10.4 Mergers and Divisions 371consideration other than in cash.^181 A merger can thus lead to a share exchange or
a clean exit or the exchange of shares for a combination of cash and securities.
Shareholders do not decide on the sale of their shares to the surviving entity as
shares are not sold, but shareholders can vote on the merger.
Friendly mergers. A merger is always friendly. According to the Third Com-
pany Law Directive, a merger requires the approval of the general meeting of each
of the merging companies.^182 However, there is no merger without draft terms of
merger, that is, an agreement between the boards of the participating companies.
Shareholders thus have a veto right provided that the boards already have agreed
on the merger.
The administrative or management bodies of the participating companies must
draw up draft terms of merger in writing.^183 In addition, the Third Company Law
Directive requires a written report drawn up by the administration or management
bodies of each of the merging companies^184 and a written report drawn up by in-
dependent experts such as certified auditors.^185 Shareholders must be able to in-
spect all such documents at least one month before the general meeting.^186 Draft
terms of merger must be published at least one month before the date fixed for the
general meeting which is to decide on the merger.^187
Case: Takeover of Scottish & Newcastle. The takeover of Scottish & Newcastle
is an example of a clean exit through a merger and of friendliness as a necessary
condition of mergers.
In the Scottish & Newcastle case, Carlsberg A/S and Heineken N.V. first made
a highly conditional proposal to Scottish & Newcastle plc to make a cash offer for
Scottish & Newcastle.^188
The proposal was not a cash offer to the shareholders of Scottish & Newcastle.
Furthermore, it was subject to a number of pre-conditions, including a recommen-
dation by the board of Scottish & Newcastle and extensive due diligence.
Scottish & Newcastle rejected the proposal on the same day.^189 A second pro-
posal was rejected on the same day it was made.^190
Finally, the Takeover Panel imposed a deadline of 21 January 2008 for Carls-
berg and Heineken (the Consortium) to launch a formal offer or withdraw (“Put up
or Shut up deadline”). By then, those two companies would have had three months
to actually make a public offer to the shareholders of Scottish & Newcastle.^191
(^181) Articles 3(1) and 4(1) of Directive 78/855/EEC (Third Company Law Directive); Article
2(2) of Directive 2005/56/EC (Directive on cross-border mergers).
(^182) Article 7(1) of Directive 78/855/EEC (Third Company Law Directive).
(^183) Article 5(1) of Directive 78/855/EEC (Third Company Law Directive).
(^184) Article 9(1) of Directive 78/855/EEC (Third Company Law Directive).
(^185) Article 10(1) of Directive 78/855/EEC (Third Company Law Directive).
(^186) Article 11(1) of Directive 78/855/EEC (Third Company Law Directive).
(^187) Article 6 of Directive 78/855/EEC (Third Company Law Directive).
(^188) Scottish & Newcastle plc, stock exchange release of 25 October 2007.
(^189) Scottish & Newcastle plc, stock exchange release of 25 October 2007.
(^190) Scottish & Newcastle plc, stock exchange release of 15 November 2007.
(^191) Scottish & Newcastle plc, stock exchange release of 17 December 2007.