32
The Mergers & Acquisitions Review Law Business Research Eighth Edition Editor Mark Zerdin
The Mergers & Acquisitions
Review
Law Business Research
Eighth Edition
Editor
Mark Zerdin
The Mergers & Acquisitions Review
The Mergers & Acquisitions Review
Reproduced with permission from Law Business Research Ltd.This article was first published in The Mergers & Acquisitions Review - Edition 8
(published in August 2014 – editor Mark Zerdin).
For further information please [email protected]
The Mergers & Acquisitions
Review
Eighth Edition
EditorMark Zerdin
Law Business Research Ltd
THE MERGERS AND ACQUISITIONS REVIEW
THE RESTRUCTURING REVIEW
THE PRIVATE COMPETITION ENFORCEMENT REVIEW
THE DISPUTE RESOLUTION REVIEW
THE EMPLOYMENT LAW REVIEW
THE PUBLIC COMPETITION ENFORCEMENT REVIEW
THE BANKING REGULATION REVIEW
THE INTERNATIONAL ARBITRATION REVIEW
THE MERGER CONTROL REVIEW
THE TECHNOLOGY, MEDIA AND TELECOMMUNICATIONS REVIEW
THE INWARD INVESTMENT AND INTERNATIONAL TAXATION REVIEW
THE CORPORATE GOVERNANCE REVIEW
THE CORPORATE IMMIGRATION REVIEW
THE INTERNATIONAL INVESTIGATIONS REVIEW
THE PROJECTS AND CONSTRUCTION REVIEW
THE INTERNATIONAL CAPITAL MARKETS REVIEW
THE REAL ESTATE LAW REVIEW
THE PRIVATE EQUITY REVIEW
THE ENERGY REGULATION AND MARKETS REVIEW
THE INTELLECTUAL PROPERTY REVIEW
THE LAW REVIEWS
www.TheLawReviews.co.uk
THE ASSET MANAGEMENT REVIEW
THE PRIVATE WEALTH AND PRIVATE CLIENT REVIEW
THE MINING LAW REVIEW
THE EXECUTIVE REMUNERATION REVIEW
THE ANTI-BRIBERY AND ANTI-CORRUPTION REVIEW
THE CARTELS AND LENIENCY REVIEW
THE TAX DISPUTES AND LITIGATION REVIEW
THE LIFE SCIENCES LAW REVIEW
THE INSURANCE AND REINSURANCE LAW REVIEW
THE GOVERNMENT PROCUREMENT REVIEW
THE DOMINANCE AND MONOPOLIES REVIEW
THE AVIATION LAW REVIEW
THE FOREIGN INVESTMENT REGULATION REVIEW
THE ASSET TRACING AND RECOVERY REVIEW
THE INTERNATIONAL INSOLVENCY REVIEW
THE OIL AND GAS LAW REVIEW
THE FRANCHISE LAW REVIEW
THE PRODUCT REGULATION AND LIABILITY REVIEW
THE SHIPPING LAW REVIEW
PUBLISHER Gideon Roberton
BUSINESS DEVELOPMENT MANAGERS Adam Sargent, Nick Barette
SENIOR ACCOUNT MANAGERS Katherine Jablonowska, Thomas Lee, James Spearing
ACCOUNT MANAGER Felicity Bown
PUBLISHING COORDINATOR Lucy Brewer
MARKETING ASSISTANT Dominique Destrée
EDITORIAL ASSISTANT Shani Bans
HEAD OF PRODUCTION Adam Myers
PRODUCTION EDITOR Anna Andreoli
SUBEDITOR Janina Godowska
MANAGING DIRECTOR Richard Davey
Published in the United Kingdom by Law Business Research Ltd, London
87 Lancaster Road, London, W11 1QQ, UK© 2014 Law Business Research Ltd
www.TheLawReviews.co.uk No photocopying: copyright licences do not apply.
The information provided in this publication is general and may not apply in a specific situation, nor does it necessarily represent the views of authors’ firms or their clients.
Legal advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as of August 2014, be
advised that this is a developing area.Enquiries concerning reproduction should be sent to Law Business Research, at the
address above. Enquiries concerning editorial content should be directed to the Publisher – [email protected]
ISBN 978-1-909830-16-5
Printed in Great Britain by Encompass Print Solutions, Derbyshire
Tel: 0844 2480 112
i
The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:
AABØ-EVENSEN & CO ADVOKATFIRMA
ÆLEX
AGUILAR CASTILLO LOVE
AKD N.V.
ALLEN & GLEDHILL LLP
ANDERSON MŌRI & TOMOTSUNE
ARIAS, FÁBREGA & FÁBREGA
ARIAS & MUÑOZ
BEITEN BURKHARDT RECHTANSWALTSGESELLSCHAFT MBH
BHARUCHA & PARTNERS
BNT ATTORNEYS-AT-LAW
BOWMAN GILFILLAN
BREDIN PRAT
BRIGARD & URRUTIA
CAMPOS FERREIRA, SÁ CARNEIRO & ASSOCIADOS
CLEARY GOTTLIEB STEEN & HAMILTON LLC
COULSON HARNEY
CRAVATH, SWAINE & MOORE LLP
DEGUARA FARRUGIA ADVOCATES
ACKNOWLEDGEMENTS
Acknowledgements
ii
DELFINO E ASSOCIATI WILLKIE FARR & GALLAGHER LLP
DENTONS
DITTMAR & INDRENIUS
DRYLLERAKIS & ASSOCIATES
ELİG ATTORNEYS-AT-LAW
FENXUN PARTNERS
HARNEYS
HENGELER MUELLER
HEUKING KÜHN LÜER WOJTEK
ISOLAS
KBH KAANUUN
KEMPHOOGSTAD, S.R.O.
