Public mergers and acquisitions in Italy: overview
A Q&A guide to public mergers and acquisitions law in Italy.
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; transfer taxes; other regulatory requirements and restrictions; as well as any proposals for reform.
To compare answers across multiple jurisdictions, visit the Public Mergers and Acquisitions Country Q&A tool.
This Q&A is part of Public Mergers and Acquisitions Global Guide. For a full list of jurisdictional Q&As visit www.practicallaw.com/acquisitions-guide.
In 2016, public M&A transactions involving Italian companies continued the upward trend of the previous year, with 20 public tender offers launched between January and October.
The recent upturn in public M&A activities, in line with renewed enthusiasm experienced globally, is the result of a growing interest from both financial and strategic players (so far about 40% of offers have been launched by strategic investors). Noteworthy deals in 2016 include the:
Mandatory tender offer launched by Hitachi Rail Italy Investments on Ansaldo STS for about EUR1 billion.
Mandatory tender offer launched by MIC Bidco (with the funds NB Renaissance and Apax VIII) on Engineering Ingegneria Informatica for about EUR450 million.
Competing voluntary tender offers launched by International Media Holding and Cairo Communication on Rcs MediaGroup, respectively for about EUR400 million and EUR540 million.
Mandatory tender offer launched by HeidelbergCement France on Italcementi for about EUR2 billion.
There has also been a renewed interest in the real estate sector, with eight (out of the total 20) tender offers launched on real estate closed-end investment funds.
Acquisition of control of an Italian public company can be accomplished through:
Public tender offers (whether voluntary or mandatory).
Statutory mergers (which may or may not trigger a mandatory tender offer).
Subscription of reserved capital increases (which may or may not trigger a mandatory tender offer).
In particular, a natural or legal person is deemed to have control of a company where it:
Holds the majority of the outstanding voting shares.
Holds sufficient voting rights to exercise a "dominant influence" at the general shareholders' meeting.
Exercises "dominant influence" over the company as a result of legal, economic and organisational controls (like a contract or a clause in the bye-laws, or through shareholders' agreements).
Public tender offers can be either voluntary or mandatory. A mandatory tender offer is made when certain participation thresholds are exceeded. Both voluntary and mandatory takeovers can be launched on a hostile basis, meaning that the transaction is not recommended by the target's management body.
Hostile takeovers are uncommon in Italy in the light of the high shareholding concentration that still exists in a number of Italian listed companies. Bidders are discouraged from launching hostile takeovers on listed companies with one or more large shareholders. Some measures that an acquirer may wish to implement as a result of a takeover require qualified majorities and, therefore, the acquisition of a very large stake.
Therefore, there have only been a few examples of hostile takeovers in Italy and some of these started out hostile but ultimately gained the recommendation of the target board or the support/acceptance of sizeable shareholders (at least in those circumstances where control of the target was tightly held by few shareholders).
Regulation and regulatory bodies
The major laws governing public takeovers and mergers in Italy are:
Legislative Decree No. 58 of 24 February 1998, as amended (Consolidated Finance Act).
Implementing Regulation No. 11971 of 14 May 1999, as amended (Issuers' Regulation).
The Italian Civil Code.
With specific regard to cross-border mergers among EU companies, Legislative Decree No. 108 of 30 May 2008 implements the relevant provisions set out in Directive 2005/56/EC on cross-border mergers of limited liability companies (Cross-border Mergers Directive).
The National Commission for Companies and the Stock Exchange (Commissione Nazionale per le Società e la Borsa) (CONSOB) is the public authority responsible for supervising takeovers and mergers involving Italian listed entities.
In addition, certain aspects of public tender offers (such as the duration of the offer period and de-listing) are also managed by Borsa Italiana SpA (Borsa Italiana). This is a private company that is entrusted with the management and organisation of the Italian securities markets.
If a transaction is subject to merger control clearance and/or the target operates its business in a regulated sector, certain additional procedures and authorisations from other regulatory authorities may be needed, for example, from the:
Bank of Italy.
