going private transactions in going private transactions in france

GOING PRIVATE TRANSACTIONS IN
FRANCE
Alain Pietrancosta
October 26 26, 2009

Contents
Legal g definition
Current status of going private transactions in France
Conditions of voluntary delisting
2

LEGAL DEFINITION

“TRANSACTIONS”?
Voluntary decisions of the issuers or their controlling
shareholders.
Exclusion of some unusual types of delisting:
Delisting g in connection with reorganisation/winding g g up p pprocedures.
2002 2003 2004 2005 2006 2007 2008
13 12 22 9 6 7 7
OOn average 15% of f all ll delistings. d li ti
Delisting ordered by the stock exchange operator due to the illiquidity
of the market for shares or the issuer breaching its obligations obligations.
Extremely rare.
4

“GOING PRIVATE”?
A) ) A delisting g is obviously y necessary y
Transactions which do not result in all the shares of the
company being taken off a stock market should be
disregarded.
Exclusion of: f
A delisting whilst retaining a prior listing (multi-listing
(
scenario)
A delisting g followed by y admission to another market
(transfer of listing scenario)
5

B) But is delisting sufficient?
UUp until til 2009 2009, th the answer tto thi this question ti was no:
Legal explanation: delisting did not automatically result in the
declassification of an issuer from the category of
publicly-held issuers.
Three additional conditions to be met:
1) the issuer’s shares have not been or are no longer traded on a
regulated market;
2) the shares, having been the subject of a public offering, are held
by fewer than 100 people;
3) the shares have not been the subject of a public offering during the
preceding year or been the subject of a buyout offer, followed by a
squeeze-out.
q
6

The 2009 legislative change:
Removal of the status of publicly-held issuers by
Ordinance no.2009-80 of 22 January 2009 relating to public
offers.
Reasons:
Alignment g of French law with EU law; ;
Competitiveness of French law.
Result: replacement of the legal distinction between
companies who have made a public offering and those who
have not, with a distinction between companies listed on the
stock t k exchange h and d all ll other th companies. i
7

Sub-division of the listed companies category according to
the legal status of the market where their shares are listed:
Regulated market: NYSE-EURONEXT
Non-regulated but “organised” markets: ALTERNEXT
Non Non-regulated regulated and non non-“organised” organised markets: MARCHÉ
LIBRE
As listing on a regulated – or even organised – market gives
the issuer a particular status, delisting now causes it ipso
jure to lose such status (even where delisting without all the
share capital being held by one party).
8

CURRENT STATUS OF GOING
CURRENT STATUS OF GOING
PRIVATE TRANSACTIONS IN FRANCE

Increase in voluntary delistings
Total delistings:
2000-2008: around 550 companies delisted from the Paris
markets.
2000 2001 2002 2003 2004 2005 2006 2007 2008
87 64 76 63 55 56 50 47 45
Domain of regulated markets: on Alternext 2 delistings in
2006, 2 in 2007 and 3 in 2008 (compared to 227, 224 and
258 on AIM).
Delisting rate relatively steady, fluctuating at around 7%.
10

Increase in voluntary y delistings: g by y far the largest g
category of delistings (over 80% of delistings since
2003):
2002 2003 2004 2005 2006 2007 2008
55% 80% 89% 84% 88% 80% 82%
11

Emergence g of PtoP transactions in the early y 2000’s:
Strong potential: 55% of French companies with a stock
exchange capitalisation of less than € 100 million. million
But less prevalent in France than in the US or even
the UK:
Fewer than 10 transactions a year, i.e. less than 10% of
all delistings.
12