KIM & CHANG
KING & WOOD MALLESONS
KINSTELLAR, S.R.O., ADVOKÁTNÍ KANCELÁŘ
MAKES & PARTNERS LAW FIRM
MANNHEIMER SWARTLING ADVOKATBYRÅ
MATHESON
MNKS
MORAVČEVIĆ VOJNOVIĆ I PARTNERI IN COOPERATION WITH SCHÖNHERR
MOTIEKA & AUDZEVIČIUS
NISHIMURA & ASAHI
OSLER, HOSKIN & HARCOURT LLP
PÉREZ BUSTAMANTE & PONCE
PINHEIRO NETO ADVOGADOS
Acknowledgements
iii
POPOVICI NIȚU & ASOCIAȚII
RAIDLA LEJINS & NORCOUS
ROJS, PELJHAN, PRELESNIK & PARTNERS
RUBIO LEGUÍA NORMAND
RUSSIN, VECCHI & HEREDIA BONETTI
S HOROWITZ & CO
SANTAMARINA Y STETA, SC
SCHELLENBERG WITTMER LTD
SCHÖNHERR RECHTSANWÄLTE GMBH
SELVAM & PARTNERS
SEYFARTH SHAW LLP
SKRINE
SLAUGHTER AND MAY
STRELIA
SYCIP SALAZAR HERNANDEZ & GATMAITAN
TORRES, PLAZ & ARAUJO
URÍA MENÉNDEZ
UTEEM CHAMBERS
WEERAWONG, CHINNAVAT & PEANGPANOR LTD
WILSON SONSINI GOODRICH & ROSATI
v
Editor’s Preface .................................................................................................xiiiMark Zerdin
Chapter 1 EUROPEAN OVERVIEW .........................................................1Mark Zerdin
Chapter 2 EUROPEAN COMPETITION ................................................13Götz Drauz and Michael Rosenthal
Chapter 3 EUROPEAN PRIVATE EQUITY .............................................20Thomas Sacher, Steffen Schniepp and Guido Ruegenberg
Chapter 4 US ANTITRUST ......................................................................33Scott A Sher, Christopher A Williams and Bradley T Tennis
Chapter 5 CROSS-BORDER EMPLOYMENT ASPECTS OF INTERNATIONAL M&A .......................................................51
Marjorie Culver, Darren Gardner, Ming Henderson, Dominic Hodson and Peter Talibart
Chapter 6 AUSTRALIA .............................................................................64Lee Horan and Greg Golding
Chapter 7 AUSTRIA ..................................................................................79Christian Herbst
Chapter 8 BAHRAIN ................................................................................91Haifa Khunji and Maryia Abdul Rahman
Chapter 9 BELGIUM ..............................................................................106Olivier Clevenbergh, Gisèle Rosselle and Carl-Philip de Villegas
CONTENTS
vi
Contents
Chapter 10 BRAZIL...................................................................................117Fernando Alves Meira and Gustavo Paiva Cercilli Crêdo
Chapter 11 BRITISH VIRGIN ISLANDS ................................................128Jacqueline Daley-Aspinall and Murray Roberts
Chapter 12 CANADA ................................................................................144Robert Yalden and Emmanuel Pressman
Chapter 13 CAYMAN ISLANDS ..............................................................160Marco Martins
Chapter 14 CHINA ...................................................................................177Fred Chang, Wang Xiaoxiao and Huang Jiansi
Chapter 15 COLOMBIA ...........................................................................191Sergio Michelsen Jaramillo
Chapter 16 COSTA RICA .........................................................................207John Aguilar Jr and Alvaro Quesada
Chapter 17 CYPRUS .................................................................................217Nancy Ch Erotocritou
Chapter 18 CZECH REPUBLIC ...............................................................224Lukáš Ševčík, Jitka Logesová and Bohdana Pražská
Chapter 19 DOMINICAN REPUBLIC ....................................................233María Esther Fernández A de Pou, Mónica Villafaña Aquino and Laura Fernández-Peix Perez
Chapter 20 ECUADOR .............................................................................243Diego Pérez-Ordóñez
Chapter 21 ESTONIA ...............................................................................253Sven Papp and Karl-Erich Trisberg
vii
Contents
Chapter 22 FINLAND...............................................................................266Jan Ollila, Anders Carlberg and Wilhelm Eklund
Chapter 23 FRANCE .................................................................................277Didier Martin and Raphaël Darmon
Chapter 24 GERMANY .............................................................................292Heinrich Knepper
Chapter 25 GIBRALTAR ...........................................................................304Steven Caetano
Chapter 26 GREECE .................................................................................317Cleomenis G Yannikas, Sophia K Grigoriadou and Anna S Damilaki
Chapter 27 GUATEMALA ........................................................................330Jorge Luis Arenales de la Roca and Luis Pedro Del Valle
Chapter 28 HONG KONG .......................................................................338Jason Webber
Chapter 29 HUNGARY .............................................................................347Levente Szabó and Réka Vízi-Magyarosi
Chapter 30 ICELAND ...............................................................................363Hans Henning Hoff
Chapter 31 INDIA .....................................................................................371Justin Bharucha
Chapter 32 INDONESIA ..........................................................................390Yozua Makes
Chapter 33 IRELAND ...............................................................................404Éanna Mellett and Robert Dickson
Contents
viii
Chapter 34 ISRAEL ...................................................................................413Clifford Davis and Keith Shaw
Chapter 35 ITALY ......................................................................................424Maurizio Delfino
Chapter 36 JAPAN .....................................................................................437Hiroki Kodate and Junya Ishii
Chapter 37 KENYA ...................................................................................447Joyce Karanja-Ng’ang’a and Felicia Solomon Ndale
Chapter 38 KOREA ...................................................................................458Jong Koo Park, Bo Yong Ahn, Sung Uk Park and Young Min Lee
Chapter 39 LITHUANIA ..........................................................................473Giedrius Kolesnikovas and Michail Parchimovič
Chapter 40 LUXEMBOURG ....................................................................479Marie-Béatrice Noble and Stéphanie Antoine
Chapter 41 MALAYSIA .............................................................................493Janet Looi Lai Heng and Fariz Abdul Aziz
Chapter 42 MALTA ...................................................................................505Jean C Farrugia and Bradley Gatt
Chapter 43 MAURITIUS ..........................................................................515Muhammad Reza Cassam Uteem and Basheema Farreedun
Chapter 44 MEXICO ................................................................................525Aarón Levet V and Isaac Zatarain V
Chapter 45 MONTENEGRO ...................................................................534Slaven Moravčević and Nikola Babić
Contents
ix
Chapter 46 MYANMAR ............................................................................544Krishna Ramachandra and Benjamin Kheng
