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The International Comparative Legal Guide To

Mergers & Acquisitions 2011

A practical cross-border insight into mergers & acquisitions
Published by Global Legal Group with contributions from: Albuquerque & Associados Arzinger Ashurst LLP Bech-Bruun Boss & Young, Attorneys at Law Brando Teixeira Sociedade de Advogados Cardenas & Cardenas Abogados Cravath, Swaine & Moore LLP Debarliev, Dameski & Kelesoska Attorneys at Law Dittmar & Indrenius Elvinger, Hoss & Prussen Eubelius Fenech Farrugia Fiott Legal Garrigues Georgiades & Pelides LLC Gide Loyrette Nouel Goltsblat BLP Guyer & Regules Herbert Smith LLP Kalo & Associates Koep & Partners Lenz & Staehelin Mannheimer Swartling Advokatbyr AB Meitar Liquornik Geva & Leshem Brandwein Nishimura & Asahi Pachiu & Associates PRA Law Offices Schoenherr Selvam LLC Skadden, Arps, Slate, Meagher & Flom LLP Slaughter and May Steenstrup Stordrange DA Stikeman Elliott LLP SZA Schilling, Zutt & Anschutz Udo Udoma & Belo-Osagie uri i Partneri law firm

Chapter 16


Steen Jensen

Lisa Reinholt

1 Relevant Authorities and Legislation

1.1 What regulates M&A?


What are the principal sources of liability?

The primary legal regime for public takeovers in Denmark is the Danish Securities Trading Act (the STA) as well as orders promulgated pursuant thereto, most importantly the Takeover Order implementing the Takeover Directive (2004/25/EC). The STA rules on prospectuses and listing of shares are relevant if share consideration is offered. The Danish Companies Act (the DCA) governs public takeovers by way of statutory mergers and contains certain limitations as to how a takeover or a defensive strategy may be structured. The Danish Financial Supervisory Authority (the FSA) has been the supervisory authority in respect of takeovers in Denmark since 1 September 2006.
1.2 Are there different rules for different types of public company?

Violation of the Takeover Order, including in particular misrepresentations or omission of information in the offer document, may entail financial penalties. Civil claims may be brought against the offeror, the target company or its directors personally based on the Danish rules on tort, although litigation is mostly absent in Danish takeover transactions. Conduct amounting to market abuse or insider trading may give rise to financial penalties or criminal liability.

2 Mechanics of Acquisition
2.1 What alternative means of acquisition are there?

Under the Takeover Order the acquisition of a Danish listed company may be structured as a voluntary offer with no or little prior stakebuilding or a prior stakebuilding followed by a mandatory offer. Alternative means of acquisitions are: (i) asset deals/spin-offs; or (ii) statutory mergers, including cross-border mergers pursuant to the DCA, which implements the EU Directive on cross-border mergers (2005/56/EC). Acquisitions of Danish listed companies by way of a statutory merger are extremely rare. Unlike some common law jurisdictions, Danish law does not provide for structures involving the courts such as schemes of arrangement.
2.2 What advisers do the parties need?

The Takeover Order applies to takeovers of Danish and non-Danish target companies which have shares admitted to trading on a regulated market (primarily NASDAQ OMX Copenhagen (OMX)) or an alternative market place (i.e. First North) in Denmark. If the shares are also listed in another EEA Member State, the Takeover Order applies if the initial listing took place in Denmark or if the securities were listed at the same time on different regulated markets and the FSA has been appointed as the competent supervisory authority by the target company.
1.3 Are there special rules for foreign buyers?

With a few exceptions, there are no special rules for foreign buyers, and no restrictions apply to foreign investment in Denmark.
1.4 Are there any special sector-related rules?

The direct or indirect acquisition of 10% or more of the share capital or the voting rights or such interest which makes it possible to exercise a controlling influence on the management of a financial undertaking (such as banks and companies within the insurance and securities trading industry) is subject to prior approval by the FSA. This applies whether the acquirer is Danish or foreign and whether the acquirer is acting alone or in concert with other parties.

The parties will always engage legal counsel and financial advisers. Accountants may be engaged to analyse the expected posttransaction equity structure based on outside-in analysis of the target company. The target board will typically but is not required to obtain a fairness opinion from its financial adviser to support the required opinion of the target board on the offer. In terms of settlement, the acquirer will need to engage a bank to handle acceptances, clearance and settlement with the issuing bank and the Danish Securities Centre and settlement in a subsequent compulsory acquisition/squeeze-out.
2.3 How long does it take?

