Takeover Guide - Switzerland.pdf

8/10/2019 Takeover Guide - Switzerland.pdf

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Switzerland

Takeover Guide

Contact

Lorenzo Olgiati and Martin Weber

Schellenberg Wittmer Ltd

[email protected]

[email protected]


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30305120_1_2014 - takeover guide - switzerland

Contents Page

INTRODUCTION 1

GENERAL LEGAL FRAMEWORK 1

ACTIVITIES PRIOR TO TENDER OFFER 2

TENDER OFFER PROCEDURE 4

LIFECYCLE OF A TENDER OFFER 8

DUTIES OF THE BIDDER 9

DUTIES OF THE TARGET COMPANY 10

SPECIFIC TOPICS 14


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30305120_1_2014 - takeover guide - switzerland page | 1

INTRODUCTION

This guide gives an overview of the law dealing with public tender offers in Switzerland asat 1 August 2013. This guide does not constitute legal advice. Anyone involved in publictakeover action should seek specialist advice.

GENERAL LEGAL FRAMEWORK

Scope of Application of the Takeover Regulations

The rules and procedures ("Takeover Regulations") applicable to public tender offers arelaid down in the Swiss Stock Exchange Act ("SESTA") and mainly three implementingordinances, one issued by the Swiss government (Federal Council) and two by regulatoryagencies, the Swiss Financial Market Supervisory Authority ("FINMA") and the TakeoverBoard ("TOB"). For an English version of the Takeover Regulations seewww.takeoverpractice.ch/home-en .

The Takeover Regulations are designed to ensure fairness, equal treatment andtransparency in public tender offers and to enable the holders of equity securities of atarget company to make an informed decision on whether or not to accept such offers.

The Takeover Regulations apply to voluntary and mandatory public tender offers("Tender Offers") for equity of (i) Swiss corporations that have at least one class of equitysecurity listed on a Swiss stock exchange and (ii) those foreign corporations that have amain listing on a Swiss stock exchange ("Target Company/ies"). Before 1 May 2013 therules of the SESTA governing public takeovers were applicable only to Swiss (target)companies listed on a Swiss stock exchange. In order to avoid a negative conflict ofcompetence and to protect the public shareholders, the scope of the TakeoverRegulations has been extended to non-Swiss companies to the extent they are "mainlylisted" in Switzerland. A foreign company is "mainly listed" (hauptkotiert) if it is required to

comply with at least the same obligations with regard to listing and maintaining the listingon a stock exchange in Switzerland as are Swiss companies; so far, market playersunderstand that "mainly listed" is the equivalent to "primarily listed" (primrkotiert). Thisextended scope of application of the SESTA also applies to the disclosure duties relatingto shareholdings by significant shareholders (of foreign companies mainly listed inSwitzerland).

The Takeover Regulations also apply to public buy-back offers, i.e. public offers by TargetCompanies to buy back their own equity securities (including related conversion or optionrights). However, a Target Company planning a standard buy-back may apply to the TOBfor a simplified procedure.

The obligation to launch a mandatory offer ("Mandatory Offer") arises whenever ashareholder or group of shareholders directly or indirectly acquires equity securities in alisted Target Company and thereby exceeds the threshold of 33.33% of the voting rightsof the Swiss Target Company, whether such voting rights are exercisable or not. Thearticles of incorporation of listed Target Companies may provide for a higher threshold ofup to 49 per cent of the voting rights (opting-up) or may declare the mandatory tenderoffer obligations to be inapplicable at all (opting-out; see below at "Specific Topics"). If aTender Offer triggers the obligation to make a Mandatory Offer, the Tender Offer mustapply to all (and not only part) of the listed equity securities of the Target Company, andthe minimum price requirements for Mandatory Offers must be observed.

Non-public share purchases, i.e. purchases on or off the market not combined with apublic offer, are not subject to the Takeover Regulations unless the threshold forsubmitting a mandatory offer is exceeded.


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The Players: the Supervisory and Appellate Bodies and the Parties

Two supervisory bodies, the TOB and the FINMA, both with regulatory competence intheir field, ensure compliance with the Takeover Regulations.

The TOB reviews all public takeover offers subject to SESTA. The TOB is supervised by

FINMA. Whenever a Tender Offer is made, the TOB appoints a committee for review ofthe offer documentation. The TOB determines whether the Tender Offer is in compliancewith the Takeover Regulations. For this purpose, the TOB may require the disclosure ofall necessary documents and information from any party to the Tender Offer proceeding,including the bidder ("Bidder") of the Tender Offer and persons acting in concert with theBidder ("Concert Parties"), the Target Company as well as any shareholder holding 3% ormore of the voting rights of the Target Company ("Qualified Shareholder"), provided thatsuch Qualified Shareholder has requested and been granted party status in the TenderOffer proceeding.

