In August/September 2015, the Swiss Takeover Board (TOB) conducted a consultation proceeding on a proposed revision of the Takeover Ordinance (TOO). At its core, the revision aims at abolishing the duty to publish the offer documents in newspapers. The authors support the proposed revision for efficiency reasons. For policy reasons, the authors further advocate the issuance of an official list of media-addressees (including email-addresses) by the TOB and a change of the current practice of the TOB according to which the offeror bears all the risks in case of (partial) failure of the electronic publication. Rather, the offeror shall be responsible only for publishing the offer documents on its website and for delivering them to the media-addressees as per the list of media-addressees and to the TOB.

By Severin Roelli / Christian Leuenberger (Reference: CapLaw-2015-45)

In August/September 2014 the TOB had conducted a consultation proceeding on a proposed revision of the TOO. At its core, that revision aimed at timing the publication in the electronic and print media (i.e., newspapers) for the same day. Already at that time the authors suggested, amongst other, the abolishment of the duty to publish the offer documents in newspapers. The reasons put forward by the authors were, in essence, the substantial costs for a newspaper publication and that in view of the reality how information is obtained nowadays such newspaper publication was outdated. The 2014 consultation proceeding did not result in a change of the TOO though.

One year later, the TOB is now proposing another revision of the TOO at the core of which is the abolishment of the duty to publish the offer documents in newspapers. The TOB puts forward the reasons which were also put forward by the authors. In addition, the TOB conducted a comparison of takeover regulations in other jurisdictions as well as a comparison with other fields of Swiss law and found that in both, foreign takeover regulations and other fields of Swiss law, the newspaper publication was scarcely relevant today. In this context, the TOB expressly mentions the recent amendment of the SIX Swiss Exchange Listing Rules abolishing the instrument of the listing notice and fully relying on electronic means for dissemination (official notice).

The currently applicable rules of the TOO require – besides publication on the offeror’s website (or a special offer website) and delivery to (at least two) leading financial information providers as well as the TOB – the publication in (at least one) German-language as well as (at least one) French-language newspaper.

According to the proposed new rules, the offeror publishes the offer documents relating to a tender offer (for example, the pre-announcement and the offer prospectus) by the following means: (i) publication on the offeror’s website (or a special offer website), (ii) delivery to the major Swiss media, press agencies as well as financial information providers (the Media-Addressees) and (iii) delivery to the TOB. By proposing these new rules, the TOB acknowledges that the electronic publication is not just a mere option complementing the newspaper publication, but has become the standard proceeding. As compared to the currently applicable rules, the consequences described below are particularly noteworthy.

1) Electronic Publication as triggering event for the beginning of / compliance with time limits

Because the newspaper publication requires more preparation time (delivery of content to typesetter, printing etc.), the currently applicable rules provide that the newspaper publication has to be made no later than three SIX-trading days following the electronic publication (i.e., publication on the offeror’s website and delivery to the financial information providers as well as to the TOB).

The two different dates of electronic publication and newspaper publication (and their interdependence) requires coordination: Based on a respective practice developed by the TOB, the TOO currently states that the relevant point in time for establishing the legal effects of the offer documents’ publication (e.g., in the case of publication of the pre-announcement or the offer prospectus, the calculation of minimum price or restrictions for defensive measures) is (i) the newspaper publication or (ii), as the case may be, the electronic publication if the newspaper publication follows no later than three SIX-trading days thereafter (article 8 TOO).

Under the proposed new rules, there is no need for coordination: the legal effects of the offer documents’ publication are established at the point in time of the electronic publication.

Further, the point in time of the electronic publication will be relevant for the beginning of resp. compliance with various other time limits for which currently the newspaper publication (or, as the case may be, the electronic publication if the newspaper publication follows no later than three SIX-trading days thereafter) is the triggering event (e.g., publication of offer prospectus, beginning of offer period, publication of the report of the target’s board of directors, time limit for amendment of offer, publication of interim results and final results, publication of a competing offer).

2) Risk allocation in case of (partial) failure of the electronic publication

As compared to the electronic publication according to the currently applicable rules of the TOO, the circle of addressees of the electronic publication according to the proposed new rules is expanded: in addition to the publication on the offeror’s website (or a special offer website) and delivery to (currently at least two) major financial information providers (e.g., Bloomberg, Reuters, Telekurs) as well as the TOB, it requires delivery to the major Swiss media (e.g., editorial office of major newspapers, radio and TV-stations) and the major press agencies in Switzerland (e.g., SDA, awp Finanznachrichten).