The time frame stipulated in the Takeover Order is up to 14 weeks. The offer document must be published within 4 weeks from the date


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of announcement of the offerors decision to make an offer or the date where the offeror has acquired control of the target company, see question 5.3. The offer period must be at least 4 weeks and not more than 10 weeks. Amendments made within the last 2 weeks of the offer period extend the offer period by 2 weeks; however, not beyond 10 weeks. If anti-trust approval is needed, the offer period may be extended for up to a total of 4 months from the time where the offer document was published. If a voluntary offer is to be followed by a squeeze-out procedure, the time frame will be extended by a minimum of 4 weeks.
2.4 What are the main hurdles? 2.9 What documentation is needed?

target company regarding bonuses and similar benefits from the time when negotiations with the target company are initiated. This rule limits the possibility of retaining management on a committed basis. The target board must present its position on the offerors strategy for the company and the expected impact on employment to the employee representatives, allowing for the representatives to provide and make public (through the target board) a separate statement on this impact. The target company may have adopted rules on internal consultation procedures to be followed in case of a takeover.


The main hurdle is to obtain the acceptance level needed to effectively gain control of the company or to allow a subsequent squeeze-out of remaining shareholders and delisting of the company, see question 2.13. Another main hurdle is often to structure how to retain management as restrictions apply in this respect, see question 2.8. Before making the public offer, the main hurdles are obtaining due diligence access, negotiating financing terms, obtaining access to and negotiating offer terms with the target board and often seeking support from larger shareholders.
2.5 How much flexibility is there over deal terms and price?

Under the Takeover Order, the offeror making a voluntary offer is afforded a great amount of flexibility in determining the deal terms, including (to some extent) setting out conditions for the offer, the form of consideration and the offer price. However, the offeror must afford equal treatment to all shareholders within the same class of shares. For mandatory offers very little flexibility is available.
2.6 What differences are there between offering cash and other consideration?

The documentation needed to complete the takeover is: (i) an announcement by the offeror of its decision to make an offer or that the offeror has acquired control of the target company; (ii) the offer document containing all information on the financial and other terms of the offer necessary for the shareholders to make an informed decision; (iii) a press advertisement providing a brief account of the offer and information on how to obtain a copy of the offer document (website and/or address); (iv) a public statement from the target board to the shareholders of its reasoned position on the offer including the considered impact of the offer on the interests of the company; (v) an announcement of the result of the offer; and (vi) a prospectus or equivalent document (see question 2.6), if applicable. A supplementary offer document and a revised statement from the target board are required if the offeror amends (only amendments in favour of the shareholders are permitted) or waives any of the conditions within the offer period.
2.10 Are there any special disclosure requirements?

In Denmark, takeovers have only been made on the basis of cash or shares or a combination thereof. Mandatory offers (see question 5.3) must include a cash alternative if the shares offered are not freely tradable on a regulated market, or if the offeror has acquired 5% or more against cash payment within 6 months prior to the offer. If shares are offered as consideration, this may trigger an obligation to publish an EU Prospectus Directive compliant prospectus or at the choice of the offeror to issue an equivalent document containing information similar to that of a prospectus. The equivalent document is often the preferred solution, as the disclosure can be included in the offer document, without necessarily being Prospectus Directive compliant.
2.7 Do the same terms have to be offered to all shareholders?

The Takeover Order sets out the requirements for disclosure to be made in the offer document. Note that the offeror must disclose in the offer document whether dividends from the target company are intended to be distributed in the 12-month period following the takeover, including the type and size of the distribution. If such disclosure is not made, the possibility of making distributions within the 12-month period is limited. No disclosure of financial information is required in the offer document, but historical financial information in summary form is typically included. If a prospectus is required, the disclosure requirements are extensive and include detailed information regarding the business of the offeror and the shares offered. Also, extensive financial information accompanied by statements from the accountants must be included in the prospectus.
2.11 What are the key costs?

The same terms must be offered to all shareholders within the same class of shares. The general principle of equal treatment also entails proportionate equal treatment of the different classes of shares, i.e. when determining the price for different classes of shares.
2.8 Are there any limits on agreeing terms with employees?

The key costs in a takeover process are fees to financial advisers and legal advisers.
2.12 What consents are needed?

The Takeover Order prohibits the offeror from entering into or amending agreements with directors or the management of the

The primary consents needed are regulatory approvals from the FSA in respect of the documents to be published according to the Takeover Order (offer document, offer advertisement; supplementary offer document and offer advertisement and prospectus, if relevant).