After its review of the offer documentation and after having heard all parties involved, theTOB issues a decision (binding order) addressed to the parties involved, stating inparticular whether the applicable regulations have been followed. Each decision is

published on the TOBs website (www.takeover.ch). Parties may appeal to the FINMAagainst a decision of the TOB within five trading days; if not satisfied, they may furtherlodge an appeal against a FINMA decision at the Swiss Federal Administrative Courtwithin ten calendar days, whose judgment shall be final.

ACTIVITIES PRIOR TO TENDER OFFER

Preliminary Steps

Approaching the Target / Letter of Intent

A Bidder intending to make a Tender Offer may first approach the Board of the Target

Company or its advisers. Alternatively, in a hostile environment the Bidder may directlydisclose its intentions to the public, by publishing a Tender Offer without prior informationof the Target Company.

In the majority of cases in Switzerland, the Bidder contacts a potential Target Companyprior to launching a formal Tender Offer. The discussions may either be initiated by anon-binding letter of intent (LOI) to the Board of the Target Company or by informaldiscussions, often followed by a LOI and subsequently a Transaction Agreement (seebelow). A LOI typically includes the strategic considerations of the Bidder, a statement ofthe approximate share price of the Tender Offer ("Offer Price"), due diligence aspects aswell as confidentiality and exclusivity/non-solicitation clauses.

The Board of the Target Company has no duty to enter into discussions about an Offerwith a potential Bidder and/or to agree to a due diligence if this is not considered to be inthe best interest of the Target Company and its shareholders.

Due Diligence

In a friendly takeover environment, the Bidder and the Target Company typically agree ona pre-offer due diligence review to be carried out by the Bidder. The Board of the TargetCompany should carefully select the information that is provided, bearing in mind that thesame information will have to be disclosed to any other Bidders that decide to launch acompeting Tender Offer (equal treatment obligation).


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an unconditional purchase of the shares shortly prior to the publication of theTender Offer.

When entering into agreements with major shareholders, the Bidder should be aware ofthe possibility that not all types of agreements may be enforceable if there is a competingTender Offer. While the unconditional purchase by the Bidder would not constitute a

hindrance, the two other alternatives may frustrate the free competition among Bidders,and would therefore be unenforceable in case of a competing Tender Offer.

Stake Building: Acquisi tion of Target Company Shares/Options for Shares

Building a significant position in a Target Company prior to launching a formal TenderOffer is permitted but may subject the Bidder to subsequent minimum price rules in theTender Offer. Stake building is often achieved through a combination of shares andfinancial instruments.

Under the disclosure rules of the SESTA a shareholder has to disclose its shareholdingsif it acquires shares and/or financial instruments (including conversion rights, shareacquisition and share sale rights) of a company incorporated and listed in Switzerland

and thereby attains or exceeds certain thresholds. The first disclosure threshold is at 3%.To ascertain whether a threshold is reached a Bidder's positions in shares and financialinstruments must be aggregated (see also at Section "Selected Topics").

The Mandatory Offer obligation is triggered whenever a shareholder or group ofshareholders directly or indirectly acquires equity securities in a listed Swiss companyand thereby exceeds the threshold of 33.33% of the voting rights of the Target Company.

TENDER OFFER PROCEDURE

Pre-announcement

The Bidder may reveal its intentions to the public through direct publication of a tenderoffer prospectus ("Prospectus") or, prior to that, in the form of a preliminary but bindingpublication of the key-terms of the Tender Offer ("Pre-announcement") followed by aProspectus. In the vast majority of Tender Offers, the Bidders make use of the Pre-announcement option.

Content and Publication of a Pre-announcement

A Pre-announcement must provide the key information regarding the Tender Offer, inparticular the following:

corporate name and registered office of the Bidder and of the Target Company;

the equity securities and financial instruments that are the object of the TenderOffer, the respective Offer Price as well as any conditions applicable to theTender Offer; and

the tentative timetable for the publication and acceptance of the Tender Offer.

Effects of a Pre-announcement

One of the main objectives of a Pre-announcement is to freeze the date for thecalculation of the minimum Offer Price and to fix the date as of which the Board of theTarget Company is restricted from implementing defence measures against a TenderOffer.


