Public mergers and acquisitions in Switzerland: overview
A Q&A guide to public mergers and acquisitions law in Switzerland.
The country-specific Q&A looks at current market activity; the regulation of recommended and hostile bids; pre-bid formalities, including due diligence, stakebuilding and agreements; procedures for announcing and making an offer (including documentation and mandatory offers); consideration; post-bid considerations (including squeeze-out and de-listing procedures); defending hostile bids; tax issues; other regulatory requirements and restrictions; as well as any proposals for reform.
To compare answers across multiple jurisdictions visit the Country Q&A tool. This Q&A is part of the global guide to mergers and acquisitions law. For a full list of jurisdictional Q&As visit www.practicallaw.com/acquisitions-guide.
Public M&A market activity in Switzerland was moderate in 2015, and only two takeovers for companies listed on the SIX Swiss Exchange were announced in 2015:
Sulzer AG. On 3 August 2015, Tiwel Holding AG, a Swiss-based investment company, launched a public tender offer for all publicly held shares in Sulzer AG. Tiwel Holding AG was set up by Renova Management AG, which already prior to the offer held a significant stake in Sulzer AG. The reason for the offer was to make sure that a share repurchase by Sulzer AG would not trigger a duty for a mandatory bid at an unfavourable price for Renova Management AG. Tiwel Holding AG launched a public tender offer at the lowest possible price. Due to weak stock market conditions, more public shareholders than expected tendered their shares.
Micronas Semiconductor Holding AG. On 22 December 2015, TDK Corporation, a Japan based storage media company, launched a public tender offer for Micronas Semiconductor Holding AG.
Other business combinations and capital market transactions in Switzerland in 2015 included:
In February 2015, Sunrise Communications AG conducted an IPO at the SIX Swiss Exchange with a total placement volume of CHF2.3 billion.
In March 2015, Dufry AG, listed on the SIX Swiss Exchange, announced its acquisition of World Duty Free SpA for a consideration of CHF3.896 billion.
In April 2014, Holcim Ltd, listed on the SIX Swiss Exchange, and Lafarge SA, listed on Euronext, announced their intention to combine the two companies through a merger of equals. In the course of this transaction, on 2 February 2015, CRH plc announced to acquire certain assets from Lafarge S.A. and Holcim Ltd for a total value of US$7.07 billion. After the closing of the merger, which occurred in July 2015, the combined company had a market capitalisation of over EUR40 billion. The transaction has been consummated by a public exchange offer of Holcim Ltd for all outstanding shares of Lafarge, leading to a top holding company with its registered seat in Switzerland.
In April 2015, Kaba Holding AG, listed on the SIX Swiss Exchange, announced its CHF4 billion merger with Germany based Dorma Group to become the dorma+kaba group. It is now listed as dorma+kaba Holding AG on the SIX Swiss Exchange.
In June 2015, Swiss based ACE Limited announced its acquisition of the US-based insurance company The Chubb Corporation for US$29.5 billion.
In July 2015, Chinese company HNA Group Co Ltd. acquired Swiss based Swissport International Ltd. for a consideration of CHF2.73 billion.
In September 2015, Swiss Re AG, listed on the SIX Swiss Exchange, announced the acquisition of Guardian Financial Services Limited through its subsidiary Admin Re UK Limited for a consideration of CHF2.4 billion.
In October 2015, Credit Suisse announced a CHF 6 billion share capital increase to further strengthen the group's capital base. A first tranche of this capital increase resulted in the issuance of registered shares to certain qualified investors and the second tranche was executed by way of a rights offering to existing shareholders.
A public tender offer is the most common way of obtaining control of a public company. It can involve:
A tender offer for cash.
An exchange offer for securities (in the event of a mandatory offer, the bidder must alternatively offer cash).
A combination of the two.
A statutory merger is common within a group of companies or between companies of equal size. It is subject to a formal procedure and can involve:
One company being dissolved and merged into another (absorption).
Two companies being dissolved into a newly incorporated company (combination).
The following formalities are required:
A merger agreement between the companies.
A report by the board of directors (board).
An auditors' report.
Resolutions by each company's board and shareholders.
Inspection rights by shareholders.
Registration in the commercial register.
The dissolved company's assets and liabilities automatically transfer to the surviving or new company.
Although hostile bids are generally allowed, no hostile bids were made in 2015.
The capital markets' liquidity and transparency are increasing, and the growing number of private and institutional investors encourages companies to focus on the value of their shares. Therefore, if there are competing offers and the target has a high free float, auctioning the target may lead to the higher bid winning, whether or not it is recommended.
A bidder can announce a hostile offer without first approaching the target's board, or by approaching it shortly before launching the bid (building up a stake before the launch).
Regulation and regulatory bodies
Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (FMIA)
The FMIA regulates friendly and hostile public takeovers. It includes provisions to ensure transparency, fairness and equal treatment of shareholders in corporate takeovers. The FMIA also provides for market abuse rules (insider dealing and market manipulation).
The FMIA applies to:
Offers for cash or securities and mixed offers.
Offers for Swiss resident companies with at least one class of equity security listed on a Swiss exchange.
Offers for non-Swiss resident companies with a primary, full or partial, listing on a Swiss exchange. Should the law of a foreign country claim to apply simultaneously with Swiss law (positive conflict of competence), the Takeover Board (TOB) may grant an exception to the application of Swiss takeover law in situations where the latter is in conflict with a foreign law that ensures an equivalent level of investor protection.
The FMIA does not apply to:
Offers for non-Swiss resident companies with a secondary listing on a Swiss exchange.
Offers for Swiss resident companies listed on a foreign stock exchange.
Other legislation has been implemented under the FMIA, including:
The Ordinance on Financial Market Infrastructures and Market Conduct in Securities and Derivatives (FMIO). This contains additional rules on the compulsory purchase of a dissenting minority's shares (squeeze-out) (see Question 20) and safe harbor rules in connection with the prohibition of insider trading and market manipulation.
The FINMA Ordinance on Financial Market Infrastructures and Market Conduct in Securities and Derivatives (FMIO-FINMA) of the Swiss Financial Market Supervisory Authority (FINMA). This contains additional rules on the disclosure of shareholdings and mandatory offers.