Anti-trust authorities, including the Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato) or the European Commission (in relation to concentrations with an EU dimension).
Insurance Industry Regulatory Authority.
See box, The regulatory authorities.
A certain amount of due diligence is typically carried out before a tender offer is launched.
In a recommended bid, the level of due diligence is negotiable, depending on the nature of the proposed takeover and the size of the target. Parties must always be aware of the rules on disclosure of price-sensitive information and insider dealing legislation, as well as the target directors' duties. The signing of non-disclosure agreements is advisable.
To comply with the equal treatment principle governing public tender offers, a listed target must allow all competing bidders to review material non-public information disclosed to any one of them.
Due diligence in a hostile bid is restricted to information available to the public.
Basic information on listed entities' main shareholders, directors and constitutional documents is available at the relevant companies' registry, as well as on the websites of the National Commission for Companies and the Stock Exchange, Borsa Italiana and the company itself.
Under Italian law, listed companies must also disclose to the public certain documents and information allowing shareholders and potential investors to make an informed decision about their investments. The following documents are available to the public:
Annual, semi-annual and quarterly financial statements with reports from the directors, statutory auditors and auditing firm.
Reports on corporate governance and capital structure with information on:
restrictions on security transfers and/or voting rights;
securities conferring special control rights;
rules on the appointment of directors;
amendments to the bye-laws;
any material agreement envisaging change of control clauses.
Selected information on shareholders' agreements.
Information on stock options or incentive plans for managers and employees.
Information on significant corporate transactions, including:
statutory mergers and de-mergers;
purchases and disposals of assets;
amendments to the bye-laws; and
capital increases and reductions.
Any non-public information concerning the company and its subsidiaries that, if disclosed, would have a material effect on the company's share price.
Shareholders crossing certain thresholds (either upwards or downwards) in the share capital or voting rights.
Specific disclosure rules also apply to related party transactions.
Listed companies must also disclose their adherence to codes of conduct (for example, the corporate governance code issued by Borsa Italiana) and provide information on compliance with the relevant rules.
The decision to launch a public tender offer must promptly be made public by the bidder.
Until the decision to launch a public tender offer is taken, discussions between a potential bidder and a target or its shareholders should remain confidential and the appropriate measures should be adopted to ensure (and preserve) confidentiality. This is done through non-disclosure agreements covering the existence and content of on-going negotiations, information exchanged among the parties and/or undertakings to tender shares.
Agreements with shareholders
Negotiations with target shareholders are common (given the ownership structure of most Italian listed companies (see Question 3)) and negotiations can lead to agreements between the parties.
Agreements that favour a tender offer (including an irrevocable undertaking to tender shares) fall within the scope of the rules on shareholders' agreements. These agreements are subject to mandatory disclosure rules (that is, communication with the National Commission for Companies and the Stock Exchange, the target and the public, as well as filing with the relevant companies' register).
The benefit of irrevocable undertakings in agreements between a potential bidder and the existing shareholders can be hampered by the rule that when a competing bid is launched, shareholders who have already tendered their shares to an offer can revoke their acceptance and tender their shares to the competing bid.
In principle, a bidder can acquire shares in a target company without restrictions before announcing its decision to launch an offer, provided that it complies with the applicable rules relating to:
The requirement to launch a mandatory bid if certain thresholds are exceeded.
Merger control notification for anti-trust purposes (if thresholds are met).
Under the Consolidated Finance Act and the Issuers' Regulation, notice must be given to the company and the National Commission for Companies and the Stock Exchange (CONSOB) whenever a person comes to hold a stake in an Italian listed company that:
Exceeds 3% of the large company's voting share capital or overall number of voting rights.
Exceeds 5% of the company's voting share capital or overall number of voting rights for a small to medium-sized company with a turnover of up to EUR300 million or an average market capitalisation of less than EUR500 million.
Reaches or exceeds 5%, 10%, 15%, 20%, 25%, 30%, 50%, 66.6% or 90% of the company's voting share capital or overall number of voting rights.
The same rules apply when a stake meeting the above thresholds is reduced.