Chapter 47 NETHERLANDS ...................................................................554Carlos Pita Cao and François Koppenol
Chapter 48 NIGERIA ................................................................................566Lawrence Fubara Anga
Chapter 49 NORWAY ...............................................................................571Ole K Aabø-Evensen
Chapter 50 PANAMA ................................................................................608Julianne Canavaggio
Chapter 51 PERU ......................................................................................618Emil Ruppert and Sergio Amiel
Chapter 52 PHILIPPINES .........................................................................628Rafael A Morales, Philbert E Varona, Hiyasmin H Lapitan and Catherine D Dela Rosa
Chapter 53 POLAND ................................................................................637Paweł Grabowski, Rafał Celej and Agata Sokołowska
Chapter 54 PORTUGAL ...........................................................................650Martim Morgado and João Galvão
Chapter 55 ROMANIA .............................................................................662Andreea Hulub, Alexandra Niculae and Vlad Ambrozie
Chapter 56 RUSSIA ...................................................................................677Scott Senecal, Yulia Solomakhina, Polina Tulupova,Yury Babichev and Alexander Mandzhiev
Chapter 57 SERBIA ...................................................................................696Matija Vojnović and Luka Lopičić
Contents
x
Chapter 58 SINGAPORE ..........................................................................706Lim Mei and Lee Kee Yeng
Chapter 59 SLOVENIA .............................................................................716David Premelč, Bojan Šporar and Jakob Ivančič
Chapter 60 SOUTH AFRICA ...................................................................727Ezra Davids and Ashleigh Hale
Chapter 61 SPAIN .....................................................................................739Christian Hoedl and Javier Ruiz-Cámara
Chapter 62 SWEDEN ...............................................................................755Biörn Riese, Eva Hägg and Anna Brannemark
Chapter 63 SWITZERLAND ....................................................................763Lorenzo Olgiati, Martin Weber, Jean Jacques Ah Choon, Harun Can and David Mamane
Chapter 64 THAILAND ...........................................................................774Troy Schooneman and Jeffrey Sok
Chapter 65 TURKEY .................................................................................781Tunç Lokmanhekim and Nazlı Nil Yukaruç
Chapter 66 UNITED ARAB EMIRATES..................................................790DK Singh and Stincy Mary Joseph
Chapter 67 UNITED KINGDOM ...........................................................802Mark Zerdin
Chapter 68 UNITED STATES ..................................................................829Richard Hall and Mark Greene
Contents
xi
Chapter 69 VENEZUELA .........................................................................869Guillermo de la Rosa, Juan D Alfonzo, Nelson Borjas E, Pedro Durán A and Maritza Quintero M
Chapter 70 VIETNAM ..............................................................................882Hikaru Oguchi, Taro Hirosawa, Ha Hoang Loc
Appendix 1 ABOUT THE AUTHORS .....................................................893
Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS .....943
xiii
EDITOR’S PREFACE
There is cause for optimism and caution in light of the past year’s events. First, we can be tentatively optimistic about Europe. The possibility of a euro
breakup appears to have faded, and European equities markets performed, on the whole, exceptionally well in 2013. Indeed, the euro/dollar basis swap has moved sufficiently to open up euro capital markets to borrowers wishing to swap proceeds to dollars; the World Bank sold its first euro benchmark bond for more than four years in November 2013, and non-European companies like Sinopec and Korea Natural Gas have issued large euro bonds in recent months. If the European economy continues to grow (and analysts are expecting growth to quicken), it is hoped that the prospect of crisis will continue to fade.
Second, though 2013 was a comparatively languid year for global M&A, the buoyancy of the credit and equity markets cannot be ignored. In terms of financing, the seeming willingness of banks to allow for looser borrower constraints, to underwrite jumbo facilities in small syndicates, and to offer flexible and fast bridge-financing for high-value acquisitions, presents a financing climate that should be particularly amenable to corporate M&A. It is also notable that continued political and economic instability did not impede the completion of some standout deals in 2013, including the Glencore/Xstrata tie-up and Vodafone’s disposal of its shareholding in Verizon Wireless. These deals show that market participants are able, for the right deal, to pull out all the stops. After a period of introspection and careful balance sheet management, corporates may be increasingly tempted to put cash to work through M&A.
There remains, however, cause for prudence. There is considerable uncertainty as to how markets will process the tapering of quantitative easing (QE) by the US Federal Reserve. The merest half-mention by Ben Bernanke, in May 2013, of a possible end to QE was enough to shake the markets, and to nearly double the 10-year US Treasury yield in a matter of months. Emerging markets are particularly sensitive to these shocks. The oncoming end of QE may already have been priced into the markets, but there is a possibility that its occurrence will cause further, severe market disruption. In addition, there are concerns around how the funding gap left by huge bank deleveraging will be
Editor’s Preface
xiv
filled, and centrifugal pressures continue to trouble European legislators. Finally, there are broader concerns as to the depth of the global economic recovery as growth in the BRIC economies seems to slow. Optimism should, therefore, be tempered with caution.
I would like to thank the contributors for their support in producing the eighth edition of The Mergers & Acquisitions Review. I hope that the commentary in the following chapters will provide a richer understanding of the shape of the global markets, together with the challenges and opportunities facing market participants.
Mark ZerdinSlaughter and MayLondonAugust 2014
106
Chapter 9
BELGIUM
Olivier Clevenbergh, Gisèle Rosselle and Carl-Philip de Villegas1
I OVERVIEW OF M&A ACTIVITY
The eurozone crisis and financial turmoil remained the most important factors for cautiousness in the Belgian M&A market, and they have again significantly influenced the Belgian M&A statistics for 2013. But from a mere total transaction value perspective, 2013 was an unremarkable year for M&As in which Belgian companies were involved.Indeed, the disclosed total transaction value for 2013 was approximately €31 billion, compared with €36.5 billion in 2012.
