How does a takeover bid (takeover bid) work in the stock market?

(BFM Bourse) – In order to renationalize EDF, the State, which owns 84% ​​of the energy company, announced its intention to launch a takeover bid (OPA) for the remaining capital without more on this. This type of operation is not very unusual, the Paris market is often driven by takeover bids. But in other words, how exactly is a takeover?

This is the saga of the summer. The government will return EDF to its flock, by buying the next fall of the minority share (about 16%) of the energy company’s capital that is still in circulation on the Paris market at a price of 12 euros per share. Capital offers of listed companies are an important part of life on the Parisian coast. In the current case, with the State in the driving seat, the EDF renationalization project has a specific character.

However, the Government cannot override a certain formalism and regulation to which these operations are subject. And not all takeover bids achieve the same goal. Here’s everything you need to know to fully understand how these offers work.

What is a takeover bid?

In general, a public offer consists of a proposal issued by a company (whether it is itself listed or not) to the shareholders of a listed company to withdraw their shares accordingly in variable terms, in accordance with a regulated procedure and controlled by the stock exchange authorities. The term OPA (public purchase offer) is often used, through metonymy, to designate all public offers. In fact, financial law distinguishes several types.

What are the different types of public offerings?

Stricto sensu, we are talking about OPA (public purchase offer) when the payment is made in cash (which is cash). An offer paid for by an exchange of securities (X shares of one company against Y shares of another) is an OPE (public exchange offer). If the promoter of the offer is already the majority shareholder of the target company, the process is shortened and simplified, the offer then takes the name of OPAS or OPES (public purchase offer or simplified exchange).

If the initiator offers both securities and a cash payment for each share presented in its offer, it is a joint offer. In addition, the buyer can agree to pay in shares or in cash at the choice of the shareholder who sells his shares, the operation is called an alternative offer (if the buyer does not set any limit of the amount) and multi- option offer (if the buyer leaves the choice while limiting for example the money part to a certain proportion of the total value of the offer).

Can a company buy back its own capital?

A company can launch an offer of a fraction of its own capital: this is a public takeover bid (OPRA). In this case, the initiator will buy back all the securities presented to it if the total presented to OPRA is lower than the target level. If the securities presented represent more than this level, he gets only part of it (each sales order is reduced in proportion to the amount requested by the acquirer). . To give an example, if a company proposes to buy back its own capital within the limit of 20,000 shares and 25,000 will be carried, each order will be reduced by 20% regardless of its value: 20 part will be taken from the one who brought 25. , 80 from the one who brought 100, 4000 from the one who brought 5000, etc.

Is it voluntary or mandatory?

Public offers can be voluntary or mandatory. A company may indeed decide on its own that it has a strategic or financial interest in controlling another. He launched a voluntary offer. It should be noted that the procedure is strict in the same way that whether or not it benefits from the approval of the board of directors of the target (friendly or hostile offer).

But in some cases, it is the regulations that oblige the launch of a public offer. The main reason is to cross the threshold of 30% of the capital: by crossing this level, a shareholder must offer others to buy back their shares if they want. In all cases, the price offered must be at least equal to the highest price paid by the promoter in the last twelve months (usually this is the price at which the transaction that caused the crossing was made). But the AMF provides for certain exceptions from the obligation to submit an offer, for example if there is a passive threshold crossing (not due to the purchase of additional securities but by reducing the number of securities that make up the capital) or if the The crossing follows the capital increase of a company in proven financial difficulty.

When does a public offering take place?

The announcement of a draft offer (must include the price and/or the parity offered) launches the so-called pre-offer period, which runs until the deposit and during which the sponsor has no right to intervene in the title. Any person who increases their stake by more than 1% must also notify the AMF. Once the project is submitted, the AMF departments have ten days to review it and declare it compliant, request a change, or reject the project. If the authority gives the green light, the offer will be opened three days after declaring compliance, for a minimum period of 25 days that can be extended by the stock market watchdog. Throughout the offer period, the initiator can also raise the price (an example of others, Vivendi did it during its offer for Gameloft). All securities will be paid at the new price, even those contributed before the upgrade.

Why do we need to reach a “success standard”?

Inspired by Anglo-Saxon law, the AMF imposed a success rate of 50% for several years. If the potential buyer does not meet this threshold after his offer, the offer is void, and the securities offered will be returned. In the case of a voluntary offer, the acquirer can also set its own preconditions (for example, the fact of obtaining the approval of the competition authorities if it is necessary to acquire the target company, or -ot a certain threshold of voting rights) . At this stage, each shareholder remains free to offer or not their shares in an offer, whether it is a takeover bid, public exchange offer or OPRA.

End the applause

At the end of any public offer, if the securities not offered in the offer represent less than 10% of the capital and voting rights, the majority shareholder may implement, within three months, a compulsory withdrawal of these titles. Minority shareholders are forced to give up their shares in the offer and get paid for it. The company’s shares will then be delisted from the market. An independent expert is appointed by the company concerned by the offer to issue a fair opinion on the squeeze-out price.

On the other hand, if the promoter of the offer does not implement a squeeze-out within a three-month period, he can launch a public buy-out offer (OPR) later. In this case, the offer price may be different from that of OPA or OPE.

Sabrina Sadgui – ©2022 BFM Bourse

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