Disclosure obligations are also triggered when:
The thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 50% and 66.6% are reached by adding together the stakes held by shareholders with an interest lower than 3% (or 5% in a small to medium-sized company). The shareholders must all be party to an agreement on the exercise of voting rights or the exercise of dominant influence over the company.
A person comes to hold (directly or indirectly) a participation in financial instruments (whether it is the aggregate of potential shareholdings or other long positions) that reaches or exceeds, or reduces the relevant participation in financial instruments below the 5%, 10%, 15%, 20%, 25%, 30%, 50% and 66.6% thresholds.
A person comes to hold (directly or indirectly) an aggregate position that reaches, exceeds or reduces the relevant aggregate position below the 5%, 10%, 15%, 20%, 25%, 30%, 50% and 66.6% thresholds.
Disclosure of the above holdings must be made without delay within four market days of the date the person required to fulfil the disclosure obligations gains knowledge of the relevant triggering event. CONSOB then discloses this information to the public.
Additional requirements are mandatory for holdings in companies operating in regulated sectors (for example, banks).
Agreements in recommended bids
There is no legal requirement for a bidder to negotiate before announcing an offer, but pre-bid negotiations are fairly common in practice. The nature of these negotiations varies depending on the (among other things):
Bidder's overall strategy.
Number of free floating shares in the market.
Target's ownership structure.
Negotiations typically take place with major shareholders of the target but merger agreements between the bidder and the target are infrequent. Agreements between the bidder and the target aimed at limiting the acquisition of shares in the target by the bidder are not common.
A recommendation (or the opposite) on the proposed tender offer is reflected in the board statement on it (see Question 12). This contains information useful for evaluating the offer and includes comments on the:
Fairness of the offer consideration.
Potential effects of the offer on the target's business, its employees and the location of its industrial sites.
In certain cases, an additional opinion from the independent directors of the target is required.
A decision by the directors not to solicit or recommend a tender offer is taken within the framework of the general corporate interest. It must therefore be in the interests of the shareholders as well as protecting the target's employees and the operation of the business of the company.
Before announcing an offer, a bidder must be able to fulfil its payment obligations in respect of cash consideration, or adopt all the reasonable measures to ensure that the obligations in respect of non-cash consideration are met.
Where an offer is for cash or includes cash (even as an alternative), the bidder must send to the National Commission for Companies and the Stock Exchange (CONSOB) the documentation confirming the availability of the relevant funds within the day before publication of the offer document. Where the consideration includes securities, a copy of the resolution approving their issue must be sent to CONSOB within the same timeframe.
Announcing and making the offer
Making the bid public
The following timeline applies to making a bid public:
Announcement of the bid. The decision to launch a voluntary tender offer (or the fulfilment of the requirements triggering the obligation to launch a mandatory tender offer) must be notified to the National Commission for Companies and the Stock Exchange (CONSOB) without delay and simultaneously disclosed to the market (Consolidated Finance Act). After announcement, the offer must be launched within 20 days by submitting the draft offer document to CONSOB. If the bidder fails to comply with this term:
the bidder will be prevented from launching an offer for the target's securities for the next 12 months;
the voting rights attached to the bidder's shareholding will not be exercisable and the securities exceeding the thresholds triggering the obligation to launch an offer will have to be sold within 12 months. As an alternative to this sale, CONSOB can decide that an offer be launched for a price established by it, taking into account the trading course of the securities. On sale of the relevant securities or launch of the offer, the voting rights attached to the bidder's shareholding will then be exercisable;
the bidder will be required to pay a pecuniary sanction ranging from between EUR25,000 and the maximum disbursement that the bidder would have paid if the mandatory tender offer had been launched on time.
In the offer document, the bidder must provide certain information, including:
corporate and financial information on the bidder;
details on the target and the shares under bid;
the consideration offered and the procedure for acceptance;
the bidder's reasons for the bid and its future intentions;
information on the agreements (if any) between the bidder and the target or its shareholders or members of the management body.