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Anti-trust approvals may be needed as well as other sector-related approvals (e.g. financial undertakings, see question 1.4).
2.13 What levels of approval or acceptance are needed?

on a recent amendment of the STA, disclosure is required if confidentiality is not maintained even though the takeover has not become a reality at that time. Further, the rules of the OMX requires the target company to make a disclosure if true rumours (not only pure speculations) appear in the press regarding a takeover in which the target is involved. Access to negotiation is solely within the discretion of the board.
4.3 What will become public?

Ownership of more than 50% of the votes gives control of the target board. Ownership of at least 2/3 of all the votes and the share capital is the recommended minimum control threshold as it gives control over most changes to the articles of association. Squeezeout and de-listing is typically the ultimate aim, which requires ownership of more than 9/10 of all shares and votes. Delisting of the company may be applied for once the squeeze-out has been initiated.
2.14 When does cash consideration need to be available?

The offeror must ensure to have certain funds available at settlement prior to announcing the offer. No formal requirements exist on how to document this requirement. According to market practice, settlement is made within 3 days following announcement of the result of the offer.

The Takeover Order does not require a disclosure of the track of contacts between the target board and the offeror. Thus, only information which the target board elects to include in its reasoned statement or in a voluntary disclosure announcement will become public. The offeror can complete the offer, even if he holds inside information provided by the target company if such inside information has been reflected in the offer price. However, no purchases outside the offer can be made in this situation.
4.4 What if the information is wrong or changes?

3 Friendly or Hostile
3.1 Is there a choice?

Once published, the offer is binding. However, the Takeover Order provides that the offeror may revoke the offer if a competing offer is made, provided that this is specifically stated in the offer document. In respect of voluntary offers, the offeror may further revoke the offer if this is specifically provided for in the offer document by stating the circumstances in which the offer may be revoked. These circumstances must, as any other condition made to the offer, be objective, i.e. beyond the control of the offeror. In the event of material changes to the information published, which cannot be considered terms as such and which are necessary to enable the shareholders to make an informed assessment of the offer, must be announced as soon as possible.

Yes. However, Denmark has only experienced a few hostile bids.

3.2 How relevant is the target board?

Support from the target board is very important. It is the gateway for conducting due diligence beyond outside-in due diligence and more importantly a supportive target board is normally deemed necessary for obtaining sufficient shareholder acceptance of the offer.
3.3 Does the choice affect process?

5 Stakebuilding
5.1 Can shares be bought outside the offer process?

See question 3.2.

4 Information
4.1 What information is available to a buyer?

If no due diligence access is granted, the information available to the offeror is information already published by the target company and other publicly available information. This includes announcements and financial statements published by the target company through the OMX. Information memoranda/prospectuses used in share offerings by the target company will be available on the FSAs website. Corporate information and documents and annual accounts can be retrieved or requested from the DCCA.
4.2 Is negotiation confidential and is access restricted?

Shares may be bought in the market both within and outside the offer process. After the launch of the offer document, the principle of equal treatment provides that if open market purchases are made on more favourable terms, including price, the same terms and price must be offered to the shareholders comprised by the offer. Acquisition of shares outside the offer may be prohibited to the extent that the offeror is in possession of inside information.
5.2 What are the disclosure triggers?

Once an acquirer has acquired a controlling stake or an offeror has decided to make a voluntary offer, the acquirer/offeror must make a public announcement to this effect and submit the announcement to the FSA and the OMX. Moreover, the acquirer/offeror must submit a major shareholding notification to the company and the FSA of a direct or indirect interest representing 5% of the shares or the voting rights of the company. Disclosure is also required if the interest rises above or falls below the level of 5, 10, 15, 20, 25, 50 or 90% or 1/3 or 2/3 of the shares or the voting rights.

Negotiations with the target company (and/or shareholders) may be conducted in confidence, provided that the target company is able to maintain confidentiality. The current position under Danish law is that disclosure is required when the takeover becomes a reality (i.e. when the offeror resolves to make an offer). However, based


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5.3 What are the limitations and implications?

short-term and long-term collective shareholder interest. In order not to fetter its future exercise of discretion, a target board can presumably not agree to restrictions on asset sales, but a voluntary offer can contain conditions to this effect.
6.3 Can the target agree to issue shares or sell assets?

A duty to make a mandatory offer is triggered upon a transfer of shares whereby the acquirer obtains control by way of a controlling influence.