The Takeover Ordinance (TOO). This sets out rules on the offer prospectus' content and the parties' obligations.
Various other rules also apply, including:
The Ordinance against Excessive Compensation with respect to Listed Stock Corporations, which entered into force on 1 January 2014, applies to Swiss corporations whose shares are listed on a stock exchange in Switzerland or abroad. The rules oblige the companies to submit the management's compensation to the shareholders for a binding vote. Further, the ordinance contains rules for the corporate governance of Swiss public companies relating to the executive management, shareholders, pension funds and independent proxies. The ordinance prohibits golden handshakes, transaction bonuses as well as golden parachutes for the members of the board and executive management.
General corporate law provisions in the Code of Obligations (CO), including rules on shareholders' rights and directors' fiduciary duties.
Listing Rules of the SIX Swiss Exchange, which:
specify disclosure requirements in relation to price-sensitive information; and
regulate the listing and de-listing of shares.
Merger control provisions in the Federal Act on Cartels and other Restraints on Competition.
The Federal Act on the Acquisition of Real Estate by Persons Abroad, containing regulations on the purchase by foreign persons, or foreign-controlled companies, of residential property or land in Switzerland.
Regulations in certain industries, such as financial services, insurance, media, telecommunications and transportation.
In addition, the Merger Act regulates:
Mergers (Fusionen) (transferring one company's assets to another pre-existing company or transferring two companies' assets into a new company).
Demergers (Spaltungen) (splitting one company's assets and liabilities and transferring them to another).
Bulk transfers of assets (Vermögensübertragungen).
Changes of legal form (Umwandlungen) (for example, converting a limited liability company into a corporation).
The TOB and its supervisory authority the FINMA monitor public takeover offers. The TOB can issue binding and enforceable orders (Verfügungen) against the parties, which can be appealed to the FINMA. The FINMA's decisions can be appealed to the Federal Administrative Court. The relevant decisions are published at www.takeover.ch. See box, The regulatory authorities.
The scope and procedures of due diligence vary. The bidder and target are both likely to want to maintain secrecy until the offer is announced.
Bidders tend to perform as much due diligence as possible before announcing the offer, as opportunities to withdraw from an announced bid are limited. The target's board is likely to restrict the scope of due diligence, as directors are under a duty not to disclose confidential information concerning the company and not to make insider information available (particularly for business secrecy reasons or if the board expects a competing hostile offer from a competitor, since a competing bidder must be treated equally in terms of due diligence).
The target's board has wide discretion when deciding on the information it provides to the bidder. However, it must balance maintenance of secrecy against maximising the value of an offer if the takeover is considered beneficial for the target. In practice, the target's board commonly discloses information gradually. However, the due diligence exercise must be limited so that:
The confidentiality of the information disclosed is maintained.
No business secrets protected by the Penal Code are disclosed.
No data protected by the Data Protection Act is disclosed.
The rules on insider trading and ad hoc publicity are followed.
The target's board observes its duty to safeguard the target's interests.
The target's board does not breach applicable anti-trust provisions.
Typically, due diligence investigations in public takeovers involve a relatively small number of senior personnel who focus on key aspects of the target's business. The bidder's board must treat all shareholders of the target company equally. A bidder must certify in the offer prospectus that it has received no material information outside the public domain on the target that is likely to have a decisive influence on the decision of the target's shareholders. If such information is received, it must be disclosed in the offer prospectus.
Generally, the bidder is not entitled to conduct due diligence and the completion of a satisfactory due diligence exercise cannot be a condition to the offer. However, the bidder can protect itself by including a clearly defined material adverse change (MAC) condition in the offer prospectus (see Question 13).
The bidder is therefore usually limited to obtaining publicly available information. However, if the target grants access to information to a bidder or a potential bidder, any other bidder, even if hostile, is entitled to receive the same information as the information disclosed to the competing bidder or the mere potential bidder.
The following sources provide public information on the target:
The Commercial Register, which contains the company's articles of association (articles) and other related documents, but not the organisational regulations.
The Swiss Official Gazette of Commerce (Gazette).
The SIX Swiss Exchange, which provides the business reports of listed companies (including financial statements and the auditors' report) and the disclosures made by shareholders that have exceeded or fallen below a legal threshold in the voting rights of a listed company. The shareholder register is not publicly available.
Any public documents the company publishes (for example, listing particulars, prospectuses or annual reports, which include a corporate governance report disclosing, for example, the defence measures the company has implemented).
The Patent and Trade Mark Register.
The Land Register (access to this register requires proof of a legal interest worthy of protection).
The Tax Register (access to this register depends on the requirements of cantonal laws).
Disclosure of price-sensitive facts
Listed companies must inform the market of any price-sensitive facts which have arisen in their sphere of activity and are not public knowledge. Price-sensitive facts are facts which are capable of triggering a significant change in market prices.
It is unclear whether receiving an unsolicited offer (or being aware that the company may be a target) is a price-sensitive fact which has arisen in the target's sphere of activity. However, the target can postpone disclosure if all of the following requirements are met:
The target is holding initial talks with the bidder, examining the possibility of a recommended offer, or the public offer is based on a plan (recommended offer).
Disclosure is likely to prejudice the company's legitimate interests.
If the target postpones disclosure, it must maintain complete confidentiality of the price-sensitive fact during the time that disclosure is postponed.
If the target receives an unsolicited offer, it can decide to postpone disclosure to maintain its confidentiality while it examines the offer or negotiates its terms. However, unless confidentiality duties would be breached, a target should consider disclosure (for legal or reputation reasons) if, having declined the offer, it becomes the subject of an imminent hostile bid.
If details of the deal leak into the market in any of the above cases, the target and the bidder (if a Swiss listed company) must make an immediate announcement to the SIX Swiss Exchange and the public.
Agreements with shareholders
Potential bidders commonly seek irrevocable undertakings from the target's major shareholders to either:
Tender their shares into the offer.
Enter into share purchase agreements (SPA) before the offer is announced.
If undertakings to tender or SPAs are entered into during the 12 months before the offer is announced, the offer prospectus must disclose the details. The price paid for the shares affects the minimum offer price (see Question 18).