When analysing these M&A transactions closely, it appears, however, that the transactions made by Belgian companies outside Belgium and the divestments by Belgian financial institutions constitute once again the major part of the deal value. The largest transaction in terms of total transaction value is the acquisition of the credit portfolio of Royal Park Investments (which is Fortis’s bad bank) by Lone Star and Crédit Suisse for €6.8 billion. Number two in 2013 M&A statistics is BNP Paribas’s acquisition of the remaining minority stake in BNP Paribas Fortis (the former Fortis Bank) from the Belgian state for €3.25 billion. Third on the top 10 list is the transaction around the Polish Kredyt Bank, previously owned by KBC, and Zachodni (Santander) for a total transaction value of €860 million.
As well as these transactions that have been triggered by the financial turmoil, some ‘regular’ M&A transactions occurred as well in 2013. The top 10 of these includes the Belgian-listed AB Inbev with its sale of the brewery Piedras Negras (Modelo) and the everlasting rights for Corona and Modelo to Constellation Brands for €2.2 billion. The Frère-holding GBL acquired a minority stake in the Swiss test-and-inspection giant SGS
1 Olivier Clevenbergh and Gisèle Rosselle are partners and Carl-Philip de Villegas is a senior associate at Strelia. The authors would like to thank Jean-Philippe Cordier, Brecht Cops, Yves Van Gerven, Benoît Malvaux, and Eric-Gérald Lang for their contributions to this chapter.
Belgium
107
for €2 billion, and Solvay followed the shale gas hype with the acquisition of a stake in Chemlogics for €1 billion.
The capital markets, on the other hand, illustrate the cautious warranty for optimism. Even though the Belgian stock exchange has never been one of the preferred ways for Belgian entrepreneurs to finance their growth, the void of IPOs on Euronext Brussels over the past few years has stopped with the June 2013 IPO of Belgium’s postal service bpost, a company owned by the Belgian state and CVC. This IPO created a partial exit for CVC and was followed by a sale, in the later part of 2013, of its entire remaining participation. bpost’s IPO was closely followed by the IPOs of Cardio3 Biosciences and Qrf. In this line, 2014 has started hopefully with the IPO of the Euronext stock exchange itself, as well as Ontex and Argen-X (among others). Other IPOs are expected in the course of 2014, especially in the bio-medical sector. Furthermore, Euronext launched Enternext in May 2013, which is designed to develop and promote its stock markets specifically for SMTs. It is hoped that this initiative will entail further IPOs in the years to come.
The issuance of bonds remains remarkably popular in 2013, totalling €12.3 billion throughout the year for both listed and unlisted companies. The reason for this continuance in popularity is that it is a relatively cheap way for companies to finance their operations. Both private and institutional investors subscribe willingly to these bonds because they get a relatively higher return than from bank accounts, and the risk is smaller risk than investing in the current volatile markets. AB Inbev is again the most important player in the bonds issuance market.
Even though the total transaction value for 2013 shows a relative success, the Belgian M&A market is likely to continue to suffer from investors’ cautiousness in the aftermath of the financial turmoil. Financing is still difficult, negotiations take longer, and obtaining approvals from various controlling authorities appears to have become more cumbersome. Moreover, investors and financial institutions request an ever-increasing amount of securities to close a deal. This already became apparent in the first Belgian M&A statistics for 2014, showing a poor total transaction value of €9.5 billion for the year, compared to €17.5 billion in the first semester of 2013, and this is contrary to the worldwide growth of M&A transactions when compared to those of previous years.
II GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A
In Belgium the negotiated sale and purchase of corporate entities’ shares or assets (or both) are governed by the Civil Code, partially by the Commercial Code, and by practice. The practice developed in common law jurisdictions has had and still has an important influence on the Belgian M&A practice. Through these practice developments, and following common law influence in the Benelux in the past two decades, the use of more or less standardised share or asset purchase agreements has been established. Although the standard clauses contained in these types of agreements have gained influence especially with regard to the representations and warranties used in M&A transactions, even the most standard provisions in these agreements are now sometimes debated during negotiations. A concern expressed by all parties involved, even more than before and
Belgium
108
most certainly since the financial turmoil of 2008, is the wish to be protected against the possible insolvency of their counterpart.
Mergers, including cross-border mergers, demergers, (partial) splits, and spin-offs, as well as contributions of part or all assets and liabilities or branches of activity are governed in detail by the Belgian Companies Code. When any one of these kinds of transactions or restructuring processes is envisaged, one must take into account that the provisions of the Belgian Companies Code impose certain filing and publication obligations as well as waiting periods after the filing of the proposal.
If the target company’s shares are either traded on a regulated market or widely spread among investors residing in Belgium so that the bid is public in character, the Law of 1 April 2007 on takeover bids (the Takeover Bid Law) and its executing Royal Decree of 27 April 2007 apply. The Takeover Bid Law makes a distinction between a voluntary bid and a mandatory bid. A voluntary bid is a bid in which a bidder seeks to acquire control over a listed company, while a mandatory bid is one in which a bidder or shareholder has increased its participation over the threshold of 30 per cent of the shares of the company in question. That bidder or shareholder must then extend its bid to all the other shareholders under the same terms and conditions. The Belgian takeover bid legislation is characterised in great detail, particularly in the area of acting in concert for the purposes of fulfilling the mandatory bid obligation.
Finally, public offerings and admissions to trading of investment securities on the Belgian territory, whether harmonised (i.e., those that are within the scope of application of the Prospectus Directive) or not (i.e., those public offerings that are solely governed by Belgian law) are governed by the Prospectus Law of 16 June 2006, and the Financial Services and Markets Authority is the competent authority for these operations. This piece of legislation is characterised as well in great detail, but it has hardly been used in the context of the market turmoil. In 2013, the Belgian postal services bpost was the first to go public, followed by Cardio3 Biosciences, which are hopefully the precursors of a turnaround. However, 2014 has started out slowly with two IPOs on the Brussels Euronext market.
III DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW AND THEIR IMPACT
No notable changes in corporate or takeover bid law were noted during 2013, nor at the beginning of 2014. The implementation of the Shareholders’ Rights Directive of 2006 went smoothly and did not cause any significant problems in the organisation of shareholders’ meetings of listed companies. Furthermore, some small changes to the Belgian Companies Code were either implemented or more quickly introduced in order to reinforce the Belgian government’s battle against tax fraud or elucidation.
Moreover, a significant and increasing number of scholars and practitioners are pleading for an overall review of the Belgian Companies Code. This review should not only pursue an increase in the attractiveness of Belgium for both Belgian and foreign investors, but also permit tidying up of the vast landscape of very different corporate forms that often have overlapping yet slightly different rules that apply to each form.
Belgium
109
IV FOREIGN INVOLVEMENT IN M&A TRANSACTIONS
Foreign involvement in the Belgian M&A market remains significant. Belgian shareholders often prefer to be a majority shareholder, or at least a ‘reference’ shareholder, in order to be able to remain in control of their company. When, at a certain point in time, these reference shareholders are no longer able to provide the company with the necessary financial means to support the growth of their company, they prefer to sell it rather than to see their participation become diluted and ‘stuck’ with another shareholder that is taking over control of the company.
In general, it is difficult to obtain an overall view on (foreign) private equity involvement apart from the reported deals (some of which are reported below). However, with Belgium being a country with many medium-sized companies with international presence or ambitions, interesting investment opportunities are still available for both industrial and financial foreign investors.
V SIGNIFICANT TRANSACTIONS, KEY TRENDS, AND HOT INDUSTRIES
As mentioned above, the most significant transactions for 2013 were still triggered by the financial turmoil in the Belgian banking sector of 2008. The sale of the credit portfolio of Royal Park Investments, Fortis’s bad bank following its collapse, for €6.8 billion has shown that post factum a benefit could be obtained, even though no one could believe it on the day Fortis collapsed. With an excess value of approximately €680 million, one must say that the Belgian state will probably benefit from the financial turmoil of 2008 in the long run. Furthermore, the Belgian state sold its 25 per cent minority stake in Fortis Bank in 2013 for €3.25 billion, thereby creating an excess value of €900 million for the Belgian state. These two divestments were very useful for the Belgian government in view of achieving the imposed budgetary constraints by the European Union to decrease the Belgian state’s liabilities below 100 per cent of its GNP. This has been one of the criteria for the European Union to free up Belgium from the list of countries that are subject of the budget procedures. The Belgian state, however, remains a direct and important shareholder of BNP Paribas, with a 10 per cent participation.
In the 2013 top 10 largest transactions in value, the Polish deal concerning Kredyt Bank (KBC) and Zachodni (Santander) is one of the last transactions triggered by the 2008 financial turmoil. KBC was indeed forced by the European Union to divest its Polish activities, even though this was not done with great enthusiasm. KBC had already sold its participation in the insurance company Warta to the German Talanx and, as a solution for Kredyt Bank, it found a merger with the Polish Santander subsidiary Bank Zachodni WBK. The merger between Kredyt Bank and Zachodny resulted in a participation of 16.2 per cent for KBC in the latter, which was later placed with institutional investors, together with a small part of Santander’s participation in Zachodni. Total transaction value is €885 million, which is €60 million more than expected.
These three transactions together result in a total transaction value of €11 billion, or one-third of the total transaction value for 2013. If the sale of Dexia Asset Management for €380 million, number 15 in the M&A statistics for 2013, is added to
Belgium
110
this total, the M&A statistics for 2013 are even more influenced by the consequences of the 2008 financial turmoil.
Of course, 2013 left room for ‘regular’ M&A transactions as well. In this regard, GBL, one of the two investment holdings of Albert Frère, one of the richest business men of Belgium, took a participation in the Swiss test-and-inspection giant SGS for a total deal value of €2 billion. Solvay in its turn acquired the US company Chemlogics for €1 billion following the shale gas hype in the US in 2013. Indeed, some believe that this new energy source is a ‘game changer’, a new factor that will change the rules of the game in industrial sectors such as chemistry, economics, and geo-politics. Those who believed in Solvay’s investment underlined the importance of this strategic acquisition for the ‘reinvention’ of Solvay. Others, however, refer to the many write-downs on shale gas investments taken by multinational groups such as the Dutch Shell.
France has also been active on the Belgian market, realising two of the most important transactions in value of 2013. The Belgian online payment specialist Ogone has been acquired by the French payment terminal specialist Ingenico (now Ingenico Group). Ingenico Group has thereby diversified its activities, giving Ogone the possibility to become active on a more global scale in countries where Ingenico Group is already active. Furthermore, this newly formed group will now have the possibility to offer a total package to shopkeepers who often have an online shop besides their classic brick-and-mortar shop.
The acquisition of Senior Living group, active in the elderly care housing business, by the French group Medica from the investment fund Waterland was another important acquisition of a Belgian company by a French company. Medica was in its turn acquired by one of its national competitors Korian four months after that acquisition. These two subsequent M&A deals resulted in the creation of the largest European group active in the market of elderly homes. Main competitors on the Belgian market are the Belgian group Armonea and the French group Orpea, and also the Belgian investment group Cofinimmo, illustrating a major consolidation exercise of this market in Belgium and Europe.
The most striking transaction in Belgium for 2013 is probably the IPO of the Belgian postal services bpost. The private equity group CVC has not only successfully realised the first important IPO in Belgium for years, it also successfully placed a first part of its shares on the market for €866 million, followed by the sale of the remainder of its participation to institutional investors for €580 million. Besides bpost, two other companies have successfully launched an IPO in 2013 (i.e., the biotech company Cardio3 and the real estate investment fund Qrf ).