The prima facie rule is that control is established if the acquirer owns more than 50% of the voting rights in the target company, unless it can be clearly demonstrated that such ownership, in exceptional cases, does not constitute a controlling influence (e.g. voting caps). Where an acquirer holds less than 50% of the voting rights, control is established if the acquirer has: (i) (ii) (iii) the power to exercise more than half of the voting rights by virtue of an agreement with other investors; the power to control the financial and operating decisions of the target company under any articles of association or agreement; the power to appoint or remove a majority of the members of the board of directors and the board has control of the business; and ownership of more than 1/3 of the voting rights and the de facto majority of votes at general meetings and thus the actual controlling influence on the target company.

As a general rule it will not be considered to be in the collective shareholder interest if the target board issues shares or disposes of assets to the offeror.
6.4 What commitments are available to tie up a deal?

The target board can commit to recommend the offer within a matter of a few days subject to subsequent developments, e.g. an unsolicited better offer.


7 Bidder Protection
7.1 What deal conditions are permitted?

The 1/3 threshold is to be interpreted strictly, i.e. pursuant to FSA practice 33.28% of the votes will not trigger the mandatory offer rules. The existence and effect of potential voting rights, including rights to subscribe for and purchase shares that are currently exercisable or convertible, are aggregated when assessing whether the thresholds have been reached. Further, voting rights held by parties acting in concert with the acquirer are aggregated for this purpose. The obligation to make a mandatory offer is triggered even though the controlling interest is acquired through a public offer or directed issue of new shares in the company. Although the STA does not purport to include situations where control is obtained by virtue of a merger, the practice of the FSA has proven to be unclear. A mandatory offer must be made as soon as possible and no later than four weeks after the obligation has been triggered. The Takeover Order sets out detailed rules for the mandatory offer, e.g. the minimum price and the form of consideration (only cash and/or shares). No conditions are permitted. Limited exemptions exist for securities dealers, credit institutions and investment companies in respect of market-maker and underwriting agreements. Further, the FSA has granted exemptions from the takeover rules in situations where a shift in the control has been the only alternative to avoiding a bankruptcy of the target company. If the stake building is made in conjunction with an offer which observes the requirements applicable to voluntary offers, the mandatory offer rules will not be triggered.

Voluntary offers can be made on a conditional basis, provided the fulfilment of a condition can be assessed objectively and provided fulfilment or non-fulfilment is beyond the offerors control. Typical conditions include: (i) obtaining more than 9/10 of the votes and the capital of the target company; (ii) the absence of changes in the target companys capital structure and articles of association; (iii) the obtaining of antitrust clearances and other necessary approvals from public authorities; (iv) the absence of new legislation, court orders etc. obstructing the offer; and (v) no material adverse change. The offeror is entitled to waive or reduce conditions if this is provided for in the offer document.
7.2 What control does the bidder have over the target during the process?

The offerors liaison with the target board requires a non-disclosure agreement and a stand-still obligation on the offeror. As to the offerors ability to influence the process, the offer price is an important tool in practice. Section 6 illustrates the limited extent to which the target can commit itself.
7.3 When does control pass to the bidder?

6 Deal Protection
6.1 Are break fees available?

Three days after the lapse of the offer, the offeror must announce the level of acceptance. Control passes at that point, provided the conditions are met (or waived).
7.4 How can the bidder get 100% control?

See question 3.2. Break fees are not specifically regulated, but due to general legal principles, such as the principle that directors are not permitted to fetter the future exercise of their discretion, the clear point of departure is that break fees are not available.
6.2 Can the target agree not to shop the company or its assets?

8 Target Defences
8.1 Does the board of the target have to tell its shareholders if it gets an offer?

A no-shop agreement limited to prevent the companys active solicitation is permissible, provided that it is entered into in the

When in receipt of an offer or indication of interest, the target board must act in the collective shareholders interest and ensure that no individual interests of shareholders or management are pursued.




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The target board is not obliged to inform shareholders of an approach; see, however, question 4.2.
8.2 What can the target do to resist change of control?

