(BFM Bourse) – In order to renationalize EDF, the state, which owns 84% of the energy company, has announced its intention to launch a takeover bid (OPA) for the rest of the capital that it does not already own. This type of company is not uncommon as the Paris market is regularly buoyed by takeover bids. But by the way, how exactly does a takeover work?
It’s the saga of the summer. The government will bring EDF back into its fold by buying the minority stake (about 16%) of the energy company’s capital still outstanding on the Paris market at a price of €12 per share by next fall. Bids on the capital of listed companies are an integral part of life on the Parisian coast. In the present case, EDF’s renationalization project, with the state at the helm, takes on a very specific character.
However, the government will not be able to override a very specific formalism and regulation to which these operations are subject. And not all takeover bids have the same goals. Here’s everything you need to know to understand how these offers work.
What is a takeover bid?
In essence, a public offering is an offer by a company (whether itself publicly traded or not) to the shareholders of a publicly traded company to redeem their shares by variable methods, following a regulated process and under the supervision of stock exchange authorities. The term OPA (public offering to buy) is widely used by metonymy to denote all public offerings. In reality, financial legislation distinguishes several types.
What types of public offerings are there?
Strictly speaking, one speaks of OPA (public purchase offer) when the payment is made in cash (i.e. in cash). An offering paid for by an exchange of securities (X shares of one company for Y shares of another) is an OPE (public exchange offer). If the initiator of the offer is already the majority shareholder of the target company, the process is somewhat shortened and simplified, and the offer is then called OPAS or OPES (public purchase offer or simplified exchange).
If the initiator offers both securities and a cash payment for each share presented in its offer, it is a mixed offer. In addition, the buyer can agree to arrange payment in shares or in cash at the option of the shareholder selling his shares, the operation is presented as an alternative offer (if the buyer does not specify an amount limit) and multi-option offer (if the buyer leaves a choice , for example by limiting the cash portion to a certain percentage of the total amount of the offer).
Can a company buy back its equity?
A company can make an offer for a fraction of its equity: this is a public takeover bid (OPRA). In this case, the initiator repurchases all securities presented to it if the amount presented to OPRA is below the target level. If the securities presented represent more than this level, he acquires only part of them (each sell order is reduced in proportion to the amount requested by the acquirer). . For example, if a company offers to buy back its own capital within the limit of 20,000 shares and 25,000 are made to do so, each order, regardless of its size, will be reduced by 20%: 20 shares will be redeemed by one who brings 25th , 80 who brings 100, 4000 who brings 5000 etc.
Is this voluntary or mandatory?
Public offers can be either voluntary or mandatory. A company can actually decide for itself that it has a strategic or financial interest in taking control of another. She then starts a voluntary offer. It should be noted that the procedure is exactly the same whether it benefits from the approval of the board of directors of the target company or not (friendly or hostile offer).
In some cases, however, it is the regulations that oblige the launch of a public offering. The main trigger is when the 30% capital threshold is exceeded: when this threshold is exceeded, a shareholder must offer to buy back their shares from others if they so wish. In any case, the price offered must be at least equal to the highest price that the initiator has paid during the last twelve months (often this is the price at which the transaction that caused the crossing was carried out). However, the AMF provides for certain exceptions to the obligation to make an offer, for example if the threshold is passively exceeded (not by purchasing additional securities, but by reducing the number of securities in the capital) or if the crossing follows a capital increase by a company in demonstrable financial difficulties.
Over what period of time does a public offer take place?
The so-called pre-offer period begins with the announcement of a draft offer (compulsorily stating the offered price and/or the offered parity), which runs until the deposit and during which the initiator has no right to intervene in the title. Any other person increasing their stake by more than 1% must also notify the AMF. After the project is submitted, AMF departments have 10 days to review and declare compliant, request a change, or reject the project. If the authority gives the green light, the offer will be opened three days after the declaration of compliance, for a period of at least 25 days, which can be extended by the exchange supervisory authority. During the offer period, the initiator can also increase the price (an example among others, Vivendi did this during their offer for Gameloft). All securities will be paid at the new price, including those contributed before the upgrade.
Why do we need to hit a “success threshold”?
Inspired by Anglo-Saxon law, the AMF has stipulated a success threshold of 50% for several years. If the potential buyer does not reach this threshold after his offer, the offer is void and the securities tendered are returned. In the case of a voluntary offer, the acquirer can also defer its own conditions (e.g. obtaining the approval of the antitrust authorities if the acquisition of the target company requires this, or reaching a certain voting rights threshold) . At this stage, each shareholder is free to offer their shares or not to any offer, be it a takeover bid, public exchange offer or OPRA.
If, at the end of a public offering, the securities not tendered represent less than 10% of the capital and voting rights, the majority shareholder may withdraw from these securities within three months. Minority shareholders are thus forced to tender their shares to the offer and will be compensated for this. The company’s shares are then taken off the market. An independent expert will be appointed by the company affected by the offer to submit a fairness opinion on the price of the squeeze-out.
If, on the other hand, the offer initiator has not carried out a squeeze-out within the three-month period, he can later submit a public takeover offer (OPR). In this case, the price of the offer may differ from that of the OPA or OPE.
Sabrina Sadgui – ©2022 BFM Stock Exchange