CMS Expert Guide to Public Takeovers in Sweden

Yes, the Swedish regulatory framework for public takeovers is set out in different regulations and divided between different authorities. The main body of the Swedish takeover legislation is based on Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover offers (“Takeover Directive”). 

The primary regulations are to be found in:  

• the Securities Market Act (Sw. Lag (2007:528) om värdepappersmarknaden) (the “Securities Market Act”); 
• the Act on Public Takeovers (Sw. Lag (2006:451) om offentliga uppköpserbjudanden på aktiemarknaden) (“Takeovers Act”); and 
• The Takeover Rules for Regulated Markets (Sw. Takeover-regler för reglerade marknader) ("Takeover Code"), whereby: 
• Nasdaq Stockholm and the Nordic Growth Market NGM have issued identical rules for their respective regulated markets and delegated to the Swedish Securities Council (Sw. Aktiemarknadsnämnden) ("Securities Council") the task of interpreting and examining issues concerning exemption from the rules; and 
• The Swedish Corporate Governance Board (Sw. Kollegiet för svensk bolagsstyrning) has issued Takeover Rules for the Nasdaq First North, Nordic MTF and Spotlight Stock Market trading platforms. Such rules essentially correspond to those of companies whose shares are admitted to trading on a regulated market. It is the responsibility of the Securities Council to interpret and examine matters regarding exemption from such rules. 

Further, there are a number of additional rules and principles that are to be considered when preparing or conducting a public takeover offer such as  

• The Financial Instruments Trading Act (Sw. Lag (1991:980) om handel med finansiella instrument) ("Trading Act"), which contains rules on shareholding disclosure requirements and offer documents; 
• The Companies Act (2005:551) (Sw. Aktiebolagslagen) ("Companies Act"), which does not specifically address public offers, but contains relevant provisions relating to, for example, the duties of directors;  
• The EU Market Abuse Regulation ("MAR") and the Swedish Securities Market Abuse Penalties Act (2016:1307), which contains rules regarding insider information, insider dealing and market manipulation; 
• specific rules applicable to takeover offers for companies in certain sectors, such as companies operating under the supervision of the Swedish Financial Supervisory Authority ("SFSA") (Sw. Finansinspektionen); and 
• rules and regulations regarding merger control. 

Public takeover offers are subject to the supervision and control of the disciplinary committees of the regulated markets, the Securities Council and ultimately the SFSA. The SFSA is the principal securities regulator in Sweden. 

Although Swedish takeover regulation does not specify the principles on which it is based, there are a few general principles that underpin the interpretation of Swedish takeover regulation. The most important of these are that:  

• all target company shareholders must be treated equally;  
• the target company board of directors must act in the best interests of the company as a whole as well as in the interest of the target company shareholders;  
• an offeror may only announce a takeover offer when it has sufficient resources to fulfil its obligations; and  
• the business of the target company must not be restricted by an announced takeover offer for any longer than is reasonably required. 

The Swedish takeover regulation applies to any situation in which an offeror offers to acquire all or part of the target company’s shares admitted to trading on a regulated market in Sweden (a takeover offer). With respect thereto, references to shares also apply to convertible securities, warrants, principal-linked participating debentures, dividend-linked participating debentures, subscription rights and other equity-related transferable securities issued by the target company. Holders of such securities are to be regarded as shareholders.  

The Swedish takeover regulation also applies to mergers and merger-like processes substantially comparable to takeover offers. The rules apply to mergers involving both Swedish and non-Swedish targets, provided that they are listed in Sweden. 

No, neither the offeror or the target company are required to engage specific advisers such as financial advisers. However, for most offerors, takeover offers are not something they often undertake and therefore a successful takeover offer, may benefit from engaging advisers with the experience and expertise to plan, prepare and execute the takeover offer. The same applies for the target company, so engaging advisers may be advisable. 

If a person, alone or together with any or group of persons acting in concert with it, as a result of an acquisition of shares carrying voting rights, directly or indirectly, holds more than 30% of the voting rights of the target company, such person must, within 4 weeks, make a mandatory offer for the remaining outstanding shares (a mandatory offer). 