An SPA's effect depends on whether it is:
Conditional on the success of the offer.
Not conditional on the success of the offer.
Even if they have already entered into an irrevocable undertaking to tender or into an SPA conditional on the success of the offer, the shareholders can withdraw from the tender obligation or agreement if a competing offer is later announced. However, if the parties have entered into an SPA that is not conditional on the success of the offer, this transaction is considered separate from the takeover offer and the seller cannot withdraw if there is a competing offer.
If shareholders enter into irrevocable undertakings to sell their shares or enter into an SPA and the sale is not completed before the offer is announced or is conditional on the offer's success, the bidder and those shareholders are usually considered as acting in concert. As a result, any transactions by those shareholders from the time they act in concert involving the target's shares must be reported to the TOB (see Question 28) and could trigger the best price rule (see Question 17).
In addition, if the parties to a pre-offer SPA provide for a price adjustment if the purchaser/bidder increases its price in the takeover offer, the value of this price protection provision is relevant for the minimum price or best price rule (see Questions 17 and 18).
If a bidder (directly, indirectly or in concert with a third party) acquires or sells securities in a Swiss resident company listed on a stock exchange in Switzerland or a non-Swiss resident company with a primary, full or partial, listing on a stock exchange in Switzerland, and as a result reaches, exceeds or falls below the following thresholds of voting rights, these holdings must be notified to the target and the relevant exchange (Article 120, FMIA):
Beneficial owners fall under the reporting obligation. In order to qualify as a beneficial owner, a party must control voting rights through its participation and bear the economic risk of the shareholding. Even if there is a chain of entities between the direct holder and the beneficial owner, only these two need to be reported. An additional reporting duty exists for persons who are granted the power to exercise voting rights in shares at their sole discretion, that is, in cases where the respective voting rights are not exercised by the beneficial owner. The reporting duty lies with the person who is granted the power to exercise the voting rights. However, it does not apply to financial intermediaries purchasing or selling equity securities, other purchase positions or sale positions on the account of third parties.
Unlike takeover law, the FMIA does not contemplate the possibility of an exemption if other applicable rules offer a similar level of protection as Swiss law.
The disclosure obligations include transactions in options (puts and calls) and conversion rights or other derivatives, irrespective of their method of settlement (cash or physical). The triggering event is the entering into the transaction, not the closing. The reporting must be made separately for:
Share positions (shares).
Acquisition positions (call-options, conversion rights, grants of put-options, financial instruments that are economically equivalent to an acquisition of shares or were entered into in view of a takeover offer).
Disposal positions (put-options, grants of call options and of conversion rights).
The share positions, acquisition positions and disposal positions cannot be netted. If a threshold is crossed in any of these positions, all three positions must be reported. The breach of disclosure obligations can be sanctioned with a fine of up to CHF1 million in case of wilful breach or up to CHF100,000 in case of negligent breach. FINMA may also suspend the voting rights and prohibit investors from acquiring additional shares or options on shares if it has sufficient evidence of a potential breach of disclosure duties. This measure can remain in force until FINMA determines whether the investor complied with its disclosure obligations (either because the latter filed a notice or because FINMA recognises that no disclosure duty applies). Finally, the FMIA formally empowers FINMA to take administrative enforcement action in connection with breaches of disclosure duties.
If a bidder buys shares in the target from a member of the board or the executive management, that person must disclose the sale to the company, which must then report it to the SIX Swiss Exchange. The SIX Swiss Exchange publishes the sale without revealing the names of the parties involved.
Listed companies must disclose in their annual report the identity of shareholders or concert parties holding more than 5% of the voting rights. The articles can specify a lower percentage (Article 663c, CO).
Some shareholdings are aggregated for the purposes of the FMIA's disclosure obligations (see above, Disclosure obligations) and the mandatory offer rule (see Question 16). For example, the following are aggregated to a bidder's holding:
Stakebuilding to prepare for a subsequent takeover offer is not generally thought to breach insider dealing rules. However, a breach can take place if certain information is given to other parties in connection with a stakebuilding exercise.
Agreements in recommended bids
If a bid is recommended (other than in restructuring and going private transactions), there is commonly an agreement between the bidder and the target. This transaction agreement sets out the:
Bid's terms and conditions.
Target's duty to support the bid and to recommend it to its shareholders.
Target's future management structure.
In these cases, the target is considered to act in concert with the bidder. The main terms of any agreements between the bidder and the target must be disclosed in the offer prospectus.
The target's undertakings not to solicit or recommend other offers (no-shop undertakings) are generally allowed because:
Exclusivity is necessary to induce a bidder to the negotiating table.
Under corporate and takeover law, there is no general duty to auction the company once it has become a target in a tender offer (this is the predominant view).
However, the no-shop clause is subject to limitations:
The directors must ensure that they can still negotiate with unsolicited rival bidders (for example, a no-talk clause would be problematic).
The directors must ensure that they can provide equal information to all bidders to comply with the equal treatment principle.
The directors must ensure that they can advise shareholders on the merits of a third party bid and if their views on the merits change to satisfy their fiduciary duty not to restrict their discretion (a so-called fiduciary out).
Break fees are valid if structured as compensation for costs and expenses incurred. The directors of both the target and the bidder must ensure that break fees do not conflict with their duty of care and their duty to treat all shareholders equally. It is unclear (and untested by the courts) whether break fees of a punitive nature to frustrate any other offer are allowed.
A break fee is usually payable if the takeover offer is unsuccessful due to:
The target breaching any laws and regulations applying to the offer.
A failure to satisfy the conditions to which the takeover offer is subject.
The successful completion of a competing tender offer by a third party.
Funding must be in place before the offer is announced. A bidder can make a preliminary announcement (see Question 12, Offer prospectus: Examination by a Review Body) before it has committed funding, but in practice this is not common.
The offer prospectus must contain details of the sources of financing and confirmation by the review body that the financing is available (see Question 12, Offer prospectus: Examination by a Review Body). Commitment letters from banks in support of the bid usually suffice for the review body to issue its funding confirmation, provided the conditions set out in those letters correspond to the conditions of the bid or are under the sole influence of the bidder.