PUBLIC TO PUBLIC TRANSACTIONS
Overview of “Public to Private” Transactions in France since 2000
P2P involving financial buyers
III P TO P CASE STUDIES
Announced
T A i
Target Value
( €)
% held by the
main
h h ld (2)
ment date Target Acquiror (m€) shareholder
% secured
before the
i (4) N
% held after
the
i
Spot
i
Premium
(Announcement - 1
h)
Premium
(Announcement -
3 h )
(2) transaction (4) Nature transaction premium month) 3 months)
24/07/2006 PagesJaunes Groupe Kohlberg Kravis Roberts & Co. –
6119 54% 54% Gar. Cours Impending -0,18 -8,41
SA
KKR
12/05/2006 TLD Group SA Axa Private Equity 81,45 85,45% 95,03% OPA 98,85% -8,24 1,74
19/03/2006 Elior Holding Bercy Investissement SAS 2 257,1 19,34% 19,34% OPA 95,49% 3,47 4,69
24/02/2006 Alain Afflelou 3 AB Optique Développement SAS 545,641 39% 61,10% OPA 76,75% 22,22 20,39
14/12/2005 APRR Eiffarie 6890 74,66% 74,66% Gar. Cours 81,4% 37,1% 37,1% 39,9%
29/12/2005 Algeco g Ristretto SAS (TDR ( Capital p
Partnerships)
322,58 53,50% 66,98 Gar. Cours 98,89% 40,7% 41,9% 41,%
22/11/2005 Pochet SA Financière Prato SAS 234 97,03% 97,03% OPRO 99,65% 18,18 18 18,1
20/09/2005 Rocamat Rocafin (LBO France SA) 11 46,56 74,66% OPAS 77,66% 20 21,6 21,5
22/07/2005 Taittinger Star GT 2362,7 68,9 68,9 Gar. Cours 97,42% 14,3% 8,6% 22,3%
22/07/2005 Société Louvre Star GT Acquisition / G. Taittinger 1691,4 44,1% 65,5% OPAS 96,4% 22,2% 20,3% 26,7%
12/07/2005 Alain Manoukian BCBG Max Aziza Group Europe 64,5 63,1% 89,3% Gar. Cours 98,4% 1,6% 3,3% 17,3%
08/07/2005 / / Buffalo Grill Colonyy 200,0 , 49,5% , 75,5% , OPAS 82,9% , 19,0% , 14,0% , 11,0% ,
02/06/2005 Groupe Philippe
Bosc
Atria Capital Partenaires 48,5 96,17% 96,17% OPRO 97,70% 28,17 36,40 32,75
23/03/2005 Rexel Ray Acquisition SCA 3150,1 73,45 73,45 Gar. Cours 98,52% 6,9% 7,5% 10,6%
01/03/2005 Colectica Engelhard Corp 61,6 58,56 77,78% Gar. cours 98,61% 2,8 12,1 19
08/02/2005 Parcours SA FCPR AtriA Private Equity Fund II 243,41 58,65 58,65 OPAS 95,90% 22,1 29,00% 31,73
31/01/2005 Camaïeu Financière Addax 451,3 28,9% 39,8% OPAS 40,1% 13,0% 15,6% 18,4%
08/04/2004 Vivarte PAI 1177,0 71,0% 69,4% (9) OPAS 99,1% 0,5% 1,2% 7,4%
09/07/2004 Sp Sportfive rtfi Ad Advent t Intl. I tl Corp C rp 210 210,00 97 97,8% 8% 97 97,8% 8% OPAS 98 98,0% 0% 21 21,3% 3% 50 50,6% 6% 18 18,3% 3%
28/11/2003 Legris Industries Frégate 223,3 65,3% 61,3% Gar. Cours 97,1% 38,9% 43,8% 38,3%
14/11/2003 Mecatherm Financière Impala 108,0 53,8% 53,8% OPAS 88,0% 2,9% 2,8% 13,7%
25/07/2003 FPEE Atria 108,7 74,9% 74,9% OPAS 95,0% 8,7% 15,0% 22,1%
23/07/2003 Grandvision PAI Partners 636,3 22,9% 22,9% OPAS 35,3% 15,1% 22,9% 37,7%
20/06/2003 Petit Boy Banque de Vizille 14,4 86,3% 86,3% OPAS 95,5% 37,9% 42,1% 40,7%
06/06/2003 / / AES Labo. ABN Amro 122,8 49,6% 49,6% OPAS 95,2% 4,2% 15,6% 26,5%
In blue: 95% threshold missed after initial offer
14
(1) Transactions realized after the main offer at the same price and the same premium as
compared to the share price before the first offer
(2) incl incl. Treasury Shares
(3) excl. operations on MB Electronique, Legrand and Sportfive
(4) incl. Contribution engagement
(5) Premium announcement - 6 months
(6) Voting rights > 95%
(7) Premium announcement - 20 days
(8) Premium announcement - 60 days
(9) Vivarte is acting in concert with 2 shareholders holding 14 14%
13

