How does a takeover bid (takeover bid) work on the stock market?


(BFM Bourse) – To renationalise EDF, the State, which owns 84% ​​of the energy company, has announced its intention to launch a takeover bid (OPA) for the rest of the capital that it does not yet own. This type of operation is not that rare, the Parisian market being regularly animated by takeover bids. But by the way, how exactly does a takeover work?

This is the saga of the summer. The government will bring EDF back into its fold, by buying out by next fall the minority share (about 16%) of the capital of the energy company still in circulation on the Paris market at a price of 12 euros per share. Offers on the capital of listed companies are an integral part of life on the Parisian coast. In the present case, with the State in the driving seat, EDF’s renationalisation project takes on a very specific character.

However, the Government will not be able to override a very specific formalism and regulation to which these operations are subject. And not all takeover bids meet the same objectives. Here’s everything you need to know to fully understand how these offers work.

What is a takeover bid?

In substance, a public offer constitutes a proposal issued by a company (whether it is itself listed or not) to the shareholders of a listed company to take back their shares according to variable methods, respecting a regulated procedure and controlled by stock exchange authorities. The term OPA (public purchase offer) is often used, by metonymy, to designate all public offers. In reality, financial legislation distinguishes several types.

What are the different types of public offerings?

Stricto sensu, we speak of OPA (public purchase offer) when the payment is made in cash (that is to say in cash). An offer paid for by exchange of securities (X shares of one company against Y shares of another) is an OPE (public exchange offer). If the initiator of the offer is already the majority shareholder of the targeted company, the process is a little shortened and simplified, the offer then takes the name of OPAS or OPES (public purchase offer or simplified exchange).

When the initiator offers both securities and a cash payment for each share presented in its offer, it is a mixed offer. In addition, the purchaser can agree to pay in shares or in cash at the choice of the shareholder who sells his shares, the operation is called alternative offer (if the purchaser does not set any limit of amount) and multi-option offer (if the buyer leaves the choice while limiting for example the cash portion to a certain proportion of the total amount of the offer).

Can a company buy back its own capital?

A company can launch an offer on a fraction of its own capital: this is a public takeover bid (OPRA). In this case, the initiator buys back all the securities presented to it if the total presented to the OPRA is lower than the target level. If the securities presented represent more than this level, he acquires only part of them (each sell order is reduced in proportion to the amount requested by the acquirer). . To give an example, if a company offers to buy back its own capital within the limit of 20,000 shares and 25,000 are brought to it, each order will be reduced by 20% regardless of its amount: 20 shares will be taken back from the one who brings 25. , 80 to the one who brings 100, 4000 to the one who brings 5000, etc.

Is this voluntary or mandatory?

Public offers can be either voluntary or mandatory. A company can indeed decide on its own that it has a strategic or financial interest in taking control of another. She then launches a voluntary offer. It should be noted that the procedure is strictly the same whether or not it benefits from the approval of the board of directors of the target (friendly or hostile offer).

But in some cases, it is the regulations that oblige to launch a public offer. The main trigger is crossing the threshold of 30% of the capital: by crossing this level, a shareholder is required to offer others to buy back their shares if they so wish. In all cases, the price offered must be at least equivalent to the highest price paid by the initiator during the previous twelve months (often this is the price at which the transaction that caused the crossing was carried out) . But the AMF provides for certain exemptions from the obligation to submit an offer, for example in the event of passive threshold crossing (caused not by the purchase of additional securities but by a reduction in the number of securities making up the capital) or if the crossing follows a capital increase of a company in proven financial difficulty.

Over what period does a public offer take place?

The announcement of a draft offer (compulsorily including the price and/or the parity offered) launches the so-called pre-offer period, which runs until the deposit and during which the initiator does not have the right to intervene on the title. Any other person increasing their stake by more than 1% must also notify the AMF. Once the project has been filed, the AMF departments have ten days to examine it and declare it compliant, request a modification, or reject the project. If the authority gives the green light, the offer is opened three days after the declaration of compliance, for a minimum period of 25 days which can be extended by the stock market watchdog. Throughout the offer period, the initiator can also raise the price (one example among others, Vivendi did this during its offer for Gameloft). All securities will be paid for at the new price, even those contributed before the upgrade.

Why do we have to reach a “threshold of success”?

Inspired by Anglo-Saxon law, the AMF has imposed a success threshold of 50% for several years. If the potential buyer does not reach this threshold following his offer, the offer is null and void, and the securities tendered are returned. In the case of a voluntary offer, the acquirer can also set its own conditions precedent (for example, the fact of obtaining the approval of the competition authorities if the acquisition of the target company requires it, or reaching a certain threshold of voting rights). At this stage, each shareholder remains free to tender or not their shares to an offer, whether it is a takeover bid, public exchange offer or OPRA.

End clap

At the end of any public offer, if the securities not tendered to the offer represent less than 10% of the capital and voting rights, the majority shareholder may implement, within three months, a compulsory withdrawal. on these titles. Minority shareholders are thus forced to tender their shares to the offer and will be compensated for this. The company’s shares will then be delisted from the market. An independent expert is appointed by the company concerned by the offer in order to issue a fairness opinion on the price of the squeeze-out.

On the other hand, if the initiator of the offer has not implemented a squeeze-out within the three-month period, he can then launch a public buy-out offer (OPR) later. In this case, the price of the offer may be different from that of the OPA or OPE.

Sabrina Sadgui – ©2022 BFM Bourse



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