Actions by the target company as a result of which a shareholding below 30% of the votes reach the 30% threshold do not trigger a mandatory offer, but any subsequent acquisition by the relevant shareholder would trigger an obligation to make a mandatory offer. 

The obligation to make a mandatory offer will lapse if:  

• within 4 weeks from the date on which the obligation arose, the obligated person or, where applicable, a closely related person, sells shares so that the holding no longer represents 30% of the voting rights of the target company, or where the obligated person, another person, or the target company takes any other measure whereby the holding no longer represents 30%; and  
• within 4 weeks from the date on which the obligation arose, the obligated person calls for redemption of all remaining shares of the target company pursuant to the squeeze out procedure pursuant to the Companies Act. However, if such request for redemption is revoked, rejected or disapproved, the mandatory public takeover offer obligation applies.         

In limited circumstances, the Securities Council may grant exceptions from the mandatory public takeover offer obligation. Such exception has for example been granted when: 

• the stake is acquired from an affiliate (i.e. no real change of control); 
• a third party exercises control over the target company or holds a larger shareholding in the target company than the party holding more than 30%; 
• a rights issue whereby the stake is acquired within the framework of a capital increase with preferential subscription rights for the shareholders, which has been decided upon by the general shareholders’ meeting; 
• the stake is acquired within the framework of a capital increase by a target company in financial difficulties, which has been decided upon by the general shareholders’ meeting; and 
• the stake is acquired in connection with an issue in kind, i.e., where the third party receives shares in the target company as consideration when the target company is making an acquisition. 

The most common transaction structure in Sweden for a takeover offer, is where the offeror makes an offer to acquire the target company’s shares and the target company's shareholders are asked to accept the offer on an individual basis.  

The parties involved in a takeover offer must restrict access to non-public information about the potential offer, and any non-public information shared in the context of the preparatory stage, including as disclosed pursuant to a due diligence review, on a need-to-know basis. Listed companies can typically delay disclosure of inside information regarding a potential takeover offer if there is no leakage of information. 

According to the takeover rules for Nasdaq Stockholm and the Nordic Growth Market NGM, the target company must inform the stock exchange about a potential takeover offer once it can be reasonably assumed that an offer will be launched. Similarly, an offeror listed on a Swedish stock exchange must notify the potential takeover offer to the stock exchange once the offeror has made such preparations that it is likely to result in an offer. This enables the stock exchange to monitor price movements in the target company’s shares (and, if applicable, the offeror’s shares) and suspend trading to prevent any unexpected movements in share price if information regarding the possible offer is leaked. 

Generally, the Takeover Code does not permit announcements about a mere intention to make an offer. In the event of a leak of information, a "possible offer announcement" may however be made. Such announcement must clearly state it is not a formal announcement of an offer, the reason as to why it is being announced and when a formal announcement can be expected. In practice, announcements in the event of a leak are generally made by the target company itself, without disclosing the identity of the potential offeror. 

If there are rumours or leaks that a potential offeror intends to launch a public takeover offer, the Securities Council may force an announcement which could lead to an early disclosure and possibly an acceleration of the preparations by an offeror. If an offeror has been compelled to make such early disclosure, the Securities Council may decide that a takeover offer must be announced within a certain period of time or that the offeror must otherwise refrain from making a takeover offer. 

It should be noted that the rules regarding insider dealing and market abuse according to MAR, including the prohibition on the manipulation of the target company's share price e.g. by creating misleading rumours, are applicable prior, during and after a takeover offer.  

Similarly, the rules regarding disclosure of changes in major shareholdings in listed companies on a regulated market ("Transparency Rules") set forth in the Trading Act also apply should a potential offeror start building up a stake in the target company prior, during and after a takeover offer. Such potential offeror will be obliged to announce its stake if the voting rights attached thereto have passed an applicable disclosure threshold, which are; 5%, multiples of 5% up to 30%, and 50%, 66 2/3% and 90% thereafter. 