PUBLIC TO PUBLIC TRANSACTIONS
Overview of “Public to Private” Transactions in France since 2000
P2P involving financial buyers
III P TO P CASE STUDIES
% held by the % secured
% held after
Premium
Premium
Announce- Announce
Target Value
main before the
the Spot (Announcement - 1 (Announcement -
ment date Target Acquiror
(m€) shareholder (2)
before the
transaction (4) the
Spot (Announcement 1 (Announcement
Nature transaction premium month)
3 months)
11/12/2002 Legrand Fimaf SAS 3699,0 98,1% 98,0% OPAS 90,0% -2,9% -2,2% 1,2%
14/11/2002 Provimi PAI, CVC 345,0 53,7% 53,7% Gar. Cours 74,1% -8,0% -8,0% -9,0%
25/11/2002 Corneal Labo. Financière Helios 22,9 70,2% 73,2% OPAS >95% (6) 48,7% 65,56% (7) 50,47% (8)
10/10/2002 Philippe Bosc Atria 50,0 70,5% 70,5% OPAS 85,9% 8,3% 5,3% 2,7%
13/09/2002 Cora Industries Fin. CORA 26,0 87,3% 87,3% OPAS 99,5% 26,8% 31,5% 39,6%
14/03/2002 Labeyrie Industri Kapital 192,9 61,3% 66,7% OPAS 98,9% 9,2% 9,2% 14,0%
12/03/2002 Créatifs Alcyon Finance 19,1 59,9% 71,2% OPAS 99,5% 24,1% 30,7% 37,3%
03/07/2001 Marc Orian CLAM Private Equity 102,4 69,6% 69,6% OPAS 98,5% 21,5% 19,4% 19,7%
09/05/2001 Deville Marengo et Financière Forest 3,3 84,9% 85,1% OPAS 97,0% 25,0% 25,0% 36% (5)
29/12/2000 SIACI Marot Participations 136,0 39,9% 94,0% OPAS 99,8% 24,0% 24,0% 29,0%
01/12/2000 Fives Lille Industri Kapital 235,1 29,3% 50,2% OPAS >95% (6) 20,2% 19,4% 23,4%
28/11/2000 CMM Industries Tisza 13,2 50,9% 73,3% OPAS 97,5% 16,4% 13,4% 15,1%
31/06/2000 De Dietrich ABN Amro 451,2 23,1% 31,7% OPAS 94,9% 4,0% 8,9% 14,5%
09/06/2000 BD Lease BNP Paribas 16,6 61,4% 61,4% Gar. Cours 87,4% 10,3% 16,4% 23,7%
08/06/2000 Nordon Fives Lille 16,0 55,0% 74,9% OPAS 95,7% 65,6% 32,3% 6,1% (5)
18/02/2000 Affiche Europenne SG European Private Equity 24,2 37,6% 65,8% OPAS 98,6% 1,4% 10,0% -0,9%
04/02/2000 MB Electronique q NatWest Private Equity q y( (Polly y SA) )
31,7 98,0% 98,0% OPAS 98,8% -20,00% -18,9% -14,70%
In blue: 95% threshold missed after initial offer
15
Adjusted Average (3) 58,1% 65,7% 90,3% 17,2% 17,1% 19,5%
(1) Transactions realized after the main offer at the same price and the same premium as
compared to the share price before the first offer
(2) () incl. c.TeasuyS Treasury Shares aes
(3) excl. operations on MB Electronique, Legrand and Sportfive
(4) incl. Contribution engagement
(5) Premium announcement - 6 months
(6) Voting rights > 95%
(7) Premium announcement - 20 days
(8) Premium Pe u announcement a oucee t-60 60 days
(9) Vivarte is acting in concert with 2 shareholders holding 15 14%
14