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A Pre-announcement also triggers the duty of the Bidder, Concert Parties and significantshareholders of the Target Company to regularly disclose their transactions in shares inthe Target Company.

Furthermore, after the publication of a Pre-announcement the Bidder is obliged to launchthe Tender Offer by publishing the full Prospectus within six weeks.

Prospectus

Mandatory Content and Publication of Prospectus

The information in the Prospectus must be correct and complete. It must contain allinformation necessary for the shareholders of the Target Company to make an informeddecision. The Prospectus shall include the following information:

information on the Bidder and Concert Parties (including information on equitysecurities in the Target Company purchased by the Bidder during the twelvepreceding months, stating the highest purchase price paid);

identity of the shareholders or groups of shareholders directly or indirectly holding3% or more of the shares of the Target Company;

information on the financing of the Tender Offer (including a declaration from thereview body (Prfstelle) confirming that the necessary funds are available);

information on the securities and financial instruments the Tender Offer targets(including the maximum number of securities to be purchased in case of a partialTender Offer) and on the Offer Price (whether solely for cash or for shares or acombination thereof);

information on the Target Company (including the Bidders intentions as to thefuture of the Target Companys business, information on any agreementsbetween the Bidder and the Target Company, its bodies or its shareholders and aconfirmation that the Bidder has not received directly or indirectly from the TargetCompany any non-public information that is likely to have a significant influenceon the decision of the shareholders of the Target Company);

further information on the securities offered in case the Tender Offer is made asexchange offer (including detailed listing information if the securities are listed ata Swiss or foreign stock exchange).

Determination of the Offer Price (Minimum Price) Best Price Rule

Whenever a (voluntary) Tender Offer is launched for all the shares of the Target

Company (or for a number of shares which would represent, together with the sharesalready held by the Bidder and the Concert Parties, more than 33.33% of the voting rightsof the Target Company), the minimum price rules for Mandatory Offers apply as well.

The Offer Price must then at least match the stock exchange price (volume-weightedaverage prices for the 60 exchange trading days before the publication of the Prospectusor the Pre-announcement, respectively). Cumulatively, if the Bidder has purchasedshares of the Target Company prior to the Tender Offer, the minimum price must also atleast equal the highest price paid by the Bidder (including other Concert Parties) in thetwelve preceding months. (Note that, the 'control premium' concept was abolished in therevision of SESTA in force since 1 May 2013. Until then, the Bidder had been allowed topay a price of up to 33% above the minimum Offer Price to shareholders selling theirshares prior to the launch of the Tender Offer.)


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The stock exchange price may not be considered for the determination of the minimumOffer Price if a listed equity security is illiquid. The Offer Price must then be based on thevaluation established by a qualified auditing company or a securities dealer. The TOB hasdeveloped criteria according to which a security is to be regarded as liquid or illiquid. If,during the Offer Period and within a period of six months after expiration of the additionalacceptance period, the Bidder (including Concert Parties), acquires additional shares of

the Target Company at a price which exceeds the Offer Price, it is obliged to offer thatbetter price to all shareholders (best price rule).

Conditions

The Bidder may make a Tender Offer subject to certain conditions, provided theseconditions are not virtually impossible to be fulfilled or their realisation lies in the control ofthe Bidder. Over time, the TOB has established an extensive practice as to thepermissibility of conditions. Common types of conditions accepted by the TOB include thefollowing:

condition that at least 66.67% of all issued shares of the Target Company betendered to the Bidder; a higher threshold, for example, 90% of all issued shares,

would usually not be permissible unless the Bidder already held a substantialnumber of shares of the Target Company prior to the Tender Offer;

conditions that the Target Companys assets and/or earnings shall not beadversely affected by 5% or more of turnover and 10% or more of consolidatedequity, EBIT or EBITDA (MAC Clauses);

condition that the competent competition authorities have given all approvalsand/or have granted all clearances without requiring either of the parties involvedto meet any additional conditions, requirements, or to fulfil obligations that wouldhave a financial impact comparable to that provided for in MAC Clauses.

conditions aimed at establishing the Bidder as new (majority) owner, such as the

registration of the Bidder in the Target Companys share register and the electionof new board members of the Target Company appointed by the Bidder;

condition that new shares necessary to facilitate an exchange offer be issued andthat such capital increase be registered with the relevant authorities (commercialregister) and/or listed with the relevant stock exchange.

Mandatory Offers may generally not be subject to conditions except for importantreasons, such as where an authorisation by a state authority is required, or a restrictionon exercise of voting rights is provided for in the articles of incorporation of the TargetCompany. The TOB may only permit conditions such as the entry of the Bidder in theshare register of the Target Company with voting rights, regulatory approvals and theabsence of a material adverse change affecting the Target Company.