Once the offeror has decided to make a takeover offer and entered into an undertaking with the regulated market to comply with the applicable takeover regulations, it must announce the offer as soon as possible. As the announcement normally will have an effect on the price of the target company’s shares, it must, as far as possible, contain all the relevant facts for making a proper assessment of the offer. The main terms to include in such announcement includes e.g. the price, any premium alongside its calculation, how the offer is financed, and any conditions for completion. 

When an offer has been announced, the offeror has 4 weeks to prepare and submit an offer document, containing the full terms of the offer and additional information, to the SFSA. The SFSA's standard review period for scrutinising and providing comments on an offer document is 10 business days. The offer document is normally approved by the SFSA a few days after the offer document has been revised in accordance with any comments received from the SFSA. Once the offer document has been approved and registered by the SFSA, it must be made public. 

For completeness, Swedish takeover rules do not stipulate any put up or shut up rules. However, if an offeror withdraws from a takeover offer, the offeror or anyone acting in concert with the offeror may not launch a new takeover offer for the target company within 12 months, unless the new takeover offer is recommended by the target company board; or if the offer was withdrawn after a nine-month period due to the failure to obtain the required regulatory approvals and a new offer is made within four weeks after approval of the required regulatory approvals. 

Takeover offers can be voluntary or mandatory, whereby it is common for completion of voluntary offers to be subject to certain conditions while mandatory offers generally, as explained below, are unconditional. 

Voluntary takeover offer 

An offeror can voluntarily make an offer for all or up to 30% of the shares carrying voting rights issued by the target company. A takeover offer for less than all of the shares is, however, uncommon. 

The offeror is free to make the takeover offer subject to specific conditions provided such are formulated in a way that allows for its fulfilment to be objectively determined; i.e. it may not be formulated in a way that gives the offeror decisive influence over its fulfilment. In practice, such conditions vary but customary conditions regularly attached to an offer include the following, whereby a condition for completion may be waived, in whole or in part, if the offeror has reserved the right to do so. 

• Minimum acceptance level: the target company’s shareholders accepting the offer to such extent that the offeror becomes the owner of shares in the target company representing more than 90% of the total share capital. There is however no mandatory minimum level.  
• Conditions relating to no other party announcing an offer to acquire shares in the target company on terms more favourable for the shareholders than the offeror’s offer.  
• Material adverse change: Conditions relating to the target company’s business, such as that no circumstances have occurred which could have a substantial adverse effect or reasonably be expected to have such an effect on the target company’s sales, earnings, liquidity, equity, or assets. However, the threshold for invoking this condition is very high.  
• Conditions relating to that no information made public or disclosed by the target company to the offeror is inaccurate, incomplete, or misleading, and that the target company has made public all information required to be made public.  
• Merger control clearance and other conditions that neither the offer nor the acquisition of the target company is rendered impossible or significantly hindered as a consequence of legislation or other regulation.  

Mandatory takeover offer  

Mandatory takeover offers cannot be made subject to conditions, other than a condition of obtaining necessary regulatory approvals.  

An offer may only be submitted after preparations, which demonstrate that the offeror has the ability to carry out the offer financially. 

This means, in case of a full or partial cash offer, that the offeror must have the financial resources to satisfy the consideration payable under the offer in full. If conditions are set for the payment of a required acquisition credit that are not included as completion conditions for the offer (even if the possibility for such completion conditions is limited), these must be conditions that the offeror itself can in practice ensure are fulfilled. The requirement for available financing means that the entire offer consideration, assuming full acceptance of the offer, must be available for drawing on such conditions as just stated already when the offer is made public. 

An offeror may not make an offer at less than the highest price it has paid over certain periods, and all shareholders of the same class of shares must have equal rights to any form or value of consideration, subject to exceptions granted by the Securities Council or if there are certain circumstances in the specific case in favour of an exception (such as legal obstacles for receiving the consideration). 

For a voluntary offer, the offeror is in principle free to determine:  

• the form of consideration (cash, shares or a combination of both) offered to the target company shareholders; and 
• the price if the consideration is to be paid in cash, subject to the condition that the price must reflect the highest price paid by the offeror within 6 months before or after the offer, or during the offer. 