Almost not visible in the deal statistics, but still an important factor in the market, is the constant stream of smaller real estate acquisitions by REITs such as Aedifica, AG Real Estate, Cofinimmo, Montea, Retail Estates, and WDP, often through share deals followed by an intra-group merger. In this market, divesting is becoming more and more key to success, leading to divestment of office facilities into (temporary) private housing and elderly housing as has been described above.
The renewable energy sector has also gained importance in the Belgian M&A market with the involvement of Belgian companies. Furthermore, Deme and Jan De Nul, two Belgian and universally known dredgers have been involved in many of the largest dredging projects in the world.
Belgium
111
An unfortunate consequence of the financial turmoil are the financial difficulties that certain companies are facing, following which they are forced to refinance their operations or even undergo a judicial reorganisation or, in the worst-case scenario, go bankrupt. This development entails a new kind of M&A, a kind in which actors, such as receivers of a bankrupt estate, take on a major role and in which certain specific regulations and legislation change the rules of the transaction profoundly. This sometimes leads to competitive bids on the bankrupt estate, a situation in which it is the court that decides who is the acquirer and this is on the basis of the continuity of the business (and of the employment) rather than on the basis of the usual criteria relating to the price. Basically, no representations and warranties are given in such ‘sales’, and the due diligence is often limited to the bare minimum. Electrawinds, active in the production of green energy, has been a good illustration of such problematic relationship between different actors with opposite interests. In light of the still increasing number of bankruptcies in Belgium, this trend is likely to continue to influence the Belgian M&A statistics for 2014.
It is very difficult to identify the main tendencies or key developments in all of the foregoing. The Belgian financial sector has worked hard to cover its losses from the past years and gradually reimburse the state aid that was granted to it. Unfortunately, the Belgian banks will most probably continue to focus on their own survival. Sellers in industrial sectors generally manage to find buyers, even though they must be more patient. Buyers are more often other industrial players, a trend of 2013 that has been confirmed at the beginning of 2014. Private equity players still seem to remain on the bench awaiting the outcome of the economic turmoil in Europe or focusing on the emerging markets. Furthermore, private equity players have also been awaiting the transposition of the AIFM Directive of 2011 into Belgian law, which was voted in the Belgian parliament in the first semester of 2014. Private equity funds, hedge funds, and other investment vehicles are now subject to new reporting and such new regulatory requirements, among other things, regarding governance structure and capital. These funds must from now on also acknowledge certain rules of conduct and other regulations regarding identification, prevention, and management of conflicts of interest.
Finally, it remains to be seen what the influence will be of the federal elections of 25 May on the economy in general, and especially in M&A. Indeed, actors active in the M&A market need to be confident before making future investments.
VI FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTS
Given that the majority of the Belgian M&A transactions are mid-market deals, financing continues to be available on reasonable conditions. Asset-backed lending in different forms is gaining popularity, whereas club financing and syndicated loans for small and mid-cap deals also remain popular. In general, funds seem to continue to be available. However, financial institutions remain very careful, and sometimes risk-averse, requesting proper and solid securities for almost all transactions.
Credit documentation is either subject to the London Loan Market Association model – even for pure Belgian deals – or largely inspired by it. The refinancing of deals continues to be important in practice.
Belgium
112
More and more industrial players finance deals through their existing credit lines or sometimes even through their own funds. As previously mentioned, the bond market also remains a widely popular means of financing. These bonds are often placed with institutional investors for less known (or less popular) companies, whereas well-known companies often place their bonds within the private investor market as well, which has the advantage of offering a lower interest rate.
VII EMPLOYMENT LAW
Belgium has implemented the Acquired Rights Directive 2001/23/EC through the conclusion of a Collective Bargaining Agreement, 32-bis (CBA 32-bis) by the National Labour Council, which was then declared generally binding on all employers and employees by a Royal Decree. CBA 32-bis safeguards employees’ rights in the event of transfers of undertakings, business, or parts of businesses as a result of a legal transfer or merger if the business retains its identity after the transfer. Individual employees’ rights that arise from employment contracts or employment relationships at the time of the transfer are transferred automatically. Hence, all transferred employees will continue to benefit from the same terms and conditions that applied to them prior to the transfer. However, there are specific employment conditions that cannot be transferred on a compulsory basis (e.g., pension plans). If such specific employment conditions are not transferred, the transferee (i.e., the new employer) should nonetheless give similar conditions or compensation to the employees concerned to avoid a constructive dismissal.
Furthermore, specific legislation has been implemented in order to provide similar protection to employment terms and conditions that follow from collective agreements. Even though CBA 32-bis prevents the transferor and the transferee from dismissing employees for reasons related to the transfer, exceptions have been laid down as well. In particular, dismissals or changes to the working conditions can be envisaged if these can be justified for economic, technical, or organisational reasons. In any event, the transferor and transferee will remain jointly liable for any obligations towards the workforce that have arisen before the date of the transfer for any transferred employment relationship. Finally, it should be noted that a specific information and consultation procedure towards employee representative bodies or, in the absence thereof, towards the employees themselves is imposed by both CBA 32-bis and civil law.
The Law on the Continuity of Undertakings of 31 January 2009 has introduced special rules for the transfer of an undertaking (or part of an undertaking) in the framework of the procedure on judicial reorganisation, and it is therefore not submitted to CBA 32-bis. This law has recently been upgraded; the amendments thereto have entered into force per 1 August 2013. The most important change with regard to the transfer of employees in an undertaking that is subject to this procedure is that CBA 102 will now also have to be taken into account. In general, the transferee will only be obliged to take over the employees under the previous terms and conditions if the transferee has been informed about those conditions prior to the transfer. The employee and transferee may agree on individual changes, but these changes must be justified by economic, technical, or organisational reasons. Moreover, changes to collective employment conditions may also be envisaged in the framework of the contemplated transfer. Any such changes are to
Belgium
113
be negotiated with the employees’ representatives and should be laid down in a collective bargaining agreement.
