Remedies During And After Public Takeover Offers In Germany – Development Lines Of The Case Law Regarding Top-Up Payments

Author:Dr. Wolfgang Grobecker and Tobias Hueck
Profession:P+P Pollath + Partners

The most interesting question with respect to public takeover offers is most probably that of the consideration offered. Therefore, the statutory minimum price rules of the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, WpÜG) are of particular importance. The bidder must offer an appropriate consideration to the shareholders of the target company. If the consideration provided for in a public takeover offer is not appropriate, the shareholders who have accepted the offer shall be entitled to a subsequent top-up payment. This had already been clarified by the German Federal Supreme Court (Bundesgerichtshof, BGH) in its landmark Postbank case in 2014 (Ref.: II ZR 353/12). For bidders and shareholders, recent developments in case law regarding remedies during and after public takeovers are likely to be no less significant.

In a decision dated 7 November 2017, the German Federal Supreme Court ruled that the consideration paid by the bidder for the derivative acquisition of convertible bonds must also be taken into account when determining the appropriate minimum consideration for a public takeover offer to the shareholders (Ref.: II ZR 37/16). US pharmaceutical giant McKesson had acquired bonds convertible into Celesio shares from US fund Elliott and converted them into Celesio shares ahead of the takeover by McKesson of German pharmaceutical distributor Celesio in 2014. The highest purchase price paid by McKesson for the acquisition of bonds from Elliott was the equivalent of EUR 30.95 per share. McKesson's public takeover offer, on the other hand, only envisaged a price of EUR 23.50 per share.

Celesio shareholder Magnetar Capital claimed payment of the difference of EUR 7.45 per share and the German Federal Supreme Court ruled in the favor of Magnetar. It was held that the so-called previous acquisitions' rule (section 31 para. 6 WpÜG) is to be interpreted as a general protection against circumvention. The legislator hand intended to ensure that the bidder would be hold to the price which he considered to be reasonable for the shares in a temporal context of the takeover offer. This price expectation of the bidder would also be reflected in the acquisition of bonds and the associated right to acquire shares. Since the main purpose of the legal framework of the WpÜG was to provide a fair and transparent procedure, a broad interpretation was necessary.

Up to now, the German Federal Supreme Court only had...

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