Review of Tender Offer by Independent Review Body and TOB

Prior to the publication of the Prospectus, it is examined by an independent review body(Prfungsstelle) to be appointed by the Bidder. Only licensed securities dealers andapproved auditors may act as review bodies. The review body must ascertain whether theProspectus is in compliance with the SESTA and its implementing ordinances and reportto the TOB for its consideration.

There is no requirement to submit the offer documentation to the TOB prior to itspublication. However, usually the Bidder would submit the draft of the Pre-announcementand/or the draft Prospectus to the TOB for preliminary review. This avoids later public

corrections for the Bidder in case the TOB does not consider the documents to be incompliance with the Takeover Regulations.


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Unless the Bidder has already filed for preliminary review, it must file the Prospectus withthe TOB no later than the date of publication. The TOB reviews the Prospectus andissues its decision generally within a few days. If the TOB is of the view that theProspectus is not in compliance with the Takeover Regulations, the Bidder must publishan addendum to the Prospectus.

Offer Period and Acceptance of Tender Offer

Cooling Period

A Tender Offer cannot be accepted for the first ten exchange trading days following itspublication. During this so-called cooling period, the Board of the Target Company mustprepare a report ("Board Report") to its shareholders (in a friendly takeover already donein the pre-offer-stage and integrated into the Prospectus), and the TOB examines theTender Offer documents and issues a decision. Also, the cooling period shall allowQualified Shareholders to request party status in the Tender Offer proceeding.

The TOB may extend or reduce the length of the cooling period and may relieve theBidder of the cooling period completely if appropriate.

Offer Period

In general, the Tender Offer must remain open during an offer period ("Offer Period") ofno less than 20 and no more than 40 exchange trading days.

At the end of the Offer Period, the Bidder has to publish the interim result of the TenderOffer and to state whether the conditions of the Tender Offer have been satisfied orwaived. If the Tender Offer is successful, the Bidder must extend the Tender Offer periodfor another ten exchange trading days (additional acceptance period).

Thereafter, the final result is published by the Bidder.

Settlement

As a rule, the settlement date of the Tender Offer must be no later than ten exchangetrading days after the end of the additional acceptance period.

Squeeze-out and Delisting

Subsequent to the completion of a Tender Offer, the Bidder has the following squeeze-out and de-listing options, depending on the outcome of the Tender Offer:

Squeeze-out according to Arti cle 33 SESTA

If the Bidder holds more than 98% of the voting rights of the Target Company, it may,within three months after the end of the additional acceptance period, request at courtthat the outstanding equity securities of the Target Company be cancelled. Uponapproval from the court, the Target Company may re-issue the cancelled equity securitiesand allot them to the Bidder against payment of the Offer Price to the previous holders ofthe cancelled equity securities.

Squeeze-out merger according to the Swiss Federal Merger Act

If the Bidder has acquired 90% or more of the voting rights of the Target Company, it mayconsider initiating a squeeze-out merger pursuant to the Swiss Federal Merger Act. In thismerger procedure, the Bidder forces the remaining minority shareholders out of theTarget Company against payment of an adequate cash consideration. In practice, the

cash consideration is generally equal to the Offer Price, but not strictly defined.


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De-listing

While it is the competence of the Board of the Target Company to apply for a de-listingfrom the SIX, after a successful Tender Offer, de-listing is de facto a decision of theBidder. The SIX or other Swiss exchange has to formally approve such a de-listingdecision, but there is no provision requiring that the free-float of the shares of the Target

Company has fallen below a certain minimum level.

LIFECYCLE OF A TENDER OFFER

The following chart shows a standard timetable of a Swiss Tender Offer:

Timing Action / Event Responsible

X Pre-announcement of Tender Offer

(including price) in electronic media

(not mandatory)

Bidder

X + 3 exchange

trading days ("TD")

Publication of Pre-announcement in

newspapers

Bidder

prior to publication

date of Prospectus

Submission to and review of the

Prospectus by review body incl.

review report

Bidder / Review

Body

prior to or on the

publication date of

Prospectus

Filing of Prospectus with the TOB for

examination and decision

Bidder / TOB

prior to or afterpublication date of

Prospectus

Formal decision relating to thecompliance of the Tender Offer with

Takeover Regulations

TOB

X + up to 6 weeks

(max.)