Specific legislation has also been implemented regarding the transfer of employees within the framework of a transfer of an undertaking that is submitted to insolvency proceedings. Whereas CBA 32-bis prevents the transferee from dismissing certain people (employees) in the framework of the transfer of an undertaking, except for the reasons stated above, the purchaser of an insolvent undertaking is not obliged to take over the entire workforce. The latter may select which employees it will take over within the workforce of the insolvent undertaking. However, it should be noted that in the bidding process on the insolvent undertaking, the receiver of the bankrupt estate is not legally obliged to accept the highest bid. The receiver may indeed accept a lower bid on the insolvent undertaking (or part of it) if that bid offers better guarantees of future employment to the workforce.
The recast Directive 2009/38/EC of the European Parliament and the Council of 6 May 2009 on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees has been implemented in Belgian law by the Collective Bargaining Agreement 101 of 21 December 2010 (CBA 101). CBA 101 has the merit of increasing the awareness of the requirement to involve the European Works Council or to apply information and consultation procedures for transnational matters. Matters are considered to be transnational when they concern a Community-scale undertaking or Community-scale group of undertakings as a whole, or at least two undertakings or establishments of the undertaking or group situated in two different Member States. Discussions have arisen with regard to the exact interpretation and scope of ‘transnational matters’.
A development that has been pending for a long time was the harmonisation of the white-collar and blue-collar employee status. After years of discussions, the legislative bills were published by the end of 2013 so that new legislation entered into force per 1 January 2014. Blue-collar and white-collar employees now have identical employment termination rights in relation to years of service accrued after 1 January 2014. Generally speaking, blue-collar employees’ rights in the event of a dismissal have improved whereas certain categories of white-collar employees are treated less favourably compared to the previous system. For years of service accrued prior to 1 January 2014, a different treatment of both categories of employees subsists; however, a state-sponsored compensation mechanism should abolish this unequal treatment for all blue-collar workers by 2017. The most important consequence of the new rules is the increased employment termination cost for employers that have a large workforce of blue-collar employees. One trend on the labour market is the increased use of temporary workers and fixed-term contracts. Although measures have been taken to mitigate the impact of the increased cost for employers to terminate contractual relationships with blue-collar workers, this new law on the unified status is likely to have consequences for M&A in Belgium, especially when restructuring procedures involving collective dismissals or closings are envisaged following an M&A transaction. Now that consensus has been reached on the harmonisation of blue-collar and white-collar employees’ termination rights, social partners have furthermore agreed to harmonise other outstanding issues over time (such as annual leave rights, social security, etc.). A number of collective
Belgium
114
employment issues should moreover be tackled by the next social elections in 2016. What the impact would be for M&A in Belgium, if any, is to be awaited.
Still in the pipeline is the amendment of the so-called ‘Renault Act’, which lays out the rules for restructuring procedures involving collective dismissals. While the Renault Act was intended to promote a greater involvement of the employees in a restructuring process, it suffers from its formalistic aspects. Depending on the outcome of the amendments to this Act, there will most probably be consequences for M&A in Belgium, and more in particular for restructurings that take place prior to or following an M&A transaction.
VIII TAX LAW
The Belgian tax landscape has experienced significant changes in the past years that are affecting M&A practice. A first set of changes have been introduced in the Omnibus Act of 29 March 2012, notably the new general anti-abuse provision, the new thin capitalisation rules, and a taxation of capital gains on shares, and in the Acts of 13 and 27 December 2012, thereby expanding the scope of the new taxation of capital gains on shares. Further changes have been introduced in the Omnibus Act of 30 July 2013, notably the new fairness tax, and in the Act of 28 June 2013, thereby increasing the withholding tax rate on liquidation bonus and introducing a new reduced withholding tax rate for SMEs.
Since financial year 2011–2012, Belgian tax law contains a strengthened, new general anti-abuse provision. One noticeable change in the terminology is that it allows the recharacterisation of ‘a legal act or series of legal acts’ for tax purposes (new provision), while only the ‘legal qualification’ of such legal acts was previously challengeable (old provision). The intention is to invalidate the restrictive case law of Belgium’s highest appeal court, the Court of Cassation. The Court’s case law requires the replaced legal qualification to have ‘similar legal consequences’ (which left the old provision largely ineffective). The new provision also moves towards EU case-law’s more economical approach by introducing the concept of ‘tax abuse’, which refers to the violation of the underlying legislative intent of a tax provision. The main escape for taxpayers is to demonstrate that the transaction is justified by economic motives other than the avoidance of tax. The actual trend thus creates legal uncertainty and implies careful scrutiny of economic motivations when structuring a deal.
Other major changes for M&A structuring are the extension of the anti-thin capitalisation provision to inter-company loans and the former exemption of capital gains realised on shares, which are continuously eroded since the past years. By enacting the anti-thin capitalisation provision, Belgium has aligned itself with the laws of neighbouring jurisdictions. As of 1 July 2012, interest paid on intra-group loans is not deductible any more above a 5:1 debt-to-equity ratio. The concept of ‘group’ refers to all companies that are connected, according to the meaning given by the Belgian Companies Code. A series of exceptions applies, notably on publicly issued bonds, loans from credit institutions and loans from leasing companies. This change affects not only M&A structuring but also existing financing structures and real estate financing. The other change relates to the capital gain on share exemption that has been noticeably
Belgium
115
revisited with respect to companies. The Omnibus Act of 29 March 2012 had already introduced a taxation of 25.75 per cent on capital gains realised without fulfilment of a one-year holding period. The Act of 27 December 2012 has now added a taxation of 0.412 per cent on capital gains realised after this holding period. This last taxation does not apply to SMEs. Capital gains realised on the shares of a company that is not considered to be subject to normal tax treatment are still not exempt and are subject to the normal corporate tax of 33.99 per cent.