CONSOB review. Once the offer is sent to CONSOB, it has 15 days to provide comments on the offer document or to approve it. This term can be extended once if CONSOB requires additional information from the bidder. If the target company is active in a regulated sector (for example, banks) for which bids require authorisation from the competent supervisory authority (for example, the European Central Bank and the Bank of Italy), CONSOB must issue its approval within five days from the date that the authorisation is granted. The offer document is deemed to be approved on the expiry of the term.
Acceptance period. The acceptance period begins five market days after the offer document is published to enable the target's board of directors to prepare a statement on it. This must contain:
any information useful for evaluating the offer;
any assessment of it and the fairness of its price (the target's board of directors can resort to the reasoned opinion of an independent financial adviser on this).
The acceptance period can begin on the market day after the offer document is published if the offer document already includes this statement. A bid must be open from:
15 to 25 market days for mandatory tender offers;
15 to 40 market days in any other circumstances.
The bidder must agree (with Borsa Italiana) the start date of the acceptance period and its duration. Acceptance of the bid is irrevocable except in the event of competing bids. Competing bids must be launched within five market days before the end of the acceptance period. Subsequent increased offers and other amendments to the offer must be made and published within five market days of publication of the competing bid.
Once the acceptance period has elapsed, the final results of the bid are made public and the price is paid to the sellers by the bidder on the date set out in the offer document. Ownership of the shares is transferred at the same time as payment.
A mandatory tender offer cannot be subject to conditions.
Voluntary tender offers can be subject to certain conditions provided that they do not merely depend on the bidder's will. Conditions can include:
The absence of material adverse changes in (or frustrating actions by) the target.
In contrast to other jurisdictions, an offer is not conditional on achieving a minimum stake in the target. However, to successfully acquire control of a target, an offer must purchase shares with at least 51% of the target's voting rights (or 66.6%, which allows a bidder to control any transaction requiring support from an extraordinary shareholders' meeting).
The target's shareholders must be provided with the:
Tender offer document (including the proposed terms and conditions and an acceptance form).
Statement on the offer prepared by the target's board of directors (comunicato dell' emittente) (see Question 15).
This documentation must be made available in both recommended and hostile bids.
Although the target's employees have no right to challenge an offer, they do benefit from some information rights. In particular, the management bodies of the target and the bidder must notify their employees' representatives (or in their absence, the employees) about the:
Offer announcement (as soon as it is made).
Offer document (as soon as it is made public).
Statement on the offer by the target's board of directors, including an assessment of the bid's effects on employment conditions (as soon as it is circulated).
The target's board must also issue a statement containing information deemed useful for evaluating the bid, along with its own assessment of the bid (including, under certain circumstances, an assessment of the bid's effects on employment conditions). The communication must be sent to the employees' representatives (or in their absence, to the employees). In particular, the employees' representatives can express their opinion on the effect of the offer on the employment conditions. If received in time, the relevant statement is attached to the communication from the board covering the assessment of the offer.
The bidder must make clear its future plans for the target, including the effect the offer may have on employees. In particular, a bidder must disclose in the offer document any current plans concerning the target company and its group, with particular reference to restructuring and reorganisation, but also in relation to the workforce. It must also indicate which of these plans will be implemented in the 12 months following payment of the offer price.
However, the employee information rights set out above will not apply where the tender offer:
Contains financial instruments different from securities.
Concerns shares that do not grant any voting rights in shareholders' meetings for the appointment/removal of directors and/or statutory auditors or in respect of other matters liable to impact the company's management.
Is launched by persons that already hold the majority of the voting rights in the ordinary shareholders' meetings of the company.
Concerns the company's own shares.
The Consolidated Finance Act provides several situations in which a public offer must be made because specific thresholds have been exceeded. Chiefly, a mandatory bid for all the listed voting securities in a company will be triggered when a person comes to hold (either alone or with concert parties):
More than 30% of the target's outstanding voting shares (following either an acquisition or grant of increased voting rights or the issue of multiple-voting shares).