Announcing and making the offer
Making the bid public
The bidder usually makes a preliminary announcement of a public offer before the offer prospectus is published, although this is not mandatory. The preliminary announcement, which must be published through the same media as the offer itself, must include:
An identification of the bidder and target.
The scope of the offer (the shares and financial instruments to which it applies).
The offer price or consideration per target share.
Any conditions to the offer.
The planned timetable for the offer.
The bidder must announce the offer within six weeks of the preliminary announcement being published. The TOB can extend this time limit in certain circumstances. A mandatory bid's offer price is calculated by reference to the date on which the preliminary announcement is published. This is also the cut-off date for disclosing share transactions during the offer period and for the target to implement defensive measures.
Once the preliminary announcement has been made, the bidder can change the offer's conditions only in favour of the shareholders.
The preliminary announcement:
Sets the minimum price.
Triggers the best price rule (see Question 17, Best price rule).
Triggers the bidder's obligation to treat the target's shareholders equally.
Triggers the target's obligation to treat all competing bidders equally.
Triggers the obligation of the bidder, persons acting in concert with the bidder, the target and any other parties in the takeover to report transactions in the target's shares and related financial instruments on a daily basis. (The TOB can order this reporting obligation to be extended to shareholders holding 3% or more of the target's shares.)
Shifts power to make resolutions on certain defensive measures from the target's board to the target's shareholders' meeting (see Question 23).
Requires the bidder to launch the offer within six weeks.
If there is no pre-announcement, these effects are triggered on publication of the offer prospectus.
Terms of the offer prospectus. Public takeover offers require an offer prospectus to be published. It must contain all the information necessary to enable the target's shareholders to decide whether to accept the offer, including:
The terms of the offer. This includes:
the offer price (cash, shares or other securities offered);
details of the target's share capital;
a description of the shares to which the offer relates; and
for a partial offer, the maximum number of shares to which the offer relates.
Information on the bidder. This includes its:
share capital; and
main business activities.
Mandatory disclosures. Details that must be disclosed include:
any major shareholders or concert parties holding more than 3% of the voting rights;
shareholders that directly or indirectly control the bidder;
any shareholding that the bidder has in the target; and
any share dealings by the bidder in the target during the 12 months before the offer is made and the highest price paid for those shares.
Sources of financing. Details of the sources of financing must be disclosed together with a confirmation by the review body that financing is available (see below, Examination by a Review Body).
Information on the target. Information includes:
details of the bidder's intention as to the future of the target's business;
a description of the agreements existing at the time of the offer between the bidder and the target; and
information on the target's corporate bodies and shareholders.
Information outside the public domain about the target. The bidder must make a statement confirming that it has not received any significant information outside the public domain from the target that could influence the target's shareholders in deciding whether to accept the offer (see Question 5).
Report by the review body. See below, Examination by a Review Body.
Shareholders' rights. Details of the rights of shareholders holding 3% or more of the voting rights (see below, Shareholder's rights).
Examination by a Review Body. The bidder must appoint a review body (a licensed security dealer or an auditor approved to review security dealers) to assess the offer prospectus. This review body must be independent from the bidder and the target. An independent accounting firm usually undertakes this role. Before the offer is published, the review body must survey the offer prospectus to verify that it complies with applicable takeover laws. It must issue a report confirming in particular that:
The offer prospectus is complete and correct.
Shareholders have been treated equally.
The bidder has the necessary funds to complete the transaction.
The availability of any securities offered in exchange.
The report must be published in the offer prospectus.
Filing with the TOB. The bidder must file the offer prospectus with the TOB no later than the date on which it is published. The TOB then reviews the offer prospectus to ensure that applicable rules have been followed. It also invites the target to comment on the offer prospectus. The TOB publishes a decision on whether the published offer prospectus complies with the applicable laws and regulations.
If a recommended offer is made, the bidder and the target (with their financial and legal advisers) co-operate with each other. Before the offer is announced, they file a draft offer prospectus with the TOB, which issues a decision on the offer when it receives the reports of the target's board and the review body. In that case, the published offer prospectus usually contains the report of the target's board.
Publication of the offer. A takeover bid is announced by distributing the offer electronically to a broader circle of recipients. The offer documents must be sent to the major financial news services (such as Reuters, Bloomberg or Telekurs) as well as to important Swiss media with nationwide reach (including newspapers, television and radio) and major news agencies (such as awp-Finanznachrichten or Schweizerische Depeschenagentur). It has to be delivered to the TOB simultaneously. In 2015 the TOB published circular number four, which contains a list of major media to which the offer documentation should be distributed. It does not necessarily have to be translated into English. Interested parties must be able to obtain the full offer prospectus free of charge from the publication date either in printed form or in electronic form on the bidder's website or a website specifically established for the offer.
Key dates in the offer timetable
The publication of the offer prospectus is the triggering event for most of the time periods. The key dates (in trading days on the SIX Swiss Exchange) in the offer timetable are as follows:
At the earliest, six weeks before publication day (P Day). A voluntary preliminary announcement of the offer is made.
P Day. The offer prospectus is published.
P Day plus 10. The cooling-off period ends, during which an offer cannot be accepted.
P Day plus 15. This is the deadline for publishing the report by the target's board.
P Day plus 30/50. The offer period ends. This must have lasted at least for 20 days (or at least ten days if, before the offer is published, the bidder holds the majority of the voting rights in the target and the target's board report is included in the offer prospectus), and not more than 40 days. This is also the deadline for publishing a competing bid.
P Day plus 31/51. The provisional interim result (confirmed by the review body) is notified to the TOB, the SIX Swiss Exchange and a broader circle of recipients electronically.
P Day plus 34/54. The final interim result is published through the same means as the offer itself. If the conditions to the offer are met, or an unconditional bid was made, a mandatory extension period of ten days for acceptance is triggered.
P Day plus 43/63. The mandatory extension period ends (see above, P Day plus 34/54).
P Day plus 44/64. The provisional end result (confirmed by the review body) is notified to the TOB, the SIX Swiss Exchange and to a broader circle of recipients electronically.