Publication of Prospectus

Latest day for filing of Prospectus

with TOB

Bidder

Publication date

(Prospectus)

Start of cooling period (10 TD) (if not

extended, reduced or waived by

TOB)

Publication date + 10

TD(= Offer period first

day)

Start of offer period: minimum

duration 20 TD and max. 40 TD

Publication date + 15

TD

Latest day for publication of Board

report (if not already integrated in

Prospectus)

Board of Target

Company

Offer period first day +

20 TD up to 40 TD

End of offer period

End of offer period + 1

TD

Announcement of provisional interim

result

Bidder


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Timing Action / Event Responsible

End of offer period + 4

TD

Publication of interim result

Notification by Bidder whether

the Tender Offer is successful

(fulfilment / waiver of conditions)

Start of additional offer period

(10 TD)

Bidder

Publication of interim

result + 10 TD

End of additional offer period

End of additional offer

period + 1 TD

Announcement of provisional final

result

Bidder


period + 4 TD

Publication of final result of Tender

Offer

Bidder


period + 10 TD

Settlement of Tender Offer Bidder


period + up to 3

months

Filing of squeeze-out action with

competent court; takes generally 3 to

5 months

Bidder

After squeeze-out

proceeding

Request for a de-listing with

admission board of SIX

Publication of de-listing in

newspapers

De-listing after squeeze-outproceeding may be as early as

5 TD after publication

Target

Company

DUTIES OF THE BIDDER

Launch of a Tender Offer / Put up or Shut up-Rule

The Bidder may reveal its intentions through direct publication of a Prospectus or, prior tothat, in the form of a Pre-announcement.

Public communications of the Bidder regarding a (potential) Tender Offer prior to thepublication of a Pre-announcement or a Prospectus do not qualify as informal Pre-announcement. However, Bidders should be aware that the public announcement by aparty that it is considering making a public takeover bid may already triggerconsequences under Takeover Regulations. Following such a communication, the TOBcan require the potential bidder to either publicly (i) announce a corresponding offer, or (ii)announce that within the next 6 months, it will not submit a public offer or exceed thethreshold triggering a mandatory offer (put up or shut up-rule).

Publication of Prospectus

The primary obligation of the Bidder is the publication of a Prospectus that is correct andcomplete (see also at Section "Tender Offer Procedure" above).


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Equal Treatment of Shareholders

In general, the Bidder is obliged to extend the Tender Offer to the holders of all classes oflisted equity securities of the Target Company and to grant equal treatment to allsecurities and all financial instruments included in the Tender Offer (including non-listedequity securities targeted in the Tender Offer).

Equal treatment means, in particular, that the Offer Prices of the various classes of equitysecurities and financial instruments are proportionate to each other. Further, theProspectus should explain how the Offer Price among the various classes of equitysecurity and financial instruments was determined.

Co-operation with TOB

The TOB may request the Bidder, but also the Target Company and QualifiedShareholders, to provide all information and documents necessary for the TOB to ensurecompliance with the Takeover Regulations.

Reporting Obligations

From the moment a Tender Offer is announced until the end of the statutory extension ofthe acceptance period, the Bidder, the Concert Parties and the significant shareholdersholding more than 3% of the voting rights of the Target Company must report allacquisitions and sales of equity securities in the Target Company and, as the case maybe, in the company whose securities are offered in an exchange offer.

Impact on Concert Parties

The obligations of the Bidder relating to transparency, equal treatment of shareholders,fairness and reporting of transactions also apply to all Concert Parties of the Bidder(including the Target Company if the Bidder and the Target Company have agreed on theoffering and the terms and conditions of a Tender Offer based on a TransactionAgreement).

DUTIES OF THE TARGET COMPANY

Report of the Board of the Target Company

A tender offer is considered friendly if it is launched with the consent of the Board of theTarget Company. It may also be launched without such support (unfriendly or hostile). Ineither case, the Board of the Target Company must issue a Board Report to theshareholders stating its position on the Tender Offer. In preparing the Board Report, theBoard may seek independent advice and particularly base its assessment on a fairnessopinion rendered by a qualified independent valuation expert (such as investment banks,corporate finance advisors or audit companies) pre-approved by the TOB.

In case of a friendly Tender Offer, the Board Report is typically integrated and publishedin the Prospectus. Furthermore, a publication in the electronic media and newspapers isrequired.