More than 25% of the outstanding voting shares in a company that is not a small to medium-sized entity (SME) (see Question 8), unless another shareholder holds a higher interest.
More than an additional 5% of the outstanding voting shares in any 12-month period, when, as a result of the grant of increased voting rights, the concerned person already holds (directly or indirectly) more than 30% of the outstanding voting shares, but does not hold the majority of the voting rights in an ordinary shareholders' meeting (for SMEs, a different threshold set out in the bye-laws can apply).
More than 30% (or 25% where applicable) in a non-listed parent company, or a controlling interest in a non-listed parent company, where the listed or non-listed parent company's assets are mainly composed of interests in the listed subsidiary company and the bidder will hold (indirectly or as a result of direct and indirect interest) a stake exceeding one of the thresholds triggering a mandatory bid.
In relation to the first two bullet points, the bye-laws of listed SMEs can provide for a different triggering threshold of between 25% and 40%. However, no offer need be launched if the holding of a stake exceeding those thresholds is the result of an offer for all the shares or a prior partial bid (offerta preventiva). For the third bullet point, the bye-laws of listed SMEs can provide an exemption from this obligation, but only until the date of the shareholders' meeting called to approve the financial statements for the fifth financial year following the listing of the company's shares.
Derivative financial instruments (whether held directly or indirectly) that grant a long position (that is, a position where the economic interest is positively linked to the trend of the price of the underlying assets) on the company's outstanding voting shares must be computed to determine the shareholding that triggers mandatory bid obligations.
Treasury shares must be deducted from the share capital of a target when assessing whether any relevant mandatory offer threshold has been exceeded.
The Consolidated Finance Act and the Issuers' Regulation provide for certain exemptions from the obligation to launch a mandatory bid. In particular, the obligation to launch a mandatory bid will not be triggered (whether or not the relevant threshold is exceeded) when any of the following are applicable:
Other shareholders (either alone or in concert) already hold the majority of the voting rights exercisable at the ordinary shareholders' meeting.
The bid is the result of a capital strengthening plan (as opposed to a debt restructuring plan) implemented in certain specifically identified instances of serious financial crisis or through subscription for shares in a reserved capital increase under a restructuring plan announced to the market and certified by an independent expert (provided that no acquisition of shares has occurred or has been agreed on in the preceding 12 months).
The company is in a critical financial situation and the relevant transaction:
if falling within the competence of the shareholders' meeting of the target company, is approved without the negative vote of the majority of the company's shareholders attending the meeting (excluding shareholders who, as a result of the transaction, exceed the mandatory offer threshold and shareholder(s) holding the majority stake in the company, provided that their shareholding is higher than 10% of the voting share capital);
if falling outside the competence of the shareholders' meeting of the target company, is approved by the majority of its shareholders (excluding shareholders who, as a result of the transaction, exceed the mandatory offer threshold and the shareholder(s) holding a majority stake higher than 10% of the voting share capital) under an ad hoc declaration made available by the company.
There is a transfer of shares between companies under common control, or from one company to its controlling shareholder(s).
The bid occurs as a result of either the:
exercise of an option, conversion or subscription right; or
acquisition of derivative instruments and the acquirer undertakes to sell the securities or instruments in excess to non-related parties within six months and to refrain from exercising the voting rights exceeding the relevant threshold in the interim.
The purchaser undertakes to sell the excess shares to non-related parties or to decrease the excess voting rights within 12 months (18 months where the acquirer is a financial institution acting as guarantor in a capital increase or placing of securities) and to refrain from exercising the related voting rights in the interim.
The bid occurs in companies whose bye-laws provide for increased voting rights or the issue of multiple-voting shares and the relevant thresholds are exceeded as a result of the reduction of the overall voting rights (unless the relevant party has acquired in concert with others a stake that exceeds one of the mandatory bid thresholds, taking into account the aggregate of the securities granting the right to vote at a shareholders' meeting on resolutions concerning the appointment/removal of members of the target's board of directors and supervisory board).
