Over the last couple of years, more companies than ever listed at an Austrian stock-exchange were targeted in M&A transactions. Consequently, the Austrian Take-Over Commission has been frequently engaged in a new area of Austrian law. Furthermore, on 1 July 2002 an amendment to the Austrian Cartel Act entered into force, substantially modifying the merger control procedure applicable to M&A transactions.
A. Austrian Take-Over-Law
1. Take-over Bids
The Austrian Take-Over Act regulates voluntary public take-over bids and sets out the conditions that trigger compulsory take-over bids. The Act applies to
- offers for the acquisition of shares and other transferable securities entitling to a share in the profits or the liquidation proceeds as well as other securities which carry stock option rights (the “securities”)
- provided that the securities are admitted to the official market or over-the-counter trading at an Austrian stock exchange and
- have been issued by a public limited company (Aktiengesellschaft) whose registered seat is in Austria.
2. Voluntary Take-over Bids
The provisions concerning voluntary take-over bids apply whenever an individual or a legal entity publicly launches an offer addressed to the holders of securities in a public limited company, as defined above, to acquire such securities for cash payment or in exchange for other securities.
In order to prevent early and irregular disclosure of his intention to launch a take-over bid, which may cause market distortion, the (potential) bidder is subject to a confidentiality obligation. The (potential) bidder is required to publicly notify its deliberations or intention to make a public bid or to effect a set of facts which would require it to make a bid if there are substantial movements in the price of securities or rumours and speculations concerning the bid in the market (and there are reasonable grounds for concluding that these originate in the preparation of the bid, the plans of the offerer to make such a bid or in the purchase of shares by the offerer). A similar disclosure requirement applies to the corporate bodies of the target company which have been contacted by the (potential) bidder.
For guidance during the entire take-over procedure, the bidder must appoint an appropriate independent expert to examine the completeness and legality of the offer document. The offer document must contain detailed information concerning the bid. The bidder must submit the offer document, the written report and the final confirmation of the expert to the Take-Over Commission within ten trading days as from disclosure of his intention to launch a take-over bid (trading days being defined as days on which the stock market operates). Additionally, a bidder whose registered office or domicile is outside Austria must nominate an Austrian resident representative (attorney-at-law, notary, certified public accountant, bank or financial institution).
The bidder must publish the offer document together with the confirmation of the expert not earlier than the twelfth and not later than the fifteenth trading day after submission to the Take-Over Commission and must notify the envisaged publication of these documents to the target´s board of directors and the chairman of the supervisory board prior to publication. Within ten trading days after publication, the target´s board of directors (which also has to engage an expert) must submit to the Take-Over Commission and the works council its opinion on the offer, the opinion, if any, of the supervisory board and the assessment of the expert and must publish these documents immediately after having notified the Take-Over Commission.
The time period for acceptance of the take-over bid must not be less than 20 and not more than 50 trading days. It can terminate, at the earliest, 15 working days as from publication of the opinion of the target´s board of directors. On expiry of the acceptance period, the bidder must publish the result of the take-over bid without undue delay.
For ease of reference, see the following chart indicating the time table for a voluntary take-over proceeding.
Please open the PDF-file.
The bidder may improve the terms of the offer. Such improvements also apply to shareholders who have already accepted the offer. After disclosure of the intention to launch a take-over bid or its notification, the bidder and the legal entities acting concertedly with the bidder may not sell securities in the target. Should they carry out transactions involving securities in the target on terms better than those of the take-over bid, the take-over bid must match or better those terms.
In case of a competing take-over bid, the shareholders of the target having already accepted the first bid may revoke their acceptance in order to accept the concurrent offer.
A bidder, whose take-over bid failed to be implemented, must not launch another take-over bid to acquire securities in the same target for a period of one year as from publication of the (negative) result of his first bid.
3. Compulsory Take-over Bids
A compulsory take-over bid must be launched if a controlling interest in the target is to be acquired. A controlling interest is defined as an interest enabling its holder (the bidder), alone or together with parties acting in concert with him, to exercise, directly or indirectly, a controlling influence over the target. If the bidder (alone or together with parties acting in concert) holds the majority of voting rights or is entitled to appoint or remove the majority of the members of the board of directors or the supervisory board, he by definition holds a controlling interest.
The Take-Over Commission is authorised to determine by administrative ordinance further circumstances that indicate the existence of a controlling interest. In this context, reference is made to the First Take-Over Ordinance and the Second Take-Over Ordinance of the Take-Over Commission, dated 9 March 1999 and 21 February 2000, respectively. According to the First Take-Over Ordinance, a controlling interest is inter alia presumed, if the bidder, alone or together with the parties acting in concert with him, holds 30 % of the voting rights.