For a mandatory offer, the same rules apply as in the case of a voluntary takeover offer, as well as: 

• the offered price may be paid in cash, shares or a combination of both, but a cash alternative must be offered; 
• the price must be equal or higher to the price paid by the offeror for any shares within a period of 6 months before or after the offer, or the weighted average trading price for securities of the target company which have been settled in shares; 
• in case of an indirect acquisition of at least 30% of the target company, e.g., when the offeror has acquired control of a company (a holding company) that in turn owns shares in the target company, the prior transaction is to be considered as conducted at a price per share corresponding to the volume weighted average price of the share during the 20 trading days preceding the date of acquisition of such holding company. If, when acquiring the holding company, the offeror has assigned a higher price for the target company’s shares than mentioned 20-day average, the prior transaction is instead to be considered as carried out at a price per share corresponding to that assigned price. The offeror is obliged to provide information on the purchase price for the holding company, how the purchase price was allocated between the target company’s shares and any other assets and the reasoning for such allocation; and 
• the Securities Council may allow exceptions from the rules on consideration. 

Swedish law has a strong focus on the rights of shareholders in relation to takeover offers, and one of the general principles applicable to public takeover offers in Sweden are that holders of the same class of shares of a target company must be afforded equivalent treatment and, hence, offered a compensation per share identical in both form and value.  

If there are special reasons, deviations may be made from the principle of equal treatment. An example of this is that certain shareholders, for legal or similar reasons, cannot receive compensation in the form that the offeror intends to offer other shareholders. Even material practical reasons can justify deviations. For example, in case of offers relating to companies with a very large number of shareholders, it may be justified to offer cash compensation for smaller shareholdings even though compensation in a different form is paid in other cases, provided that such cash compensation at the time the offer is made does not deviate from the value of the compensation offered to other shareholders. However, it is not compatible with the principle of equal treatment to design the offer so that all shareholders are offered cash compensation for a certain number of shares, and another form of consideration for a larger number of shares. 

The Swedish public takeover bid rules contain general rules about a pre-offer due diligence. 

If an offeror requests permission to conduct a due diligence on the target company, the board of the target company is to decide whether the company can and will participate in such an investigation and, if so, on what conditions and to what extent. There is no obligation for the target company board to allow a due diligence process and it is up to the board of directors to decide whether or not a due diligence is appropriate in the individual case.  

The target company board must determine to what extent a request for due diligence should be met, taking into consideration the commercial interest of the target company and its shareholders, and keeping in mind the principle that all shareholders must receive equal treatment, e.g., disclosure of inside information. Thus, the target company board must assess whether or not the offeror is serious and if the terms of the takeover offer are sufficiently favourable to justify a due diligence. 

The target company board is to limit the investigation to factors necessary for submitting and implementing the offer.  

If the target company discloses information to one potential offeror, it must disclose the same information to all potential bona fide offerors which may emerge. The target company board's obligation not to unfairly discriminate against a certain offeror is ultimately a consequence of the obligation to act in the interests of the shareholders, since it may be assumed to be in the interests of the shareholders that any offer competition takes place on equal terms. 

In Sweden, the concept of a prior due diligence or pre-acquisition review by an offeror is generally accepted and appropriate mechanisms have been developed in practice to organise a due diligence or pre-acquisition review and to cope with potential market abuse and early disclosure concerns. These mechanisms include the use of strict confidentiality procedures, a limitation on sharing information and virtual data rooms. Inside information is often specifically excluded from information shared since there is an obligation to disclose such shared information. 

As a general rule, protection measures by the offeror entered into with the target company are not allowed. The board of directors of the target company is not allowed to enter into any agreements with the offeror that results in obligations of the target company that benefit the offeror. Therefore, neither break fees or exclusivity arrangements are allowed. Although, the Securities Council may in case of certain circumstances grant exemptions and allow a protection measure.  

Confidentiality undertakings from the target company to the offeror are not prohibited. 

The directors in the target company must make an announcement regarding their opinion on the offer. The announcement shall include the reasons behind the boards opinion and shall be made no later than two weeks before the expire of the acceptance period of the offer.  

