5.11 Shares as a Means of Payment 259This can be illustrated by Barclays’ offer for ABN AMRO in 2007. The offer was condi-
tional on Barclays obtaining at least 80% of the issued ordinary share capital of ABN
AMRO as at the closing date of the offer on 4 October 2007. This condition was not ful-
filled and, as a result, Barclays withdrew its offer. ABN AMRO paid Barclays a break-up
fee of €200 million.
Fourth, the firm should ensure that it can assess the total cost of the share ex-
change offer. In particular, exceeding a certain threshold may trigger an obligation
to make an offer for the remaining shares, a squeeze-out right, and/or a sell-out
right. Whereas the offeror is free to propose the share exchange ratio under a vol-
untary offer, the offeror may have a legal obligation to pay at least a minimum
amount under a mandatory offer. For this reason, the firm should ensure that the
price that it pays for the target’s shares before or during the share exchange offer
and the share exchange ratio will not increase the minimum price that it will have
to pay for remaining shares afterwards.
This can be illustrated by the Directive on takeover bids. According to the Takeover Bid
Directive, a shareholder who has obtained control of a listed company must make a manda-
tory bid as a means of protecting the minority shareholders of that company.^623
The minimum price that the shareholder must pay is the “equitable price”. The equitable
price has been determined in three ways. (1) The first is the highest price paid by the bidder
before the bid: “The highest price paid for the same securities by the offeror, or by persons
acting in concert^624 with him/her, over a period, to be determined by Member States, of not
less than six months and not more than 12 before the bid ...” (2) The second is the highest
price paid by the bidder during the bid: “If, after the bid has been made public and before
the offer closes for acceptance, the offeror or any person acting in concert with him/her
purchases securities at a price higher than the offer price, the offeror shall increase his/her
offer so that it is not less than the highest price paid for the securities so acquired.” (3)
Those two rules are complemented by the right of supervisory authorities to adjust the
price.^625
This means the bidder should not to pay too much for the target’s shares before the
commencement of the mandatory bid or during the bid.
On the other hand, the Takeover Bid Directive does not require the making of a manda-
tory bid where control has been acquired following a voluntary bid made in accordance
with the Takeover Bid Directive to all the holders of securities for all their holdings.^626
There are thus share exchange offers that will not trigger any obligation to make a man-
datory bid even where the usual threshold is exceeded. A similar duty to make a bid may
nevertheless be based on the target’s articles of association (poison pill, see section 18.8).
In addition to the duty to make a mandatory bid in some cases, the Takeover Bid Direc-
tive also provides for a squeeze-out right and a sell-out right. Depending on the governing
law, the threshold that triggers those rights can range from 90% to 95% of the capital carry-
ing voting rights and of the voting rights.^627 The squeeze-out right and sell-out right will be
(^623) Article 5(1) of Directive 2004/25/EC (Directive on takeover bids).
(^624) For acting in concert, see section 19.9.
(^625) Article 5(4) of Directive 2004/25/EC (Directive on takeover bids).
(^626) Article 5(2) of Directive 2004/25/EC (Directive on takeover bids).
(^627) Article 15(2) of Directive 2004/25/EC (Directive on takeover bids).