P Day plus 47/67. The final end result is published through the same means as the offer itself.
P Day plus 53/73. Settlement is reached.
The timetable changes if a competing bid is made, in which case the TOB can intervene to ensure that the shareholders can choose between the competing bids.
A competing bid must be published no later than the last trading day of the ordinary acceptance period for the first offer. The competing bid must remain open for acceptance for as long as the original offer, and for a minimum of ten trading days. When the competing offer is published, the ordinary acceptance period for the first offer is automatically extended until the competing offer lapses (if this happens after the original offer has lapsed).
Shareholders holding directly or indirectly 3% or more of the voting rights in the target, whether exercisable or not (qualified shareholders):
Can obtain legal standing in takeover proceedings by applying to the TOB within five trading days after the earlier of:
the publication of the offer prospectus; or
if the first order by the TOB on the offer is published before the offer prospectus (for example, orders relating to the pre-announcement), after publication of that order.
Can, if they have not applied to obtain legal standing and have yet to participate in the proceedings, file an appeal with the TOB against the first order issued by the TOB on the offer within five trading days after publication of that order, if published before or together with the offer prospectus.
The stake must be held at the time of publication of the pre-announcement, if any, or offer prospectus and throughout the proceedings, except during the appeal before the Federal Administrative Court. Parties acting in concert holding 3% or more are expected to be qualified shareholders (this has not yet been decided by the TOB).
On admittance, the qualified shareholders can:
Participate in the proceedings.
Access the TOB's file.
Challenge the TOB's order at the FINMA.
The TOB is likely to suspend the offer period if a decision relating to the offer is challenged at the TOB or at the FINMA. Therefore, the participation of qualified shareholders in the proceedings before the TOB may delay the offer timetable.
Voluntary public takeover offers can only be made subject to objective conditions precedent, which must:
Be outside the bidder's control to satisfy.
Have clear terms.
If the bidder's co-operation is required to satisfy the conditions, the bidder must take all reasonable steps to ensure that they are fulfilled. When the offer period closes, the bidder must clearly state whether the conditions have been satisfied. The bidder can reserve the right to waive certain conditions.
There are three main categories of conditions to an offer:
Conditions on obtaining control of the target. These must be set at a level that does not prevent the offer from succeeding. In certain circumstances (for example, if the bidder has a high pre-existing shareholding or in an exchange offer with the aim to establish a holding structure), a condition of obtaining 90% of the voting rights in the target may be acceptable.
Conditions on implementing the offer, such as:
regulatory approval (for example, anti-trust conditions);
obtaining the approval of the bidder's shareholders (for example, in case of an exchange offer for which the issuance of exchange shares must still be authorised); or
issuance and listing of the shares that the bidder provides as consideration.
Conditions included for the benefit of the bidder, such as MAC conditions. MAC clauses can be used in voluntary takeover offers, but not in mandatory offers (except for MAC in connection with regulatory approvals). The TOB requires that MAC clauses mention specific amounts or clear percentages, for example, loss or reduction of:
10% in consolidated earnings before interest and taxes (EBIT);
5% in consolidated turnover; or
10% of the target's net asset value or consolidated equity.
The offer can also be made subject to conditions that can only be satisfied after the offer period, with the TOB's approval. The TOB usually allows these conditions if the advantages of them to the bidder outweigh their disadvantages to the target's shareholders and the bidder (for example, obtaining regulatory approval).
Generally, mandatory bids cannot be subject to conditions (see Question 16), other than:
Obtaining regulatory approval.
That no injunction is made preventing completion.
Recognition of the bidder as a shareholder with voting rights.
In both recommended and hostile bids, the bidder must produce both the preliminary announcement (if any) and offer prospectus (see Question 12).
The target's board must publish a special report to its shareholders stating its position on the offer. The report must contain all information necessary for the target's shareholders to make an informed decision on the offer. The disclosed information must be accurate and complete. The report can either:
Recommend the shareholders to accept or reject the offer.
Discuss the advantages and disadvantages of the offer without making a recommendation.
Additional disclosure requirements include the disclosure of:
Potential conflicts of interest of board members and management and measures taken to avoid the effect of conflicts, such as:
the abstention of conflicted board members;
a special committee of at least two disinterested members;
a fairness opinion (see below).
Details of agreements or other relationships between board members and bidder or persons acting in concert, such as:
employment or mandate agreements;
The number of shares and options in the target held by each board member and member of executive management (individually).
Any advantage a board member or a member of executive management may receive as a consequence of the closing of the SPA (if any) and the settlement of the offer (for example, compensation payments).
The intentions of shareholders holding more than 3% of the target's voting rights (if known).
Defence measures that the target has adopted or intends to adopt, and any relevant shareholder resolutions (see Question 23).
Updated interim financial statements, if the last published financial statements refer to a cut-off date that is earlier than six months before the end of the offer period.
If the board issues a recommendation on the offer, a fairness opinion is usually obtained from an audit firm or an investment bank chosen by the target. In that case, it must be published. For recommended bids, the board's special report and the fairness opinion are normally included in the offer prospectus. A fairness opinion is mandatory if fewer than two board members qualify as independent. If the fairness opinion is part of the board special report, it must have a certain mandatory structure and content; it is in fact a detailed valuation report and must explain the basis for the fairness conclusion (such as the companies and transactions used for comparables, the parameters used for the discounted cashflow (DCF) calculation but not the target's business plan). Since it is considered part of the board report, the fairness opinion must be provided in German and French.
In a takeover offer, a target's board is not required to inform or consult its employees. However, if the transaction is a statutory merger, the employees' representatives of both the absorbing and the absorbed entities must be informed or consulted before the respective shareholders' meetings resolve on the merger.
If the bidder acquires shares, directly or indirectly, taking its holding (or its holding combined with any concert party) (see Question 8) to one-third or more of the target's voting rights (whether or not these voting rights can be exercised), it must make a mandatory offer for all the target's listed equity securities.
However, a shareholders' meeting can:
Discard the duty to make a mandatory offer (opting-out).
Raise its threshold from one-third to 49% (opting-up).
