376 10 Exit of Shareholders
The Third Directive and therefore also Dutch and Luxembourg corporate law
required the drawing up of a written report. The explanatory memorandum ful-
filled this requirement.^218
The merger proposal (draft terms of merger) and the explanatory memorandum
(report) were regarded as equivalent to a prospectus when ArcelorMittal offered
its shares to the shareholders of Mittal Steel.^219 ArcelorMittal did not publish any
prospectus at this stage.
However, they would not have been regarded as equivalent to a prospectus
when ArcelorMittal applied for the admission of its shares to trading on a regu-
lated market. ArcelorMittal therefore published a European prospectus for Euro-
pean shareholders under the Prospectus Directive before the ArcelorMittal shares
issued in the first-step merger could be admitted to trading on regulated markets.
In addition to the European prospectus, ArcelorMittal published a US proxy
statement and a prospectus for US shareholders.
Cross-border mergers. Cross-border mergers differ from domestic mergers be-
cause the shareholders, creditors and employees of the company that will not sur-
vive the merger will not only become shareholders, creditors and employees of a
different company but also of a company governed by the laws of a different
country. More extensive protection may therefore be granted under Community
law.^220 For example, the legality of a cross-border merger will be scutinised in ad-
vance by a competent authority.^221 A competent authority will also scrutinise the
legality of the completion of the cross-border merger.^222
Cash-out mergers, releasing capital. As said above, the merger consideration
can consist of shares in the company that will survive the merger and/or a cash
payment.^223
The surviving company or its shareholders may use cash-out mergers as a
means to get rid of minority shareholders. For this reason, cash-out mergers are
sometimes called “squeeze-out mergers” or “freeze-out mergers”.^224
From the perspective of the target’s shareholders, cash-out mergers are a way to
release capital. This can be illustrated by the Boxclever case.
Case: Boxclever. In 1999, both Granada and Nomura owned struggling TV
rentals businesses in the UK. They decided to merge them in order to create
savings and to cash in as much of their investment as possible. The transaction
was completed in 2000.
A new company, Boxclever, was formed to acquire the businesses. Granada
and Nomura maintained a 50/50 shareholding in the company.
The deal was financed by Boxclever borrowing £860 million from WestLB, a
German bank. Granada took £511 million in cash, of which about £200 million
(^218) Article 9(1) of Directive 78/855/EEC (Third Company Law Directive).
(^219) Article 4(1)(c) of Directive 2003/71/EC (Prospectus Directive).
(^220) Siems MM, SEVIC: Beyond Cross-Border Mergers, EBOLR 2007 p 309.
(^221) Article 10 of Directive 2005/56/EC (Directive on cross-border mergers).
(^222) Article 11 of Directive 2005/56/EC (Directive on cross-border mergers).
(^223) 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).
(^224) See Groner R, Barabfindungsfusion (Cash Out-Merger), SJZ 99 (2003) pp 393–402.