PUBLIC TAKE-OVER RULES IN THE NETHERLANDS AND THE NETHERLANDS ANTILLES
Legal battle between minority shareholders of Hunter Douglas and Bergson Holdings
Hunter Douglas NV is a company established in the Netherlands Antilles. It is the worlds largest producer of window blinds (Luxaflex) and a major manufacturer in architectural products. Its shares are listed at the Amsterdam stock exchange, Euronext. Bergson Holdings NV is also a Netherlands Antilles established company. Ralph Sonnenberg, the CEO of Hunter Douglas, ownes all of the outstanding shares in Bergson.
In May 2005, Bergson announced a plan for a (friendly) tender offer to acquire shares in Hunter Douglas: 10.5 million in cash for floating shares at a target price of 46 euros per share. Bergson issued an Offer Document, which is a lengthy disclosure document prepared under Dutch law, which by implementation complies with European Union Directives. In particular, the Offer Document has been prepared in compliance with the Dutch 1995 Act on the supervision of the securities trade, and the Dutch 1995 Decree on the supervision of the securities trade.
Several minority shareholders raised objections and initiated legal proceedings in the Netherlands. After all, Hunter Douglas is a Euronext Amsterdam listed company and as such subject to the Dutch (public) take-over rules. Foreign bidders like Bergson should also comply – to the extent possible – with Dutch (public) take-over rules.
A distinction should be made between public offers (friendly or hostile) and negotiated acquisitions. Dutch law contains provisions for the protection of shareholders to be observed with a public offer for shares, both friendly and hostile. In general, there are two types of public offers: an offer to acquire all outstanding shares in a target or a tender offer which allows a bidder to acquire a maximum of 30% of the shares in a target (including previously acquired shares).
A tender offer is a (public) invitation to all shareholders of a target (i.e. Hunter Douglas) to tender their shares to the offeror (Bergson), at a price to be determined by the shareholders: all shares offered at a price below the offer price of the offeror must be acquired at such price (reverse book building system).
In proceedings against the Dutch supervisory authority (the Stichting Autoriteit Financiele Markten, the AFM) the minority shareholders argued that a tender offer would be detrimental to the minority shareholders and that is does not allow a bidder to acquire more than 30% of the voting rights. The administrative court ruled, however, that the minority shareholders’ objections relate to the nature of a tender offer. Furthermore, it ruled that the bidder may not acquire more than 30% of the nominal share capital of the target irrespective the percentage of (direct or indirect) voting rights. The fact that Ralph Sonnenberg controls and will control in total more than 30% of the voting rights both before and after the tender offer is not relevant, according to the court. Thus, the tender offer by Bergson does not violate Dutch take-over rules.
The minority shareholders subsequently initiated preliminary relief proceedings against Hunter Douglas and Bergson in an attempt to prevent both companies to perform the tender offer. They basically used the same arguments as in the administrative proceedings and it is no surprise that their claims were rejected again.
In both proceedings the minority shareholders referred to the Netherlands Antilles take-over rules, simply because both Hunter Douglas and Bergson are companies incorporated in the Netherlands Antilles. Contrary to what they argued, Netherlands Antilles law does not require that holders of more than 30 percent of the share capital are obligated to make a tender offer for all outstanding shares, rather than just for part of the shares. If, and only if, a bidder wants to make a public offer without the consent of the management board and the supervisory board of the target, it should make an offer for all outstanding shares. Basically, as far as Netherlands Antilles law is concerned, there are no provisions at all which could prevent Bergson from performing its tender offer.
Take-over battles are still a lawyers’ paradise.
Karel Frielink
Attorney (lawyer) / Partner