The Federal Banking Commission (the FINMA's predecessor over banking and takeover matters) has ruled that shareholders cannot resolve on an opting-up or opting-out provision that only applies for a limited time and for a specific shareholder. The TOB extended this rule to a general opting-out adopted by the shareholders' meeting, if the resolution has actually or implicitly been taken in view of a specific transaction or in favour of a specific shareholder. However, the TOB overruled this practice and held instead in a decision of the year 2012 that it would not challenge opting-out decisions provided that they were approved by a majority-of-the-minority vote.
The duty to make a mandatory offer is only triggered if a share purchase is completed. Entering into an SPA does not trigger a mandatory offer obligation (except if provisions qualify as acting in concert in relation to exercising control over the target). However, the TOB ruled that in specific circumstances, exceeding the threshold through purchasing call options can also trigger the mandatory offer obligation.
The mandatory offer must be made no later than two months after the shareholder has exceeded the relevant threshold, unless a statutory exemption is available or the TOB has granted an exemption. A shareholder has a statutory exemption from the duty to make a mandatory offer if it exceeds the relevant threshold as a result of:
The division of an estate or a matrimonial arrangement.
An acquirer making use of this exemption needs to notify the TOB, which will open proceedings within five trading days if it has reason to believe that the prerequisites of the exemption invoked have not been met.
The TOB can grant an exemption from the duty to make a mandatory offer if:
Voting rights are transferred among a group of shareholders organised by contract or otherwise. The duty to make an offer applies only to the group as a whole.
The threshold is exceeded as a result of the overall number of voting rights in a company being reduced.
The threshold is only temporarily exceeded.
The equity securities are acquired as a result of a new issuance of shares or the exercise of pre-emptive rights in connection with a capital increase.
The equity securities are acquired in connection with a reorganisation of a company in financial difficulty.
The FMIA provides for two measures to strengthen the regime on mandatory bids:
If the TOB finds that a shareholder has not complied with the duty to submit a public tender offer, it may suspend the voting rights of such shareholder and prohibit the purchase of any additional shares of the target company.
If a shareholder does not intentionally submit a public tender offer despite a final decision finding that such duty exists, it may be sanctioned with a fine of up to CHF10 million.
A bidder can offer cash, listed and non-listed shares or non-equity securities, including securities issued by a company domiciled abroad. If securities are offered, the bidder must prepare an offer prospectus and, if it intends to list the shares on the SIX Swiss Exchange, a listing prospectus. In a mandatory offer, the bidder must alternatively offer a cash consideration when making an exchange offer.
Subject to the principle of equal treatment, the bidder can give the target's shareholders the right to choose cash, securities or a combination of both.
Best price rule
The bidder must treat all holders of equity securities of the same class equally. The best price rule applies from the time the preliminary announcement or the offer is published until six months after the additional acceptance period expires. If the bidder (or a party acting in concert), within this period, acquires the target's equity securities for more than the offer price, it must offer that higher price to all recipients of the public offer (and not only those who have accepted the offer). Furthermore, if during an exchange offer, it acquires target's equity securities for cash, it must offer such cash to all recipients of the public offer.
Strict minimum price rules apply to any public takeover offer made for equity securities exceeding the threshold for triggering the mandatory offer rule (see Question 16). The possibility of paying a premium to certain main shareholders prior to the public offer has been abolished. Therefore, the offer price in a public offer has to be at least as high as the higher of the following:
The stock exchange price (that is, the volume weighted average price on a Swiss exchange for the 60 trading days before the preliminary announcement (or the offer prospectus, if there is no preliminary announcement) is published).
The highest price paid by the bidder or a person acting in concert during the 12 months before the preliminary announcement (or the offer prospectus, if there is no preliminary announcement) is published.
If the market of the shares of the target is not liquid under the TOB's practice, the bidder must appoint a licensed security dealer or an auditor approved to review security dealers to prepare a valuation of the target shares, which replaces the determination according to the minimum price rule. This valuation firm must be independent from the bidder and the target. Usually, an independent accounting firm undertakes this role. The report of the independent review body needs to explain if and to what extent it relies on its valuation or the stock exchange price for its determination of the minimum price. The stock exchange price is not necessarily the 60-trading day volume weighted average price. If a target has several classes of equity securities, the prices offered for the various classes must be reasonably related to each other. Determining an appropriate relationship between the prices of several classes of equity security must be based on:
The highest price paid for any equity security in comparison with its par value.
Its market price.
The voting rights it confers.
Any other rights attached to it.
If a bidder acquires the target's shares before announcing its offer and the consideration paid includes substantial benefits in addition to cash (for example, guarantees or a price adjustment undertaking), the minimum price can be increased or reduced by an amount corresponding to these benefits.
There are no special restrictions on the type of consideration that a foreign bidder can offer to the target's shareholders. Domestic and foreign bidders are treated equally in this respect (see Question 16). A bidder can offer securities of a non-Swiss issuer as consideration.
Compulsory purchase of minority shareholdings
Following a successful public bid, a bidder can request a squeeze-out of the remaining shareholders if it holds more than 98% of the target's voting rights. A court order must be obtained to cancel the minority shares. The bidder must file a request for cancellation of the target shares with the relevant court within three months after the end of the additional acceptance period. The target must reissue and allot the shares to the bidder at the offer price. There are no appraisal rights (that is, the court does not review the adequacy of an offer price). To obtain compensation, the remaining shareholders must approach the target. The procedure is typically completed within about six to eight months following the offer.
As an alternative, the Merger Act allows a bidder that holds more than 90%, but less than 98% of all of a Swiss target's voting rights, to effect a squeeze-out merger between the target and a Swiss wholly owned subsidiary of the bidder. This merger is subject to approval by 90% of the target's shareholders. In a squeeze-out merger, the minority shareholders do not receive the absorbing company's shares, but instead receive cash or any other form of consideration (such as the parent/bidder company's shares or debt securities). The compensation must be equal to the value of the shares that are squeezed out. Minority shareholders can challenge the merger and/or the compensation in court within two months of the shareholders' meeting approving the squeeze-out merger having been held.
Restrictions on new offers
A company whose shares are listed on the SIX Swiss Exchange can apply for its securities to be de-listed at any time. It must file an application with the Admission Board of the SIX Swiss Exchange.