The bid results from a statutory merger or de-merger, where the transaction is approved by the shareholders' meeting of the company whose shares would otherwise be subject to the mandatory offer without the contrary vote of the majority of the target's shareholders attending the meeting. This majority excludes shareholders who, as a result of the transaction, exceed the mandatory offer threshold and the shareholder(s) holding the majority stake in the company, provided that the shareholding is higher than 10% of the voting share capital.
The bid occurs as a result of inheritance or free of charge transactions between living individuals.
The bid is the result of a (voluntary) offer made for 100% of the target company's voting securities, provided that, in the case of a share-for-share offer, the consideration securities are listed on a regulated market in an EU member state or a cash payment is offered as an alternative.
In addition, a mandatory tender offer will not be triggered when:
It is made in the framework of a prior partial bid (an offer launched for less than 100% but not less than 60% of a target's voting securities), provided:
the bidder and any concert party has not acquired more than 1% of the target's outstanding voting shares in the 12 months before the offer announcement or during the offer;
the offer is conditional on the approval of shareholders who together possess the majority of the target's securities (excluding those held by the offeror, any shareholder with an absolute or relative majority shareholding higher than 10% of the voting share capital of the company, or persons acting in concert);
the National Commission for Companies and the Stock Exchange (CONSOB) has agreed that the requirements have been met.
During the 12 months following the completion of the prior partial bid, the bidder or persons acting in concert with it do not acquire more than 1% of the target's outstanding voting shares, or the target do not resolve to carry out a statutory merger or de-merger.
In addition, CONSOB can grant an exemption from the obligation to launch an offer for cases not expressly set out in the regulations but which share the same rationale.
Voluntary tender offer
In a voluntary tender offer, the consideration can be either cash or securities or a combination of both. For offers covering 100% of the target's share capital, the securities must be listed on an EU regulated market (unless a cash alternative is provided).
Mandatory tender offer
A bidder can opt for the consideration to be represented, in whole or in part, by securities but it must offer shareholders a cash alternative where:
The offered securities are not listed on an EU regulated market.
The bidder (or persons acting in concert) has purchased securities (in cash) granting at least 5% of the target's outstanding voting shares in the 12-months before the offer announcement, or during the offer period.
In a voluntary tender offer, the level of consideration is set by the bidder.
In a mandatory tender offer, the offer must be launched at a price no lower than the highest price paid by the bidder (or any person acting in concert with it) for securities that are of the same category as those subject to the offer for the 12-month period before the offer announcement. However, under certain circumstances the minimum price can differ from the above. In particular:
The minimum price must be equal to the weighted average market price in the previous 12 months if, during this period, either:
no purchase for consideration of securities of the same category as those subject to the offer was made; or
the obligation to launch a mandatory bid was triggered as a result of granting increased voting rights and there was no purchase for consideration at a higher price.
In other specifically identified cases, the National Commission for Companies and the Stock Exchange (CONSOB) can determine a higher price or a lower price in order to preserve balanced market conditions of its own motion.
CONSOB can determine a higher price in cases where the bidder (or its concert parties) has agreed a higher price than in the offer document and it is evident that the bidder has colluded with one or more sellers, or suspected market manipulation leads to a temporary reduction of market prices. The price will be raised to the higher price agreed between colluding parties or, in the event of suspected market manipulation, to the weighted average market price for the 15 days both before and after the manipulation event (excluding the trading sessions affected by the manipulation).
CONSOB can lower the price if there are exceptional, unforeseeable events that cause a temporary, material increase in market prices or if suspected market manipulation leads to a temporary increase in market prices. The price will be reduced to the higher of either the:
Highest (unaffected) price paid by the bidder in the 12 months before the tender offer.
Weighted average market price in the 15 days both before and after the manipulation event, excluding the trading sessions affected by the manipulation.
In 2016, CONSOB intervened in the determination of the tender price in the context of the tender offer launched by Hitachi Rail Italy Investments on the securities of Ansaldo STS. Launched at a price of EUR9.50 per share, CONSOB increased the consideration to EUR9.89 per share claiming the existence of a colluding agreement between the bidder and the target majority shareholder Finmeccanica. The bid eventually closed at EUR9.60 per share.