Another major set of changes relates to the notional interest deduction (NID), which has been continuously eroded in recent years, and to the introduction of a new ‘fairness tax’, with a view to increasing the tax benefits of NID and tax losses. As of tax year 2013, it is no longer possible to carry forward excess NID. Furthermore, measures have been taken to reduce the NID rate and calculation base (see the Act of 17 June 2013 and 28 June 2013) and to remedy former breaches of the establishment freedom affecting companies with foreign permanent establishment (see the Act of 21 December 2013). For its part, the new fairness tax is due as from tax year 2014 by large companies (not by SMEs). The fairness tax is a separate tax of 5.15 per cent on a portion of the company’s dividend distributions. This portion aims at representing the part of the distributed taxable profit that has been offset against NID and has carried forward tax losses. The fairness tax is not deductible.
The last major changes relate to new withholding tax policies. As from January 2013, withholding tax on movable income has widely been standardised to a uniform rate of 25 per cent (with only few exceptions). In the same trend, the withholding tax rate on liquidation bonus has been upgraded from 10 per cent to 25 per cent as from 1 October 2014 (see the Act of 28 June 2013). SMEs currently only benefit from a reduced withholding tax rate of 20 per cent (second accounting year) or 15 per cent (after the third accounting years) for new cash contributions made after 1 July 2013 and if certain other restrictive conditions are met.
Other important changes have been introduced, notably, to the tax regime that applies to regulated investment companies and funds, the patent income deduction, the investment deduction, the permanent establishment’s definition, and the tax shelter legislation.
The foregoing shows that the M&A practitioner must be careful and that important opportunities offered by the Belgian tax system are still surviving the crisis.
IX COMPETITION LAW
Legislative reform proposals mentioned in the 2012 Belgium chapter of this publication were introduced in the Belgian parliament during the autumn of 2012 and were adopted as law on 3 April 2013. This reform entailed, on the one hand, the removal of the government’s power to approve transactions that have been prohibited by the Competition Authority and, on the other hand, the possibility for the Competition Authority to investigate and approve or prohibit mergers that have been notified to it.
As foreseen, the Belgian Competition Authority has been reshaped in accordance with the ‘independent agency’ model. The Competition Authority now both investigates and approves or prohibits mergers that have been notified to it, while safeguarding the
Belgium
116
separation between the investigative and decision-making powers. This transformation is primarily inspired by the desire to accelerate the investigations, and mostly the decisions regarding suspected violations of competition rules. Moreover, these changes should also contribute to a somewhat shorter clearance process for mergers.
X OUTLOOK
Following the influence of financial institutions’ M&A activities in this year’s statistics, it is expected that these will be less important as from 2014. While private equity appears to remain on the sidelines in M&A transactions in Belgium, industrial players will continue to be active in 2014, the next year, and the years to come. This trend will most probably be accentuated because of the increasing number of Belgian family businesses that are struggling with succession and are searching for buyers.
Although not often mentioned in the M&A statistics, the (unfortunate) trend of sale processes in the framework of a judicial reorganisation, or even bankruptcy, will also most probably continue in 2014. An important highlight in 2013 is the sale of the activities of Electrawinds, active in the production of green energy. This debacle in which many important Belgian M&A actors were active finally came to an end at the beginning of 2014.
Even though it appears that the Belgian economy in general will only grow slowly in 2014, the forecasts for 2015 show a slightly more important growth for the coming years. Belgian savers continue to behave in a responsible manner, and the country’s workforce is talented enough to deliver a stable economic growth in the years to come. On the whole, cautious optimism seems warranted.
893
Appendix 1
ABOUT THE AUTHORS
OLIVIER CLEVENBERGHStreliaOlivier Clevenbergh is mainly active in the field of M&A and corporate law. He deals with national and international acquisitions and disposals of shares or assets, private equity and venture capital transactions, mergers and joint ventures. He has considerable experience as regards restructurings and the acquisition of the assets of distressed companies.
He has also specific expertise in the field of retail and distribution law and is an acknowledged specialist in franchising.
Olivier Clevenbergh combines his transactional practice with a contentious practice covering the same areas. He therefore also represents clients in commercial and corporate litigation before the Belgian courts and arbitration tribunals.
Olivier was admitted to the Brussels Bar in 1989 and was admitted as a solicitor of England and Wales in 1995.
Before becoming partner at Strelia, Olivier Clevenbergh was a partner at Stibbe from 2000.
In addition to his client activities, Olivier Clevenbergh was managing partner of Stibbe Brussels from 1 January 2005 until 30 June 2011. He was the Secretary General of the Alliance between Herbert Smith, Gleiss Lutz, and Stibbe until 31 December 2011.
GISÈLE ROSSELLEStreliaGisèle Rosselle concentrates on corporate and corporate finance transactions, with particular experience in cross-border mergers and acquisitions, private equity, and capital market transactions involving a wide variety of industries, including banking, chemicals, paper and pulp, technology, and energy.
About the Authors
894
Gisèle Rosselle was admitted to the Brussels bar in 1994 and started her career at Allen & Overy (formerly Loeff Claeys Verbeke) in Brussels and in London. Before joining Strelia, she was a partner at the Brussels office of White & Case LLP.
She served as Chair of the Corporate and M&A Committee of the International Bar Association from 2009 through 2011, after having chaired the Private Equity Subcommittee of the International Bar Association’s Corporate and M&A Committee.
Gisèle Rosselle obtained an executive master’s degree at the INSEAD Business School in 2014.
CARL-PHILIP DE VILLEGASStreliaCarl-Philip de Villegas concentrates on corporate law, corporate finance transactions, and M&A in general.
Carl-Philip de Villegas obtained a bachelor’s degree at the Facultés Universitaires Notre-Dame de la Paix (FUNDP, currently Université de Namur), following which he obtained a master’s degree at the Katholieke Universiteit Leuven (KUL) in 2007. During the final year of his master’s programme, Carl-Philip de Villegas studied one year at the Ludwig Maximilians Universität (LMU) in München (Germany) through the Erasmus exchange programme.
Before being admitted to the Brussels Bar in 2008, Carl-Philip de Villegas also obtained a master’s degree in general management at the Vlerick Business School.
STRELIARoyal Plaza, rue Royale 1451000 BrusselsBelgiumTel: +32 2 627 00 90Fax: +32 2 627 01 [email protected]@strelia.com [email protected] www.strelia.com