If an issuer requests the de-listing of its securities:
It must provide a reason for the intended de-listing.
The Admission Board decides when the announcement is made and the last trading day of the securities to be de-listed. It considers the interests of the investors and the issuer, as well as the principle of fair and orderly trading. The de-listing is announced at least three months before the last trading day by publishing an advertisement under the Listing Rules and an official notice on the SIX Swiss Exchange homepage.
The Admission Board can reduce the time between the de-listing being announced and the de-listing actually taking place if any of the following occur:
The de-listing takes place due to a merger or the liquidation of the company.
The de-listing is requested after a public offer stating an intention to cancel the listing is announced.
The securities are cancelled following a public offer (squeeze-out).
An application is being made to list new securities as replacements for the securities to be de-listed.
The issuer or a recognised agent must apply for de-listing 20 trading days before it is announced, together with the declaration of the company that all relevant corporate bodies agree to the de-listing and any other relevant documents.
A potential target can adopt defensive measures before an offer is announced, even if it knows that an offer is imminent, unless these measures clearly breach corporate law. After the offer's public or preliminary announcement, the target's board must not take any action to frustrate the offer unless it has shareholders' consent. For example, it must not:
Enter into any transactions that would significantly alter the target's assets or liabilities or revenue situation, including purchasing or selling assets:
worth more than 10% of consolidated assets or more than 10% of the "earning power" of the target;
that are the bidder's main target and are described as such in the offer (crown jewels), even if less than 10% of consolidated assets or earning power.
Purchase or sell its own shares or shares offered in exchange or related financial instruments.
Execute agreements with members of the board or senior management to receive unusually high compensation in case of withdrawal from the target.
Issue shares from the company's authorised or conditional capital without granting pre-emptive rights to the shareholders (except if this was permitted by the shareholders' resolution creating the authorised or conditional capital).
If a public takeover offer has not (yet) been made, a potential target can take the following actions, among others, to defend against a hostile takeover:
Percentage limitation on registration of registered shares. The articles of a listed company with registered shares can specify a percentage limit (usually 2% to 5%), above which the board can refuse to enter a shareholder in the share register. However, a company cannot stop a shareholder from acquiring shares beyond this threshold and benefiting from the dividend or other economic rights. This restriction only limits the voting rights and therefore can prevent changes in the board. An offer can be made subject to the condition that these provisions in the articles are removed by the shareholders' meeting.
Restrictions on exercising voting rights. The articles can specify that no shareholder, directly, indirectly or acting in concert with third parties, can cast more than a certain percentage of votes (by itself or through a proxy). This restriction can apply to registered and bearer shares. A bidder can make any offer subject to the prior removal of these restrictions by the shareholders' meeting.
Requirements for changing the articles. The provisions on share registration and voting restrictions can be further entrenched by imposing special majority requirements for their removal in the articles.
Repurchase of the target's own shares. A company can purchase up to 10% of its own shares (treasury shares). Selective share repurchases (and re-sales) are limited by the need to treat shareholders in similar circumstances equally.
Poison pill. A poison pill comprises options or subscription rights granted to all or some shareholders or third parties. It allows them to acquire new shares or other securities of the target at a substantial discount in the case of a hostile takeover. Poison pills are generally not permitted.
Change of control provisions. Many Swiss companies have express or implied change of control provisions in their loan or bond documents. They require debts or bonds to be repaid immediately if a company is subject to a hostile takeover.
White knight. The search for a white knight, for example, by organising an auction on receipt of an unsolicited bid, is not prohibited. The board or the target's management can as an alternative take over the company through a management buyout.
Anchor shareholders. The board can build up a loyal shareholder base which would not tender in the case of an unfriendly takeover offer.
The purchase or sale of shares, whether by a Swiss resident or a non-resident, is subject to federal stamp taxes on the transfer of securities that amount to either:
0.15% of the consideration for shares issued by a Swiss resident issuer.
0.3% of the consideration for a non-resident issuer.
This tax levy only applies if the purchase or sale takes place by or through a securities dealer, as defined in the Federal Stamp Tax Act and no exemption applies. Securities dealers are:
Banks or similar financial institutions as defined in the Federal Law on Banks and Savings Institutions.
Swiss companies with investments that have a book value of more than CHF10 million.
Foreign member firms of the SIX Swiss Exchange (remote members) holding shares of a Swiss resident issuer that are listed on the SIX Swiss Exchange.
The tax is due and payable by the securities dealer, but is usually passed over to the parties to the transaction, who share the stamp duty equally.
The sale of shares by or through a member of the SIX Swiss Exchange can also be subject to a stock levy of up to 0.02% of the consideration.
Other regulatory restrictions
Thresholds for investigation by the Competition Commission. The duty to notify concentrations is set out in the Federal Act on Cartels and Other Restraints of Competition and the more detailed Ordinance on Merger Control. The undertaking intending to acquire sole or joint control must file a notification brief with the Competition Commission before the concentration is completed if, in the last accounting period before the concentration:
The undertakings concerned reported worldwide joint sales of at least CHF2 billion or joint sales in Switzerland of at least CHF500 million.
At least two of the undertakings concerned reported individual sales in Switzerland of at least CHF100 million each.
Turnovers are principally calculated on a consolidated basis, excluding business outside a company's group. For banks and financial intermediaries, turnover calculation is based on gross revenues. For insurance companies, gross annual insurance premiums are taken into account.
Substantive test. The substantive test for investigation by the Competition Commission is whether the proposed concentration:
Creates or strengthens a dominant position that risks eliminating effective competition.
Does not lead to a strengthening of competition in another market that outweighs the harmful effects of the dominant position.
Time limit for a decision and obligation to suspend. Within one month of receiving a notification, the Competition Commission decides whether there are grounds for investigating the concentration. If there are, it must inform the undertakings concerned that it is opening an investigation procedure. If it fails to do so, the concentration can be completed without reservation. During this preliminary assessment period, the undertakings must not carry out the concentration without the Competition Commission's authorisation.
