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Regulation: Norwegian rules on acquisitions of listed companies are mainly regulated by chapter 6 of the Norwegian Securities Trading Act and associated regulations (the Offer Rules). The rules are based on EU Directive 2004/25/EC.
Oslo Børs has been designated as the offer authority. As the offer authority, Oslo Børs is responsible for, among other things, approving offers and offer documents, and granting exemptions from the Offer Rules.
Scope of application : The Offer Rules apply to the acquisition of shares in Norwegian companies and to a certain extent foreign companies that have shares listed on a Norwegian regulated market, i.e. Oslo Børs or Euronext Expand.
Special rules on shared jurisdiction and supervision apply to acquisitions of companies listed in Norway, but which are domiciled in another EEA state and/or listed on a regulated market in another EEA state.
The Offer Rules do not apply to companies listed on a multilateral trading facility in Norway, i.e. Euronext Growth Oslo. We refer to a separate post on acquisitions of companies on Euronext Growth Oslo.
The offer rules distinguish between mandatory offers and voluntary offers:
Anyone who through acquisition becomes the owner of shares representing more than 1/3 of the votes (with a repeated offer obligation at 40% and 50%) is obliged to make an offer to purchase the remaining shares in the company (Mandatory Offer)
The rules on voluntary offers apply if the offer is accepted by the recipients of the offer, triggering an offer obligation for the offeror (i.e. more than 1/3 of the voting rights of the offeree company) (Voluntary Offer)
The Offer Rules do not apply to the acquisition or holding of shares representing 1/3 or less of the voting rights of a listed company.
Typical structure of a public takeover in Norway: The typical procedure for a public takeover in Norway is to initiate a structured process for acquisitions of all shares in target by way of a negotiated Voluntary Offer with support from target board. After completion of a Voluntary Offer, a Mandatory Offer obligation is likely triggered due to the Voluntary Offer resulting in ownership in excess of the 1/3 voting rights threshold discussed above and as further described below.
Mandatory bid obligations: Mandatory bid obligation for the remaining shares is triggered if and when a person or entity, alone or acting in concert with others, directly or indirectly acquire 1/3 of the voting rights (either through a Voluntary Offer or otherwise). There are repeated mandatory bid thresholds at 40% and 50%.
The Mandatory Offer obligation ceases to apply if the shareholder sells the portion of the shares that exceeds the relevant threshold within four weeks of the date on which the Mandatory Offer obligation was triggered.
When a Mandatory Offer is triggered, bidder shall immediately notify Oslo Børs and target, and the notification shall state whether an offer will be made to acquire the remaining shares in the Company or whether a sale to reduce bidder’s holding below the offer threshold will take place. As a main rule, a notification to the effect that a Mandatory Offer will be made cannot be retracted.
Hostile bids: There are no legal restrictions on hostile bids, i.e. offers without recommendation or participation on the part of the target. Hostile bids have not been very common in the Norwegian market the recent years.
Secrecy: Bidder and target will usually enter into a confidentiality agreement at an early stage in the process. The Takeover Rules include no specific rules about confidentiality before a bid is announced. A potential bid may, however, constitute inside information (depending on a concrete assessment) which target is obliged to disclose to the market promptly. Target may apply delayed disclosure subject to, inter alia, being able to keep the information confidential. Share dealings with knowledge of undisclosed inside information may constitute a criminal offence.
Irrevocable undertakings: A takeover process is usually commenced by solicitation by bidder of irrevocable undertakings from key shareholders prior to announcement of an offer, subject to the rules on handling of inside information. A possible takeover offer will normally be considered inside information, and shareholders who receive the inside information are barred from trading in the share until the information has been settled or the transaction has been cancelled. Furthermore, the solicitation cannot target a too broad group of shareholders if not to be regarded de facto as a Voluntary Offer. Such irrevocable undertakings are typically drafted as either "soft" irrevocable in which the selling shareholder commit to accept the offer it no higher competing bid is made or "hard" irrevocable in which the selling shareholder commits to accept the offer regardless of any subsequent higher competing offer.
Disclosure of large acquisitions: Bidder is obliged to notify the market of pre-acceptances or firm acquisitions exceeding the following thresholds: 5%, 10%, 15%, 20%, 25%, 1/3, 50%, 2/3 and 90%. Irrevocables received or further firm acquisitions after the initial disclosure must be disclosed if resulting in the total number of irrevocables and/or shares exceeding new thresholds.
Primary insider notifications: If the bidder is a primary insider in target, or certain primary insiders are to enter into pre-acceptance or sell shares in the offer, typically the board or management, an obligation to notify the transaction will be triggered, regardless of the number of shares the transaction includes.