While in the experience of the authors, delivery to two major financial information providers leads to a broad coverage in electronic and print media, they still support the expansion of the circle of addressees of the electronic publication from a policy standpoint: the wider the dissemination of the relevant information, the higher the information transparency in the market.

To simplify the process for the offeror, the TOB proposed to provide a list of the Media-Addressees and to publish such list on the TOB’s website. The authors support the idea of the TOB-list for efficiency reasons. In their opinion, the TOB-list should include the email-address of each Media-Addressee. In addition, the authors advocate taking an additional step forward and changing the TOB’s current practice according to which the offeror bears the risk if – for whatever reason – the electronic publication fails or is incomplete (see TOB-recommendation 0358/1 re Groupe Baumgartner Holding SA of 3 April 2008, N 1.4). The authors are of the opinion that for practical reasons and policy considerations the TOO should state explicitly that the offeror bears the risk only for publishing the complete offer document on its website (or a special offer website) and for sending the complete offer document to the TOB and to the email-addresses of the Media-Addressees in the TOB-list. If, with respect to the latter, the publication fails later on (i.e., in the sphere of influence of the Media-Addressees or the TOB), the offeror shall nonetheless enjoy the benefits of the publication (e.g., in the case of publication of the pre-announcement or the offer prospectus, the calculation of the minimum price or restrictions for defensive measures).

From a practical point of view, it has, firstly, to be acknowledged that the risk that the publication fails becomes smaller, the more Media-Addressees the TOB-list contains. Further, in the unlikely case of failure of receipt / processing by the Media-Addressees (e.g., outdated email-addresses on the TOB-list), the TOB and the offeror would notice this within hours and the offeror would – in its own best interest in view of a successful offer – re-deliver the offer documents in due course. To mitigate this remote risk, one could think of including the target company in the list of addressees and relying on the target’s ad hoc-publicity duties to ensure widespread dissemination; in the view of the authors, the preparation for such an event would, however, be unduly onerous on the ad-hoc officers / departments of listed companies.

In view of the authors, the publication by the media does not have to contain all material terms of an offer, it rather serves as means to create the awareness of the investor community that an offer has been launched. Complete offer documents are then available on the TOB’s and the offeror’s website (or a special offer website) and can be found easily with the common electronic search tools. Therefore, the authors are of the opinion that an incomplete publication of the offer documents by the media, should not hinder the triggering of the legal effects.

From a policy point of view, the comparison of the interests involved requires the allocation of risks as proposed by the authors:

• If the offeror bore the risk of failure or incompleteness of the publication absent his fault (i.e., the fault is in the sphere of influence of the Media-Addressees or the TOB), the consequence of such failure or incompleteness deprived the offeror from the benefits of the publication (in particular, (i) in the case of publication of the pre-announcement or the offer prospectus, the calculation of the minimum price or the restrictions for defensive measures, (ii) in the case of publication of an amendment to the offer at the last possible date, such amendment, or (iii), most importantly, in the case of the publication of a competing offer at the last possible date, such competing offer). The consequences for the (competing) offeror, and ultimately for the takeover market, would be severe.
• If the shareholders bore the risk of failure or incompleteness of the publication absent the offeror’s fault (i.e., in the sphere of influence of the Media-Addressees or the TOB), the consequence of such failure or incompleteness is that the shareholders loose a few hours of the offer period in which they can decide to accept the offer or not. Given that the offer period is at least ten days (excluding exceptions), the consequences for the shareholders seem minor. More importantly, however, the negative consequences have to be weighed against the positive consequences of a failed or incomplete publication in case of an amendment of the offer or in case of a competing offer. Further, the argument that shareholders may sell their shares at a lower price, because they have not learned about a higher-priced offer (TOB-recommendation 0358/1 re Groupe Baumgartner Holding SA of 3 April 2008, N 1.4 could be interpreted to follow this line of argumentation) is not a valid one, because the allocation of the risk to the offeror does not improve the shareholder’s situation in this regard.

The TOB itself has not taken a clear position with respect to such change of practice. However, the new wording in the TOO as proposed by the TOB does no longer require the offeror to disseminate the offer document nationwide (“muss […] landesweit bekannt gemacht werden”), but only requires that it is published on the offerors website and delivered to the Media-Addressees as well as the TOB. This could be seen as an indication for a change of the practice.

Severin Roelli (severin.roelli@pestalozzilaw.com)
Christian Leuenberger (christian.leuenberger@pestalozzilaw.com)