12.4 Ensuring Exclusivity, Deal Protection Devices 413Shareholder lock-ups. In shareholder lock-ups, the favoured acquirer enters into
a lock-up arrangement with a large target shareholder or shareholder group.
Shareholder lock-ups can include: share purchase agreements; options to purchase
shares; agreements to sell only to the bidder; agreements not to sell to others; and
voting agreements.
If the target company’s shares have been admitted to trading on a regulated
market, the use of such shareholder lock-ups typically triggers a duty to disclose
major shareholdings under the Transparency Directive,^26 and may trigger a duty to
make a mandatory offer under the Directive on takeover bids.^27
Cash-settled derivatives. There is a difference between shareholder lock-ups
and the use of cash-settled derivatives. For example, when Porsche AG (and later
Porsche Automobil Holding SE) started to increase its stake in Volkswagen AG in
preparation for the abolition or amendment of the so-called Volkswagen Law,
Porsche used swap contracts to secure the transaction. The choice of derivatives
rather than shareholder lock-ups was influenced by legal constraints (for creeping
takeovers, see section 19.3).
Asset lock-ups: the Alma Media case. Asset lock-up options grant the favoured
acquirer an option to purchase a significant target asset. Asset lock-ups are princi-
pally intended to end or prevent competitive bidding for the target. From the per-
spective of the target, the prospective acquirer’s asset lock-up options work as the
“crown jewel” takeover defence strategy.^28
The use of asset lock-ups can be illustrated by the Alma Media case. In 2004, the Finnish
media group Alma Media Corporation owned newspaper assets and broadcasting assets. In
addition to a Finnish commercial television company (MTV3), it owned a quarter of the
largest commercial television company in Sweden (TV4). Access to TV4 shares gave other
shareholders of TV4 an incentive to acquire Alma Media. Whoever obtained control over
Alma Media would end up with control over TV4 as well.
In December 2004, the Norwegian media group Schibsted ASA finally launched a pub-
lic tender offer for Alma Media. In January 2005, Alma Media’s board of directors took
takeover defences by proposing an alternative to Schibsted’s offer. The broadcasting divi-
sion was to be sold to Bonnier and Proventus, two Swedish companies. After a complicated
series of transactions, Alma Media’s broadcasting assets were owned by a company owned
by Bonnier and Proventus. Alma Media was an independent company that owned newspa-
per assets. Schibsted remained a small shareholder in Alma Media. (See also section 18.11
for the Dofasco case.)
Legal aspects of exclusivity clauses and lock-ups. Exclusivity clauses and lock-ups
raise three kinds of particular legal questions in the target company. First, com-
pany law rules on board duties and the question to whom they are owed will act as
a constraint. Second, it can be unclear to what extent company law rules on intra-
company distribution of power can make contractual clauses invalid or unenforce-
able. Third, company law and securities markets law rules can influence the avail-
(^26) Article 9(1) of Directive 2004/109/EC (Transparency Directive).
(^27) Article 5(1) of Directive 2004/25/EC (Directive on takeover bids).
(^28) Bainbridge SM, op cit, pp 191–192.