The target company may apply defensive measures, although a decision to implement such defensive measures lies within the competence of a general meeting. Thus, defensive measures are very unusual in Sweden. Instead, it is more common that the board of directors of the target company will try to involve other competitive offerors in order to increase any offer. 

Any purchases by a potential offeror within six months prior to the offer will set a floor on the minimum consideration which may be offered. The form of consideration offered in a purchase before the offer also affects the form of consideration that must be offered to all shareholders in the target company.  

Furthermore, any purchases made before or during the offer period will be subject to ordinary statutory disclosure requirements according to Swedish law. The thresholds are 5%, 10%, 15%, 20%, 25%, 30%, 50%, 66.67% or 90% and each time a transaction leads to the offeror passing any of such thresholds, whether increasing or decreasing its shareholding, the offeror must disclose such transaction within three days.  

An offeror may not acquire shares representing more than 30% of the target company shares without triggering a mandatory offer. If a voluntary offer is made by the offeror, and the offeror during the acceptance period of the voluntary offer through purchases on the regulated market increases its shareholding to above 30%, the voluntary offer shall be amended so that it fulfils the special requirements for mandatory offers.    

Target company shareholders may give irrevocable commitments or statements of intent to accept an offer if made or once made. If commitments are made before the offer is disclosed, the offeror is required to disclose all such commitments when disclosing the offer.  

The target company shareholders may sell shares to the offeror outside of the offer. Although, what is stated above regarding the floor price of the offer applies also to sales outside of the offer, which is why an offeror is not likely to purchase shares on more favourable terms outside of the offer since it affects the offer. 

If the offeror purchases shares outside of the offer such purchases shall be disclosed if the terms of the purchase are more favourable for the seller than under the offer. The disclosure shall include information regarding the price paid and any other terms of the purchase, whereafter the offer shall be amended to reflect such price and terms.   

As set out above, purchases with similar or less favourable price and terms during the offer are subject to the ordinary statutory disclosure requirements according to Swedish law. The thresholds are 5%, 10%, 15%, 20%, 25%, 30%, 50%, 66.67% or 90% and each time a transaction leads to the offeror passing through any such threshold, whether increasing or decreasing its shareholding, the offeror must disclose such transaction within three days. 

Where the offer is implemented by way of a voluntary public takeover offer: 

D – <<28: Preparation of the offer by the offeror (for example, contact with the target company’s board of directors and/or its key shareholders and possibly securing irrevocable undertakings where the shareholders agree to accept the offer under certain circumstances) 

D – 28: Announcement of firm intention to make an offer after having undertaken to comply with the applicable takeover regulations 

D: Publication of formal offer documentation to the public. Prior to that, the offer document must have been filed with, and approved by, the Swedish Financial Supervisory Authority ("SFSA") (Sw. Finansinspektionen). 

D: + 7: Target company's board of directors announces its opinion regarding the offer no later than two weeks prior to the end of the acceptance period. 

D + 21: End of first acceptance period (the acceptance period may not start before the offer document has been made public and the duration is not less than three weeks and not more than 10 weeks. The total acceptance period may not be extended by more than three months or, if the offer is conditional on the attainment of necessary regulatory approval, nine months. The Securities Council may approve even longer extensions.) 

D + 22: Publication of results as soon as possible after the end of the acceptance period. 

D + 25: Payment of the offered consideration by the offeror as soon as possible after publication of the result. 

D + >25: Compulsory redemption (squeeze-out) if the offeror acquired more than 90% of the shares and delisting of the target company shares is applied for. 

The key documents in relation to a takeover offer would typically include: 

• A non-binding indicative offer letter from the potential offeror to the board of the target company. 
• Irrevocable undertakings from key/major shareholders of the target company. 
• Financing documents. 
• An undertaking by the offeror to the stock exchange to comply with the Takeover Code (or other applicable code). 
• The offeror's press release announcing the offer. 
• The target company board's recommendation to the shareholders, and any fairness opinion. 
• The offeror's offer document and acceptance forms which complies with the Takeover Code requirements. 
• Offeror prospectus (in case of an offer where securities are being issued as consideration) which complies with the EU Prospectus Regulation (2017/1129) and the Swedish Act on additional regulations to the EU Prospectus Regulation (2021:973).  
• The offeror's press release announcing the outcome of the offer and other press releases, for example, where the acceptance period is extended, or the offer consideration is increased (in which case the bidder must prepare a supplement to the offer document). 