Content of the Board Report

The Board Report has to be correct and complete and must contain all informationnecessary to allow all shareholders of the Target Company to make an informed decisionas to the acceptance or refusal of the Tender Offer. This means in particular the following:

objective examination of the Tender Offer, in particular as to whether theintended takeover is advantageous for the Target Company, the shareholders at


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large and other stakeholders and whether the Offer Price seems appropriate andfair;

disclosure of the intentions of significant shareholders (that is, shareholdersowning more than 3% of the Target Companys voting rights), to the extent thatthe Board of the Target Company has knowledge thereof;

disclosure of the conflicts of interest of the members of the Board of the TargetCompany and of the senior management, for example, information regardingrelationships with the Bidder, whether any of the Board members was elected onthe proposal of the Bidder, etc. as well as information as to the measures takento eliminate any potential negative effect of such conflicts on the shareholders(such as, e.g. abstention or fairness opinion);

indication of the consequences the Tender Offer will have for the individualmembers of the Board of the Target Company and for the senior management,also in relation to the remuneration they receive upon continuing or terminatingtheir activities;

publication of any information relevant to the shareholders of the TargetCompany (even if this information could be delayed under the ad-hoc publicityrules, that is, Article 53 of the SIX listing rules of 12 November 2010);

indication of defence measures, if such are planned;

issuance of a recommendation or rejection or mere enumeration of theadvantages and disadvantages (without recommendation) of the Tender Offer,each time with comprehensible analysis of the substantial considerations;disclosure of the number of votes cast for and against the Boards position.

The TOB may approve that information required to be included in the Board Report maybe omitted if the auditors of the Target Company certify to the TOB that this is justified by

a clearly overriding interest of the Target Company in keeping the informationconfidential.

Interim Financial Report

Based on the practice of the TOB, the Board of the Target Company is obliged to issuean interim financial report if more than six months have passed between the accountingdate of the last published annual or interim report of the Target Company and the end ofthe Offer Period.

Publication of the Board Report

The Board Report may be published either in the Prospectus or separately no later than15 exchange trading days after publication of the Prospectus in at least the same twonewspapers in which the Prospectus was published and on at least two principalelectronic media that provide stock market information (financial information providers).

Duty to Update the Board Report

The Board of the Target Company has to publish a new Board Report with everymodification of the Tender Offer. This Board Report can be brief and be publishedtogether with the modified Tender Offer.

Further, there is a duty to update the Board Report with respect to (new) informationwhich, because of its relevance for the decision of the shareholders of the Target

Company, should have been published in the initial Board Report had it been known atthat point in time.


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Sanctions

If the Board of the Target Company fails to issue a Board Report or to publish the BoardReport, or if the Board Report is incorrect or incomplete, the responsible members of theBoard of the Target Company may be fined. Furthermore, the Board of the TargetCompany may be liable for damages under general principles of corporate law if it is held

to be in breach of its statutory duties in connection with the preparation or publication ofthe Board Report.

Reaction to Competing Offers

As a rule, the Board is obliged to grant equal treatment to all Bidders, in particular withrespect to the disclosure of information on the Target Company. This rule is subject totwo important limitations:

first, the Board of the Target Company may recommend that the shareholdersaccept one Tender Offer and reject the other(s);

secondly, the Board of the Target Company may afford one Bidder preferential

treatment if this is justified by an overriding interest of the Target Company andauthorised by the TOB.

Disclosure of non-public Information to the Bidder

Subject to the equal treatment obligations of the Target Company in Competing Offersituations as outlined above, the Board of the Target Company is under no duty toprovide any non-public information about the Target Company to the Bidder, save forinformation relevant to influence the stock price which must be disclosed in the BoardReport.

Defence Measures

Measures taken by the Board of the Target Company

Pursuant to Article 29 SESTA, the Board of the Target Company is restricted in its abilityto implement defence measures against a Tender Offer from the date of publication of aPre-announcement or a Prospectus until the publication of the final result of the TenderOffer, unless it has the shareholders' approval.

Prior thereto, defence measures are permitted even if the Board of the Target Companyknows that a Tender Offer is imminent. While the Board of the Target Company maycontinue to take the position that the Tender Offer is not attractive, it must not takemeasures that alter the Target Companys assets or liabilities to any significant extent.An alteration of 10% or more of the balance sheet total is deemed to be significant.