Restrictions on target: After target is informed that a bid will be made and until the bid period has expired and the result is clear, board of target is not permitted to resolve to issue shares or other financial instrument in target or any subsidiary, or undertake any merger or major investments or divestments, or sell or purchase target’s shares. However, these restrictions do not apply to dispositions that are part of the normal course of business or where the general meeting of target has empowered the board to make such decisions in a takeover situation, but the extent of such flexibility must be assessed in each individual case.
Agreements between bidder and target: In a Voluntary Offer, it is usual for bidder and target to enter into a transaction agreement, including provisions on due diligence, time table, conditions for making a bid, exclusivity, non-solicitation, matching right, etc.
Break fee: There are no specific rules on break fee in the Takeover Rules. According to the non-binding Norwegian Corporate Governance Code, any financial compensation should be limited to the costs bidder has incurred in making the bid.
Conditions: Voluntary offers can be made subject to conditions, and are only limited by the prohibition of discrimination against shareholders. Examples of conditions are (i) acceptance threshold (for instance 90% or 67%), (ii) acceptable financing, (iii) Norwegian Competition Authority approval, (iv) other approvals and waiver of change of control provisions and (v) other conditions, for instance due diligence. Conditions can be structured so that they can be waived or amended by the bidder.
Mandatory offers cannot be conditional. A takeover procedure is therefor often initiated by way of a Voluntary Offer in which conditions can be set.
Offer/offer document: The offer and the offer document must be approved by Oslo Børs, in capacity as the supervisory authority, before the offer is published. This applies to both voluntary and Mandatory Offers.
Restrictions on foreign ownership of shares: As a main rule, there are no foreign ownership restrictions in Norway, however, in certain sectors, general ownership restrictions apply, such as in the financial sector etc. Norwegian FDI rules concerning national security matters provide authorities with broad powers to block transactions of importance to national security. FDI analysis of any potential target company that is involved in types of business that falls within the scope of those rules are recommended.
Information or consultation with employees: In Voluntary and Mandatory Offers, both bidder and target have a duty pursuant to the Takeover Rules to inform the employees immediately after the bid is published. If target board receives in reasonable time a separate opinion from the employees on the effects of the bid on employment, that opinion shall be appended to the statement from the board on the bid.
Consideration: In Voluntary Offers, the consideration may consist of cash, shares or a combination thereof. In Mandatory Offers, the consideration shall comprise cash. Settlement in another form may be offered; however, shareholders are entitled to demand cash.
Offer price: There is no regulation of the offer price in Voluntary Offers.
In Mandatory Offers, the offer price shall, as a general rule, be at least as high as the highest consideration the offeror has paid or agreed to pay for shares in the offeree company in the period six months before the obligation to make a mandatory offer arose. If it is clear that the market price when the obligation to make a mandatory offer arises is higher than the price stated above, the offer price shall be at least as high as the market price. If, after the obligation to make an offer has arisen and before the expiry of the offer period, the offeror has paid or agreed to pay a higher price than the offer price, a new offer shall be deemed to have been submitted with an offer price corresponding to the higher price.
Squeeze out: The squeeze out threshold appears from local company law of target.
If target is domiciled in Norway, if bidder alone or through subsidiaries owns nine tenths or more of the shares and voting rights in target, bidder may resolve take over the remaining shares in target, typically at the price offered in the takeover bid. The minority shareholders have a corresponding right to force redemption of their shares.
If bidder holds more than nine tenth of the shares and votes in target following a Voluntary Offer, a squeeze-out of the remaining minority shareholders can be carried out without a preceding Mandatory Offer if: (i) the squeeze-out is commenced no later than four weeks after the acquisition of shares through the Voluntary Offer, (ii) the price offered per share is equal to or higher than what the offer price would have been in a Mandatory Offer, and (iii) the settlement is guaranteed by a qualified financial institution. Fulfillment of the conditions is subject to control by Oslo Børs.
If bidder completes a squeeze-out within three months after the expiry of an offer period, the redemption price shall be determined on the basis of the offer price, absent specific reasons indicating another price.
If target is domiciled in Norway, minority shareholder may object to the offer price within a specified deadline of at least two months' and demand that Norwegian courts determine the offer price.
Delisting: A listed company may apply to the stock exchange for de-listing of the company’s shares if the general meeting has approved delisting with a majority as for changes to the articles of association (2/3 according to Norwegian company law). Delisting of a target is subject to approval of Oslo Børs.
Proposal for reform: In 2019, the government appointed securities committee proposed amendments to the Norwegian rules on takeovers. The main issues concern, inter alia, additional requirements for preparations before a bid is made and more detailed regulations of Voluntary Offers. The proposal has been consulted on, but is still under consideration.
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This memo is written as a general overview and should not be regarded as specific advice and we recommend that you seek specific legal advice from Norwegian counsel should you consider making an offer for a company listed in Norway. This memo is limited to selected matters and should not be perceived as exhaustive. In particular, we do not address tax and accounting regulations. There are relevant issues in relation to a takeover-situation that are not covered herein.