There are no specific rules governing competitive offer situations in Sweden. However, competitive offers are not uncommon in Sweden whereby the circumstances may entail that the target company board of directors may invite parties to make competing offers following rejection of the original offer. Many transactions in recent years in Sweden have indicated that target company’s board of directors are increasingly trying to negotiate higher offer prices following confidential approaches by potential offerors or seeking alternative proposals from third parties. In accordance with the Takeover Code, the target company board of directors is obliged to consider all options when an offer is presented on the target company and, where necessary for this purpose, take actions the board considers being in the shareholders' interests. 

All potential offerors must receive equal access to perform a due diligence review of the target company upon competitive offers. As a result, the target company board of directors usually has to disclose the same information to competing offerors of the same type. 

Should a competing offer be announced to an original offer, this will not automatically have an effect on the acceptance period of the original offer. It is possible for the original and the competing offerors to increase their offers, provided that the amended offer is kept open for acceptance for at least two more weeks. 

An offeror is only entitled to withdraw its offer if one of the conditions to its offer is not satisfied (or if it is clear that it cannot be satisfied) within the relevant time period and this non-satisfaction is of material importance for the offeror's acquisition of the target company. However, no materiality threshold applies to acceptance level conditions. 

An offeror is entitled to modify its offer if the offer through the modification becomes more favourable for the shareholders, provided the modified offer is kept open for acceptance for at least two more weeks. 

Pursuant to the Companies Act, an offeror can acquire minority shareholdings on a compulsory basis (squeeze-out) if the offeror owns more than 90% of the shares in the target company, whether or not those shares also represent more than 90% of the voting rights in the target company. 

The offeror may initiate the compulsory buy-out by sending a letter to the target company’s board of directors. The procedure is settled by arbitration. The arbitration tribunal consists of three arbitrators.  

This type of squeeze-out procedure is subject to the same rules and procedures that would otherwise apply to a stand-alone procedure outside the framework of a voluntary or mandatory public takeover offer. The minority shareholders have a corresponding right to force redemption of their shares. 

If an offer fails, the offeror is prevented from making another offer, or acquiring target company shares that would trigger a mandatory offer, for a period of 12 months after the failed offer. This restriction does not apply, however, where the new offer is recommended by the target company board on announcement. The offeror is also allowed to make a new offer if the failed offer was withdrawn after a 9-month period due to the failure to obtain the required regulatory approvals and the new offer is made within four weeks after approval of the required regulatory approvals. 

Furthermore, there are certain restrictions on subsequent acquisitions of target company shares if the offeror decides to waive acceptance conditions and declare the offer unconditional (completes the offer). If the offeror acquires shares in the target company within a period of six months from the date the offer was declared unconditional, and if the offeror acquires shares in the target company at a price exceeding the price in the takeover offer, the offeror must pay additional consideration to those shareholders who accepted the original offer to make up for the price difference.  

The resolution to de-list a company is resolved upon by the board of directors of the target company. After the de-listing resolution, the board of directors can submit an application for de-listing to the stock exchange operating the regulated market on which the target company is listed. The stock exchange will not oppose the application to de-list the company. Although, the guidelines issued by the Securities Council shall be taken into consideration before de-listing the target company, as they clarify when a de-listing is deemed legitimate. A de-listing is generally seen as a limitation of minority shareholder rights.  

The Securities Council prefer that a target company, which no longer fulfils the free float requirement of the regulated market (which is most typically the requirement which is no longer fulfilled after an offer), before a de-listing is considered, re-lists on a marketplace with a lower free float requirement. A shareholding of more than 90 per cent is therefore needed in order to ensure that the de-listing does not violate the guidelines issued by the Securities Council.