9 Other Useful Facts

9.1 What are the major influences on the success of an acquisition?

Defensive devices may exist in the articles of association of the target company. Most importantly, the share capital of many Danish listed companies is divided into different classes of shares, typically A shares and B shares. A classic scenario is that the B shares are listed on the OMX, while the (unlisted) A shares remain in the hands of the original shareholders. As the A shares often carry 10 times as many votes per share as the B shares, 9.1% of a companys share capital may hold the majority of the votes in the company. Another common defensive device is voting caps and, less commonly, ownership caps or other defensive devices. Denmark has opted out of the non-frustration regime and the breakthrough regime under the Takeover Directive, but the DCA provides for an opt-in procedure whereby defensive devices may be suspended. However, this procedure requires a resolution to be made by the shareholders. The right to amend the articles of association is vested in the general meeting of shareholders, whereas the target board, with very few exceptions, may not make any amendments on its own. Thus, all amendments to a companys articles of association, including for defensive purposes, must be approved by the shareholders. Another obstacle is the fact that many Danish companies are controlled by foundations which under their constituent documents may be obliged to maintain control at all times. As to the target boards ability to resist a takeover, there are no provisions in Danish statutory law or in Danish regulations setting forth the duties of the target board and the management when faced with a hostile takeover attempt. The provisions of the DCA dealing with directors and management liability are based on the general standard in Danish tort law being a rule of negligence based on a prudent and reasonable person test. In that regard it is important to note that Danish company law also imposes on the target board a duty to act loyally towards all shareholders and in the short-term and long-term interest of all shareholders and thus prohibits the target board and the management from acting in a fashion that is clearly likely to provide certain shareholders or others with an undue advantage at the expense of other shareholders or the company. There is no bright line in Danish law between events where pursuit of interests other than that of the shareholders is permissible (e.g. the impact on employees) and where such pursuit violates the duties owed to the shareholders.
8.3 Is it a fair fight?

Obtaining the support of the target board as well as the major shareholders of the target company is essential for the success of an acquisition as this will facilitate convincing the shareholders to accept the offer. The communication strategy and skills of the offeror (and of the convinced target board) are key.
9.2 What happens if it fails?

There are no restrictions in terms of submitting a new offer.



10.1 Please provide, in no more than 300 words, a summary of any relevant new law or practices in M&A in Denmark.

On 1 March 2010 the first stage of a new Danish Companies Act came into force. The new Danish Companies Act aims at providing more flexibility in terms of the organisation of the company and the relationship between shareholders, e.g. issue of shares without voting rights and unlimited differentiation of voting rights between different classes of shares and the possibility to waive certain formality requirements upon the consent of all shareholders. The second stage of the new Danish Companies Act is expected to come into force on 1 March 2011. Most importantly, new rules will come into force which abandon the current prohibition on the target company providing financial assistance to the acquirer in connection with a takeover. However, financial assistance from the target company is subject to certain conditions being met, e.g. approval from shareholders, the target board must provide a credit rating and limitation of the funds that may be used for financial assistance. The prohibition against shareholder loans still exists. Whether the new financial assistance regime is an attractive alternative to a debt push-down structure will depend on the effect on the financial ratios and the tax position. Recent changes in the STA and the rules of OMX entails that the target company is required to make a disclosure of ongoing negotiations with a potential offeror on a possible takeover in case of leaks/true rumours in the press about the possible takeover. This requirement applies even though the offeror has not yet decided to actually make an offer. Thus, it is extremely important to effectively handle inside knowledge in the process on both sides in order to limit the risk of leaks.

Apart from the rules under the Takeover Order, no rules designed to create a level playing field for competing offerors exist. Differentiation in treatment of offerors is permitted, including as regards access to information during due diligence. Whether this is fair or not is not an issue in the Danish market.


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Steen Jensen
Bech-Bruun Langelinie All 35 DK-2100 Copenhagen Denmark

Lisa Reinholt
Bech-Bruun Langelinie All 35 DK-2100 Copenhagen Denmark


Tel: Fax: Email: URL:

+45 2526 3346 +45 7227 0027

Tel: Fax: Email: URL:

+45 72 27 3548 +45 72 27 0027

Steen Jensen specialises in securities law and securities lawrelated transactions, such as listings, private placement and delisting and takeover offers. He has been involved in numerous structures for public acquisition processes, flotations as well as other ECM work. Clients are national and international banks, financial advisers and major Danish corporates. Steen Jensen holds a Master of Laws from the University of Copenhagen and a Master of Laws from the University of London.

Lisa Reinholt is a senior associate at Bech-Bruuns Copenhagen office. Lisa Reinholt specialises in securities law and securities law-related transactions and has experience in public take-overs, initial public offerings, rights issues and other ECM work, securities regulation and compliance. Lisa Reinholt holds a Master of Laws from the University of Copenhagen.

Bech-Bruun is a leading Danish full-service law firm with offices in Copenhagen and Aarhus. Bech-Bruun has a strong international profile based on its longstanding experience in working cross border in conjunction with leading foreign law firms on a non-exclusive basis. Practice areas include M&A Corporate, Capital Markets, Tax, Restructuring, EU and Competition, Public law, Construction and Real Estate, Environmental, TMT, Labour law, Transport and Insurance.




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The International Comparative Legal Guide to:

Mergers & Acquisitions 2011

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