The procedure differs from that applicable to voluntary take-over bids as follows: within 20 working days after the acquisition of a controlling interest the bidder is obliged to launch a take-over bid for all remaining securities in the target. The consideration must be offered in cash. It has to amount at least to the average stock exchange price during the preceding six months and must not be less than 85 per cent of the highest consideration paid by the bidder (or an entity acting in concert with the bidder) during the previous 12 months.
The above provisions also apply to voluntary take-over bids which are structured in a way that, if fully accepted, they could result in the bidder holding a controlling interest. Such take-over bids are subject to the mandatory condition that, as a result of the take-over bid, the bidder together with entities acting in concert holds more than 50 per cent of the securities of the target.
A violation of the above obligations may give rise to the following sanctions:
- suspension of the voting rights or other rights (e.g. pecuniary rights, if so ordered by the Take-Over Commission) of the bidder;
- right of the seller to rescind the agreement; and/or
- administrative fines of between Euro 3,600 and Euro 36,000.
B. Merger Control Law in Austria
Due to the "One-Stop-Shop"-principle, Austrian merger control law only applies if a concentration does not have a Community dimension and therefore does not fall under the European Merger Control Regulation.
Sec 41 of the Austrian Cartel Act qualifies, in particular, each of the following scenarios as a concentration:
- the direct or indirect acquisition of shares in a company if this leads to a participation interest of 25 per cent or 50 per cent or more;
- any other combination of enterprises which enables an entrepreneur to directly or indirectly exercise a controlling influence over another enterprise.
2. Relevant Turnovers
The thresholds triggering the notification requirement under the Cartel Act are as follows:
- the undertakings concerned had a combined global aggregate turnover of Euro 300 million or more,
- a total turnover of Euro 15 million in Austria and
- at least two of these entrepreneurs and/or enterprises each had a global turnover of Euro 2 million.
The relevant turnover is generally defined as the turnover of the business year preceding the one of the concentration. In the turnover calculation, external turnovers (thus, with the exception of intra-group turnovers) of companies affiliated with either party in a manner described in sec 41 Cartel Act also have to be considered.
3. Notification Procedure and Timing Issues
A concentration exceeding the turnover thresholds must be notified to the Cartel Court before implementation. Joint notification by all entrepreneurs is possible. Copies of the notification are supplied to the Official Parties in the cartel proceedings, i.e. – since 1 July 2002 – the Federal Competition Authority (Bundeswettbewerbsbehörde) and the Federal Cartel Attorney (Bundeskartellanwalt).
Within four weeks of delivery of such copies, the Official Parties may request the Cartel Court to review and further investigate the concentration. If no such request is filed within this four-weeks´ period, the Cartel Court must promptly issue a confirmation of such fact. Upon issuance of this confirmation, the concentration is cleared. The former Official Parties, i.e. the Law Office of the Republic of Austria, the Federal Economic Chamber, the Federal Chamber of Labour and the Presidents´ Conference of the Austrian Chambers of Agriculture are entitled to comment on the concentration but can no longer institute a review.
If further investigations are initiated due to a request, s concentration may be prohibited only within five months after receipt of the notification by the Cartel Court. If the five-months period lapses without the Cartel Court prohibiting the concentration, the Cartel Court must issue a confirmation clearing the concentration.
Clearance of the concentration may also be subject to compliance with certain restrictions and conditions imposed by the Cartel Court. Such restrictions or conditions may be modified or revoked if the circumstances having mandated them should subsequently change.
Since 1 July 2002, the Cartel Court may impose measures mitigating the effects of the concentration even after clearance, in case the clearance was obtained due to an incomplete or incorrect notification or the undertakings concerned violate a condition imposed by the Cartel Court.
4. Material Assessment
If a review of the merger is requested, the Cartel Court may either (i) declare that there is no concentration in terms of the Cartel Act, (ii) prohibit the concentration or (iii) not prohibit the concentration. The Cartel Court will prohibit a concentration if it creates or strengthens a dominant market position as defined in sec 34 Cartel Act.
Even if the Cartel Court could justly prohibit the concentration on account of the dominant position of the enterprises concerned, the Cartel Court must rule not to prohibit the concentration if
- it is to be expected that as a consequence of the concentration, the benefits of an improvement in competitive conditions will outweigh the disadvantages of the dominant market position, or
- the concentration is justified from the view of the Austrian national economy and is necessary to maintain or increase the international competitiveness of the undertakings concerned.
Since 1 July 2002, the Cartel Act no longer provides for criminal sanctions against undertakings (and their officers) implementing a concentration before its clearance or violating restrictions or conditions imposed by the Cartel Court. Instead, the Cartel Court may impose pecuniary fines up to an amount of 10 % of the turnover generated by the undertaking concerned in the preceding business year, a sanction which is seen to be much more efficient than criminal penalties.
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