In particular, the following actions are not permitted without shareholders' approval(pursuant to Articles 36 and 37 Ordinance of the TOB on Public Takeover Offers):

sale or acquisition by the Target Company of business or intangible assets worthmore than 10% of its assets (based on the last consolidated annual or interimaccounts);

sale or encumbrance of such parts of the Target Companys business orintangible assets that have been designated by the Bidder as being among theprincipal objects of the Tender Offer (crown jewels);

golden parachute agreements with members of the Board of the Target

Company or senior management involving unusually high compensation;


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issue of new shares, convertible debt or warrants without granting the existingshareholders a pre-emptive right (as an exemption to this rule, the Board of theTarget Company may be authorised in advance by the shareholders to effectsuch an issue);

off-balance sheet transactions that entail significant risks or obligations; and

any other defence measures that constitute a manifest violation of Swisscorporate law.

Shareholders Resolutions on Defence Measures

The Takeover Regulations do not restrict the competencies of the Target Companysshareholders meeting which may resolve upon defensive measures even after publicationof a Pre-announcement or Tender Offer. Shareholders resolutions on defence measuresare permitted as long as they do not manifestly violate applicable corporate law.

The shareholders resolution authorising the Board of the Target Company to implementdefence measures may generally be passed before or after publication of a Tender Offer.

Accordingly, the shareholders may authorise the Board of the Target Company inanticipation of a potential Tender Offer to take up defence measures mentioned above.

Reporting Obligations

The Target Company must report to the TOB any defence measures taken after thelaunch of a Tender Offer. The TOB may state, in its recommendation on the Tender Offer,that a defence measure adopted by a Target Company constitutes a violation ofapplicable corporate law. Moreover, the shareholders of the Target Company maypetition the courts of civil law to enjoin the Target Company from implementing such adefence measure.

Defence Measures in the Articles of Incorporation

The Target Companys articles of incorporation may contain provisions with defensivecharacter. The shareholders' meeting is at all times allowed to resolve with the applicablequorum on the implementation of such provisions in the companys articles ofincorporation. Certain resolutions, including some of the resolutions mentioned below,require a majority of two thirds of the votes represented.

The following provisions in the articles could work as defence measures:

share transfer restrictions, for example limitation of voting rights per shareholder;

qualified quorum for the cancellation of certain provisions of the articles, for

example share transfer restrictions;

shares with enhanced voting rights;

provisions requiring a certain percentage of voting rights represented in theshareholders' meeting in order to pass resolutions;

a provision putting only a certain number of board members up for re-election in agiven year (staggered board); however, it is anticipated that as from 1 January2014 no staggering will be possible anymore, as an amendment to the corporatelaw will require that board members are elected annually;

authorised or conditional share capital with exclusion of pre-emptive rights which

the Board of the Target Company may use in the event of a Tender Offer.


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In practice, however, the effect of such defensive measures is mitigated to a substantialextent, in that the Bidder regularly makes its public takeover bid conditional on priorrepeal of the defensive provisions in the articles of incorporation and on gaining control ofthe Board of the Target Company.

SPECIFIC TOPICSMandatory Tender Offers and Opting up/Opting out

Pursuant to the SESTA, anyone who holds shares representing more than 33.33% of thevoting rights of a Target Company, whether or not such rights may be exercised, mustsubmit a Tender Offer for all listed equity securities in such Target Company. MandatoryTender Offers may not be subject to conditions, except for important reasons, such aswhere official authorisation is required, or a transfer restriction or a restriction on exerciseof voting rights is provided for in the articles of incorporation of the Target Company.

The articles of incorporation of Target Companies may provide for a higher threshold ofup to 49% (opting up) or may declare the Mandatory Offer obligations to be inapplicable

at all (opting out). If an opting up or opting out clause shall be introduced in the articles ofincorporation after the listing of the Target Company, there are strict transparency andmajority requirements in the shareholders meeting to be complied with. The TOB's caselaw on this aspect has seen several changes of direction in recent years and must betaken into careful consideration when preparing such an introduction.

Exemptions from a Mandatory Tender Offer

Upon formal application, a party may request the TOB to review a planned transactionand state by way of formal decision (i) whether the conditions for the grant of anexemption from the obligation to make a Tender Offer are fulfilled or (ii) to declare that theobligation to make a Tender Offer does not exist.

Exemptions from the obligation to make a Tender Offer may be granted in particular inthe following cases:

where the transfer of voting rights occurs within a shareholders group organizedpursuant to an agreement or otherwise. In such case, only the group as suchshall be subject to the obligation to make an offer;

where the threshold of 33 1/3% is exceeded as a result of a decrease in the totalnumber of voting rights in the Target Company;

where the threshold is exceeded only temporarily;

where the equity securities are acquired without consideration or upon exerciseof pre-emptive rights pursuant to a share capital increase;

where the equity securities are acquired for reorganization purposes;

if the acquirer cannot control the Target Company because the holding of votingrights of another individual or group is higher; and

if there is an indirect change of control regarding the Target Company which isnot the main purposes of the transaction and the interests of the publicshareholders the Target Company are preserved.


