The Law of Corporate Finance: General Principles and EU Law: Volume III: Funding, Exit, Takeovers

5.11 Shares as a Means of Payment 271

If the target (“offeree”) is a listed company, its shareholders will be protected
by their right to decide on the transaction; in a share exchange offer, each share-
holder will nevertheless decide whether to accept the offer or not.
In addition, the Directive on takeover bids lays down general principles for the
protection of holders of the target’s securities and requires the publication of an
offer document and information. The target’s shareholders will also be protected
ex post against loss of an effective market for their shares (mandatory bids, sell-
out rights). The application of such provisions requires the valuation of their
shares (see section 19.10).^677

Table 5.3 Protection of Shareholders in a Share Exchange Offer

Protection of the offeror’s

shareholders

Protection of the target’s shareholders

Disclosure

of informa-

tion ex ante

(General duties of listed

companies to disclose in-

formation.)

Disclosure of information

to the general meeting.

Independent experts re-

port.^678

(General duties of listed companies to dis-

close information.)

General duty to give sufficient information

to shareholders.^679

Publication of a prospectus before admis-

sion of securities to listing.

Publication of an offer document.

Possibly, a fairness opinion under national

rules.

Opinion of the target’s board.

Specific

constraints

on price ex

ante

No issue at a price lower

than nominal value or ac-

countable par value.^680

In listed companies, principle of equivalent

treatment of holders of securities that be-

long to the same class.

In listed companies, prohibition of partial

offers depending on the governing law.^681

Valuation of shares ex post (see below) will

influence the valuation of shares ex ante.

(^677) Article 3(1) of Directive 2004/25/EC (Directive on takeover bids).
(^678) Articles 27(2) and 10(3) of Directive 77/91/EEC (Second Company Law Directive).
(^679) Article 3(1)(b) of Directive 2004/25/EC (Directive on takeover bids).
(^680) Article 8(1) of Directive 77/91/EEC (Second Company Law Directive).
(^681) Article 5(1) of Directive 2004/25/EC (Directive on takeover bids) prohibits partial offers
only in the context of mandatory bids.