If, pending the offer or for six months after payment of the offer price, the bidder or its concert parties (directly or indirectly) buy target shares at a higher price than the offer price, the bidder must pay the difference between the higher price and the offer price to those shareholders of the target who have tendered their shares to the offer (the so-called "best price" rule).
Compulsory purchase of minority shareholdings
There are two circumstances in which a bidder must buy the shares of the remaining minority shareholders. These are the:
Minority squeeze-out mechanism. After a bid for 100% of the target, where the bidder acquires at least 95% of the target's outstanding voting shares, the bidder can buy the remaining voting securities within three months from close of the offer's acceptance period. The shareholders have no right to object.
Minority sell-out mechanism. After a bid for 100% of the target, where the bidder holds (either alone or with concert parties) at least 95% of the target's outstanding voting shares, it must buy the remaining voting securities if their holders request it (the "95% sell-out"). The same applies where the acquired stake exceeds 90% of the target's outstanding voting shares (the "90% sell-out"). In this case, however, the bidder is relieved of the obligation to buy the remaining shares if it restores, within 90 days, a free float sufficient to ensure regular trading activities.
The criteria used to determine the price of the relevant shares are set out in the Issuers' Regulation. The consideration must be generally equal to the price of the offer in both mandatory and voluntary tender offers. In certain instances, the National Commission for Companies and the Stock Exchange the National Commission for Companies and the Stock Exchange (CONSOB) determines the price, taking into account the following:
The price under the previous offer.
The weighted average market price in the six-month period prior the announcement of the tender offer.
The value of the target or of its securities resulting from an independent expert's appraisal using typical market criteria and compiled not earlier than six months before the sell-out or squeeze-out mechanisms were triggered.
Acquisitions of securities of the same kind in the previous 12-month period by the bidder (or its concert parties).
The consideration tends to be in the form provided in the tender offer. However, the sellers can request to be paid in cash.
Restrictions on new offers
The Consolidated Finance Act and the Issuers' Regulation do not prevent a bidder from re-launching its offer if the first offer is unsuccessful. There are also no restrictions on the number of offers a bidder can make for the same target.
A temporary restriction will only apply if the bidder fails to launch an offer after announcing it. If the offer is not launched within 20 days of the notice of the decision to launch a voluntary tender offer, the bidder will be prevented from launching another offer for the target's securities for the next 12 months.
In the framework of public tender offers:
Borsa Italiana can suspend and/or revoke the listing of a company's securities if regular market flow is not secured. When a bidder acquires a stake exceeding 90% of the target's outstanding voting shares, de-listing is automatic.
De-listing can also occur by merging the listed company into a private company. Any shareholders who did not vote in favour of the merger can withdraw from the company. The shareholders will receive consideration equal to the weighted average of the market price during the six months before the date on which the merger was decided by resolution at the relevant shareholders' meeting.
Unless otherwise stated in the target's bye-laws, in the absence of authorisation in the shareholders' meeting, the target's directors must refrain from taking action that would jeopardise the success of an offer once a bid is launched (passivity rule). The passivity rule also applies where the target's directors intend to implement any resolution, outside the ordinary course of business, passed before this period and not yet completed, which may jeopardise achievement of the objectives of the offer. Mere research by the target's directors for an alternative bidder is outside the scope of the passivity rule.
The passivity rule (unless otherwise provided by the bye-laws) does not apply to tender offers launched by an entity that is not subject to these provisions (or equivalent provisions in its country of incorporation), or a company controlled by such an entity (reciprocity rule).
Since 2013, transfers of shares and securities issued by companies with their registered office in Italy are subject to the application of a financial transactions tax (Tobin Tax).
The Tobin Tax is currently set at 0.2% (or for transfers occurring on regulated markets or in a multi-lateral trading facility, 0.1%). The tax is applied to the value of the transaction (the transfer price or the net value of all daily transactions) and must be paid within 16 days of the transfer of shares and securities.