A detailed investigation is then completed within four months. The entire procedure must not last longer than five months from notification. At the end of the investigation, the Competition Commission decides whether the concentration can be carried out unconditionally, carried out subject to conditions or obligations, or must be prohibited.
The undertakings can challenge the Competition Commission's decision within 30 days before the Federal Administrative Court, whose decision can in turn be challenged before the Federal Supreme Court.
The FINMA is the supervisory authority of banks in Switzerland (see box, The regulatory authorities). All banks incorporated or with a place of business in Switzerland, including Swiss branches of foreign banks, must have FINMA authorisation before starting business.
Qualifying shareholders of a bank (namely, persons or entities whose direct or indirect shareholdings amount to 10% or more of a bank's capital or voting rights) are also subject to scrutiny by the FINMA. Shareholders that acquire or sell a qualifying shareholding, or that increase or decrease their shareholding beyond a certain limit, must notify the FINMA before completing the transaction.
Additional licence requirements apply to foreign-controlled banks.
The FINMA is also the supervisory authority for Swiss insurance companies. If a (potential) bidder intends to, directly or indirectly, acquire shares in a Swiss (re)insurance company, it must notify the FINMA if, as a result, it reaches or exceeds the thresholds of 10%, 20%, 33% or 50% of the capital or voting rights of that company. The FINMA can prohibit or impose conditions on such shareholdings.
Generally, foreign persons can purchase an interest in a Swiss company. There are restrictions on share purchases in certain industries (for example, financial services, radio and television, telecommunications and transportation).
The Federal Act on the Acquisition of Real Estate by Persons Abroad restricts the acquisition by a foreign person or a foreign-controlled company of residential real estate (but not commercial real estate). The acquisition of shares in a company whose statutory or factual business purpose is trading in non-commercial real estate is also subject to approval, except if the shares of the company are traded on a stock exchange. Governmental approval is only granted in exceptional cases.
Switzerland levies a withholding tax of 35% on dividends, which is fully refunded to Swiss residents. Switzerland has entered into numerous double tax treaties under which full or partial relief is granted either by refund or reduction at source to foreign residents. Besides bilateral double tax treaties, Switzerland has entered into an agreement with the EU providing for measures equivalent to those set out in Directive 2003/48/EC on taxation of savings income in the form of interest payments (Savings Directive). This agreement contains provisions on taxation of dividends which apply with respect to EU member states (Article 15, Savings Directive).
From the time the offer is announced until the acceptance period ends, certain disclosure requirements apply to the bidder or anyone who, directly, indirectly or acting in concert with third parties, holds at least 3% of the voting rights in the target (or, as the case may be, in another company whose equity securities are offered in exchange). These persons must report on a daily basis every purchase or sale of equity securities in the company to the TOB and to the exchanges on which the securities are listed. The TOB publishes such transactions on its website. A purchase of securities falling within this category triggers the best price rule (see Question 17). No specific restrictions apply to security brokers, except if acting in concert with or on behalf of a party subject to disclosure, or if they themselves exceed the threshold mentioned above or if otherwise restricted.
Until the end of 2015, the Swiss rules on the disclosure of substantial shareholdings and on mandatory bids in listed companies as well as some of the Swiss takeover rules have been embedded in the Federal Act on Stock Exchanges and Securities Trading (SESTA), the Ordinance on Stock Exchanges and Securities Trading (SESTO) and the Ordinance on Stock Exchanges and Securities Trading of FINMA (SESTO-FINMA). On 1 January 2016, these rules were replaced by the FMIA, the FMIO and the FMIO-FINMA. On the same date, the revised takeover ordinance of the TOB (TOO) took effect. However, the substantial part of the existing disclosure, bid and takeover rules remain unchanged by this mere transfer.
The regulatory authorities
Main area of responsibility. The Takeover Board is the regulator for takeover offers in Switzerland.
Swiss Financial Market Supervisory Authority (FINMA)
Main area of responsibility.
The FINMA is the supervisory authority of public takeovers as well as of banks, insurance companies, stock exchanges and securities dealers as well as other financial intermediaries in Switzerland.
Federal Competition Commission
Main area of responsibility. The Federal Competition Commission is the regulator for merger control.
SIX Swiss Exchange
Main area of responsibility. This is the main stock exchange in Switzerland.
Description. The official website of the Swiss government. The original text of the laws referred to in this article can be obtained there.
Professional qualifications. Switzerland, 1994; New York, US, 1998
Areas of practice. International and domestic M&A; public takeovers and defence; private equity; corporate law and governance; equity offerings and IPOs.
- Assisted Citigroup Global Markets Limited, Credit Suisse AG, Morgan Stanley & Co. International plc, UBS as Joint Global Coordinators and Joint Bookrunners in EFG International's CHF295 million rights offering in connection with the proposed acquisition of BSI.
- Assisted Nestlé Skin Health to form the Non-Prescription Acne Joint Venture with Guthy-Renker.
- Assisted gategroup Holding AG in the CHF1.4 billion tender offer of HNA Group for all publicly held shares.
- Assisted Bank am Bellevue AG in the CHF133.8 million equity capital increase (rights offering) of Orascom Development Holding AG.
Professional qualifications. New York, US, 1996; Zurich, Switzerland, 1997
Areas of practice. M&A, including public takeovers and private equity transactions, as well as on equity offerings and IPOs, in particular in the (re)insurance sector.
- Assisted Kaba Holding AG in its CHF4 billion merger with Dorma Group to become the dorma+kaba group.
- Assisted Credit Suisse in its CHF6 billion share capital increase.
- Assisted Canopius Holdings UK Limited Canpoius in the redomiciliation of its Bermuda business to Switzerland and establishment of a reinsurance company in Switzerland.
Professional qualifications. Switzerland, 2003; New York, US, 2010
Areas of practice. M&A, including private equity, capital markets and real estate transactions, as well as public takeovers and corporate law.
- Assisted Kuoni Group in the divestment of its European tour operating businesses to REWE.
- Assisted Kuoni Group in the divestment of its tour operating businesses in India, Hong Kong and China, respectively, to Thomas Cook (India) Ltd.
- Assisted Kuoni in the CHF 1.5billion public tender offer by EQT.