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Party Status and role of Qualified Shareholders

A Qualified Shareholder, i.e. a shareholder who provides evidence of a holding of at least3% of the voting rights in the Target Company, whether exercisable or not, as per thedate of the publication of the Tender Offer (by Pre-announcement or Prospectus) mayrequest the TOB to grant party status by way of petition or by way of objection against the

first decision issued by the TOB on the Tender Offer. In recent years QualifiedShareholders have in particular challenged the calculation of the (minimum) Offer Priceby the Bidder. Therefore, a Bidder is well advised to take the existence and potentialintentions of Qualified Shareholders into consideration when planning a Tender Offer.

Once granted, the party status of the Qualified Shareholder remains valid in relation to(the challenging of) any further decisions issued in connection with the respective TenderOffer, provided that the Qualified Shareholder continues to hold 3% or more voting rightsof the Target Company during any proceedings before the TOB or before the FINMA (butis not required before the Federal Court of Administration).

Competing Tender Offers

Where a competing Tender Offer ("Competing Offer") is launched, the TakeoverRegulations aim to ensure the Target Companys shareholders are free to choose whichTender Offer they prefer, and to guarantee the equal treatment of all Bidders by creatingan auction environment.

Based on the principle of equal treatment of Bidders, the Board of the Target Companymust provide the same information and grant the same access to a data room to allBidders, regardless of whether they are friendly or hostile. The Offer Period for all TenderOffers is co-ordinated by the TOB so that the Target Companys shareholders are notforced to decide on the initial Tender Offer prior to the expiration of the Offer Period ofany Competing Offer.

Once a Competing Offer is made, the initial Bidder may revise its Tender Offer until five

exchange trading days before the lapse of the Offer Period for the Competing Offer.However, any such amendments to the initial Tender Offer must be in favour of theshareholders of the Target Company, e.g. result in an increase of the Offer Price.

The Board of the Target Company is allowed but under no obligation to seek afriendly Bidder (white knight).

Ad hoc Publ ic ity Rules

In a public takeover situation, ad hoc publicity rules need to be considered by all listedcompanies involved. The SIX Listing Rules addresses ad hoc publicity requirements inArt. 53 of the SIX Listing Rules. Based thereon, an issuer must inform the market of anyprice-sensitive facts within the realm of its activities, not being within the publicsknowledge. Facts qualify as price-sensitive when they are capable of triggering asignificant price change.

Occurrences which usually require immediate disclosure include:

mergers, takeovers, substantial acquisitions or dispositions, or majororganisational changes;

material changes in the issuers earnings;

board decisions proposing a suspension of, or drastic reduction in, dividendpayments, illiquidity or suspension of payments;

important changes in the normal course of the issuers business; and


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changes in the board of directors, senior corporate management or auditors.

The issuer has to disclose price-sensitive facts as soon as it becomes aware of theirexistence. The release may only be deferred if such facts are based on a plan or decisionof the issuer, and if disclosure would prejudice the issuers legitimate interests. In thiscase, the issuer must make sure that the information is kept confidential.

Duty of shareholders to disc lose significant shareholdings

Under the disclosure rules of Art. 20 SESTA, a shareholder has to disclose itsshareholdings if it acquires shares or financial instruments (such as share acquisition orshare sales rights) of a Target Company and thereby attains or exceeds the percentagesof 3, 5, 10, 15, 20, 25, 33.33, 50 or 66.66 percent of that Target Companys voting rights.Target Company is to be understood as (i) Swiss corporations that have at least oneclass of equity security listed on a Swiss stock exchange or as (ii) foreign corporation thathave a main listing on a Swiss stock exchange (see the analogous rule under theTakeover Regulations at Section "General Legal Framework" above).

The disclosure obligation also applies to beneficial owners indirectly acquiring stakes in

Target Companies and to shareholders acting in concert. Furthermore, certain financialinstruments relating to derivative transactions (such as the granting, the acquisition or thedisposal of put options, call options and conversion rights) must also be disclosed if thestatutory thresholds are reached or exceeded. Disclosure must be made irrespective ofthe settlement terms of such derivative transactions, i.e. in the event of both, physicalsettlement and cash settlement. To ascertain whether a threshold is reached a Bidder'spositions in shares and in other financial instruments relating to derivative transactionsmust be aggregated.

Documents

Takeover Guide - Switzerland.pdf