There are a few exceptions to the Tobin Tax, including where the shares or securities transferred are in a company whose average capitalisation during the year prior to the transaction was lower than EUR500 million. The Tobin Tax must be paid by the transferee regardless of where the transaction takes place.
Other regulatory restrictions
Tender offers must be approved by the National Commission for Companies and the Stock Exchange (CONSOB) within 15 days of receiving the offer document (or longer if CONSOB suspends the term for acquiring additional information from the bidder). Also, under current legislation, acquiring a significant stake or a controlling interest in a company operating in regulated sector (for example, banks or insurance companies) will be subject to the relevant regulator's approval. In these circumstances, CONSOB must issue its approval within five days of the date the relevant authorisations were granted.
Anti-trust provisions setting out specific merger control rules that apply to public takeover bids must be co-ordinated with the rules under the Consolidated Finance Act. In addition, the "golden powers" rules (see Question 26) can affect transactions in specific sectors.
There are no restrictions against foreign investment under Italian law and Italy has no exchange control regime.
However, limits on foreign investment can stem from two main circumstances:
Under the reciprocity principle, certain methods used to facilitate the completion of public takeovers would not apply in case of bids launched (either directly or through a controlled company) by a bidder who is not subject to the same rules or equivalent provisions. In particular, this can prevent the application of the:
breakthrough rule, which is intended to eliminate certain pre-bid defences which are viewed as significant impediments to a level playing field in a transaction;
passivity rule, which is intended to prevent the board of the target from taking any action that could hinder the successful completion of a takeover in the absence of authorisation from the target's shareholders.
Second, under the golden powers rules (set out in Law No. 56 of 11 May 2012), there are limitations on certain transactions relating to Italy-based assets in specifically identified industries, including:
In these sectors, the Italian Government can impose conditions and/or undertakings on (or even block in exceptional cases) the transaction.
Both the National Commission for Companies and the Stock Exchange (CONSOB) and the market must be informed of any transaction carried out in relation to the securities subject to the tender offer and any derivative financial instruments relating to them, together with the indication of their agreed price either:
On a daily basis if the transactions occur between the announcement and the completion date.
On a monthly basis if the transactions occur during the six months following completion of the takeover.
The following are bound by the disclosure requirements:
Persons acting in concert with either the bidder or the target.
Any shareholders participating in a relevant shareholders' agreement.
Members of their respective managing bodies.
Natural or legal persons connected by relationships of control and/or under common control.
If, pending the offer or for six months after the date of payment of the offer price, the bidder or its concert parties (directly or indirectly) buy the target's shares at a higher price than the offer price, the bidder must pay the difference between the higher price and the offer price to those shareholders of the target who tendered their shares to the offer.
In addition, from the date of the announcement of a competing offer up to termination of the relevant acceptance period, no bidder can acquire, directly or indirectly, securities subject to the offer at a price higher than the highest consideration offered in relation to any competing bid.
There are no current proposals for reform. The National Commission for Companies and the Stock Exchange (CONSOB) regularly updates the Issuers' Regulation to reflect changes made to the Consolidated Finance Act (for example, to implement EU directives) and any new interpretations of relevant matters arising from CONSOB's day-to-day work.
The regulatory authorities
Commissione Nazionale per le Society e la Borsa (CONSOB)
Main area of responsibility. CONSOB is the Italian securities regulatory authority and is in charge of supervising the good functioning of the Italian securities market.
Main area of responsibility. Borsa Italiana manages the Italian Stock Exchange.
Nicola Asti, Partner
Freshfields Bruckhaus Deringer LLP
Professional qualifications. Italian Bar, 1995
Areas of practice. Corporate and commercial law; private acquisitions and disposals; joint ventures; public takeovers.
Languages. Italian, English
Laura Li Donni, Senior Associate
Freshfields Bruckhaus Deringer LLP
Professional qualifications. Italian Bar, 2008
Areas of practice. Corporate and commercial law; private acquisitions and disposals; corporate restructurings; mergers; joint ventures; recapitalisations; public takeovers.
Languages. Italian, English