concert with the offeror cannot perform any operations (e.g., cannot enter any deal for the transfer, alienation or encumbrance) with respect to the shares that are subject to the offer. 

Target company shareholders may give irrevocable commitments or statements of intent to accept an offer if made or once made. In the case of target company directors, these undertakings are limited to acceptance of the offer as a shareholder, and not to taking any action, as a director, to support the offer. 

After the making of the offer, the offeror (and any person acting in concert with the offeror) is allowed to acquire shares outside the offer, providing that the following cumulative conditions are met (a) the price paid outside the offer is higher than the price offered in the offer; and (b) the shares purchased outside the offer are purchased at least four business days before the closing of the offer. The offeror must increase the price of the offer to at least the highest price paid by the offeror outside the offer. The increase in the offer price must be approved by the FSA. 

During an offer period, the parties to the takeover offer must make public disclosures, or in certain cases private disclosures to the FSA, of their positions or dealings in relevant securities of the parties to the offer.

Where the offer is implemented by way of a tender offer: 

• Before Submitting the offer document to the FSA to obtain its approval the offeror will need to arrange: 
  • Signing preliminary documents with shareholders (i.e., NDAs);
  • Signing SPA and satisfaction of any closing conditions;
  • Public announcement mandatory offer;
  • Approval of the Board of Directors/Extraordinary General Meeting of the offeror  of the offer document;
• Submitting the offer document to the FSA for its approval (T0); 
• FSA approval of the offer document (T+10); 
• Send the public offer announcement (T+11); 
• Commencement of the takeover offer period ranges between 10 and 50 business days (T+20); 
• Potential counteroffers which will extend the takeover acceptance period by 10 business days (T+30); 
• Public announcement and publication of the target company position statement (T+60); 
• End of period of takeover offer (T+70); 
• Publication of takeover offer results (T+75); 
• Payment in 3 business days after the closing of the takeover offer acceptance period; 
• Squeeze-out procedure in 3 months of the publication of takeover offer results; 
• Extraordinary General Meeting for delisting.

• Offer or scheme document which complies with the legal requirements; 
• Public offer announcement; 
• FSA approval; 
• Offeror prospectus (in the case of an offer where securities are being issued as consideration) which complies with the Prospectus Regulation; 
• Irrevocable undertakings to accept the offer; 
• Offeror financing documentation. 

Specific provisions apply to changes to the offer price in the event of competing offers. A competing offer can be made within a maximum of ten business days from the publication of the offer announcement, at a price at least 5% higher than the original offer price and provided that it refers to the same quantity of securities or it envisages reaching the same share capital threshold.  

If a competing offer is made, the FSA will suspend the mandatory offer and the competing offer and will establish when the original offeror and the competing offeror may submit amendments to the offered price.  

On the date of the expiry of that period, the FSA will organise an auction between the original offeror and the competing offeror regarding the increase of the price offered. The auction will be carried out in bid sessions with increases of the respective offer price of at least 5%. Only the offer made by the winning party is allowed to proceed.

• The offer is irrevocable throughout the offer period. 
• The offeror is entitled to modify the terms of the offer provided that: 
  • the amendment is approved by the FSA;
  • the amendment does not result in less favourable terms (compared to the initial ones); and
  • the amendment shall be subject to an announcement brought to the attention of the target company shareholders in the same conditions the offer document and offer announcement have been brought to the attention of the public.

According to Romanian law, a squeeze-out procedure may only be performed if, following a public takeover offer made to all shareholders of a target company, for all their shares (a mandatory or a voluntary takeover offer), the offeror: 

• owns shares representing at least 95% of the total number of shares and at least 95% of the voting rights; or 
• has acquired through the offer, shares representing at least 90% of the total number of shares and at least 90% of the voting rights the subject of the offer. 

The offeror or the persons with whom they act in concert may not launch another public takeover offer for the same target company for one year after the close of any previous takeover offer, 

Pursuant to Law 24/2017, shares admitted to trading on a regulated market are withdrawn from trading in the following cases: 

• as a result of the completion of the procedure for the withdrawal of shares from a company, initiated in accordance with the provisions applicable to the squeeze-out procedure; 
• following the decision of the FSA under the conditions in which it is considered that, in some special circumstances, it is no longer possible to maintain or orderly market in such shares; 
• as a result of the decision of an extraordinary general meeting to approve the delisting, with the fulfilment of the requirements established by the FSA; 

To delist a company from the Bucharest Stock Exchange’s (“BSE”) Main Market, according to the BSE Rulebook, withdrawal of the shares from the regulated market at the initiative of the issuer can be made only by a public takeover offer addressed to all shareholders, if the majority shareholder has obtained at least 95% of the voting rights or purchased, pursuant to the offer, shares representing more than 90% of the shares to which the offer relates (regulations with respect to squeeze-out procedure should be observed). 

A delisting decision must be taken in the general meeting of the target company held with a quorum of fifty percent of the issued and outstanding share capital plus one share (present or represented). The resolution to delist shall be passed by an absolute majority of the votes cast. Delisting must be subsequent to fulfilment of the squeeze-out procedure.