The Offering of Shares in a Cross-Border Takeover

After recent years of stagnancy, the number of cross-border takeover offers within Europe has rapidly increased since 2003. Mittal Steel's (UK) takeover offer for Arcelor (Luxembourg), Linde's (Germany) takeover offer for BOC (UK) and E.on's (Germany) takeover offer for Endesa (Spain) are just a few examples of European cross-border takeover offers. In 2006, 47 % of all M&A transactions worldwide (which came to an all-time high) took place in Europe, totalling to a transaction volume of 1,200 billion EUR. In some cases, the bidder offers own shares as offer consideration (“Consideration Shares”). This allows the bidder not only to limit the debt-financing of the offer consideration, but also to attract strategic investors who are interested in a stake in the new company.Although the EU-regulators intended to create a sound legal framework for this situation with the adoption of the Prospectus Directive together with the Prospectus Regulation and the Takeover Directive, it nevertheless remains unclear if and – as the case may be – under what circumstances the offering of Consideration Shares requires the issuance or passporting of a Securities Prospectus in addition to the takeover offer document and which procedure in the single member states has to be followed in the event the bidder/issuer intends to make use of an exemption from a potential prospectus requirement. These questions arise in every European cross-border takeover offer when shares are offered as consideration (“Exchange Offer”) and are therefore of utmost practical importance.