PUBLIC TO PUBLIC TRANSACTIONS
42
Overview of “Public to Private” Transactions in France since 2000
P2P not involving financial buyers
Announcement
Date
Target Acquiror
Target
Value (m€)
% held by the
main
shareholder (2)
% secured
before the
operation (4)
Nature
% held after
the operation
Public Offer
Spot
Premium
Premium
(Announceme
nt - 1 month)
APPENDIX
Premium
(Announceme
nt -3 months)
20/09/2005 SOAEO Air Liquide 1719,8 86,8% 86,8% OPS 98,2% 10,0% 11,0% 15,0%
22/03/2005 Ski Skis Rossignol R i l Qikil Quicksilver 236 236,55 44 44,5% 5% 38 38,3% 3% OPA 95 95,3% 3% 06% 0,6% 70% 7,0% 11 11,1% 1%
05/04/2005 Liberty Surf Telecom Italia 261,7 94,9% 94,9% Gar. Cours 98,0% -2,8% 0,2% 8,1%
29/03/2005 Galeries Lafayette Semad 3144,5 31,6% 29,5% OPAS 96,5% -2,8% 7,2% 10,9%
14/01/2005 Marionnaud Parfumeries AS Watson 407,8 19,8% 28,7% OPA 94,9% 37,1% 35,8% 24,2%
25/11/2004 Teisseire France Fruité Entreprises 89,4 61,9% 83,3% OPAS 97,7% 8,3% 17,0% 6,1%
24/11/2004 European Cargo Services World Cargo Services 88,1 80,8% 95,3% Gar. Cours 99,4% 16,7% 21,1% 12,1% (4)
19/11/2004 Crometal Norinco Holdings SAS 113,7 62,0% 81,1% Gar. Cours >95% (5) 28,6% 39,9% 28,3%
16/11/2004 OPTIMS Amadeus 31,2 30,0% 65,0% OPAS 96,1% 25,0% 35,0% 33,0%
12/08/2004 Norcan Lambla & Hannes 15,6 71,3% 71,3% OPRA 96,8% 20,5% 19,7% 20,0%
08/06/2004 Staci Main shareholder 42,5 77,6% 0,0% OPAS 95,9% 1,7% 2,6% 3,9%
01/03/2004 Consodata Axciom European Holdings Ltd 152,4 98,6% 98,6% OPAS 99,4% 9,0% 5,2% -19,8%
19/01/2004 Righini Main shareholder 8,2 91,4% 0,0% OPAS 99,3% 55,0% 62,6% 66,4%
11/09/2003 Brioche Pasquier Main shareholder 364,6 57,0% 0,0 OPRA 84,0% 6,1% 15,3% 19,8%
24/06/2003 SERF Main shareholder 6,0 91,4% 0,0% OPAS 97,8% 100,0% 106,2% 129,9%
16/06/2003 BOISSET Main shareholder 52,0 89,1% 0,0% OPAS 97,1% 146,0% 120,0% 105,8%
20/05/2003 NAF NAF Main shareholder 134,7 73,8% 0,0% OPRA 96,2% 18,9% 23,1% 25,7%
05/05/2003 Ubi Ubiqus Mi Main shareholder h hld 34 34,88 63 63,0% 0% 00% 0,0% OPRA 93 93,4% 4% 35 35,5% 5% 16 16,7% 7% 13 13,5% 5%
12/01/2003 AB Groupe Main shareholder 303,9 84,1% 0,0% OPRA 99,7% 62,2% 43,7% 41,2%
14/01/2003 Ferrand et Renaud FAB 10,8 50,1% 0,0% OPAS 86,7% 47,3% 47,8% 47,3%
26/11/2002 Cornéal Laboratoires Financière Helios 22,9 73,7% 73,2% OPAS 93,7% 48,7% 38,3% 6,1%
05/06/2002 Groupe Zannier Financière Zannier 466,2 55,7% 0,0% OPAS 99,2% 8,8% 9,1% 20,3%
20/12/2001 IMV Technologies Dirigeants & Fonds 42,2 62,8% 0,0% OPRA 99,7% 9,7% 10,5% 17,3%
13/12/2001 Waterair Groupac SA 33,2 80,9% 0,0% OPAS 99,3% 41,5% 55,3% 38,2%
29/11/2001 Fragrantia Holding M H. ASSOUS 3,9 85,3% 0,0% OPAS 97,9% 9,2% 153,0% 102,1%
17/01/2001 PPochet h AActionnaire i i maj. j 389 389,88 57 57,0% 0% 00% 0,0% OPRA/OPA 94 94,6% 6% 25 25,0% 0% 35 35,0% 0% 51 51,0% 0%
03/10/2000 Dal'Alu Dal'System 29,4 87,6% 0,0% OPAS 98,2% 34,4% 26,4% 26,3%
Ajusted Average (2)
(1) Operations realized after the main offer at the same price and the same premium as compared to the share price before the first offer
(2) excl. operations on Liberty Surf, Righini, Serf et Boisset
(4) Premium announcement - 6 months
(3) incl. incl Treasury Shares
(5) Voting rights > 95%
OPRA are in grey
69,0% 31,3% 96,3% 29,6% 35,7% 32,8%
42
15

Record high g of 11 in 2008 ( (4 in 2007). )
Reasons for these differences in scale:
shareholder structure of French listed companies;
legal technical obstacles of a legal and tax nature (need
to reach the 95% threshold).
16

Objectives of the companies delisting
Directors cite two main reasons:
1. Group restructuring (in two-thirds of cases):
streamline the group’s listing structures, as opposed to
organisational models based on multiple cascade
structures;
and/or integrate the business activities and
management t of f subsidiaries b idi i within ithi th the group.
17

2. Cost of listing (in one-half of cases):
IIncrease to the h overall ll cost of f going i public bli and d
remaining public.
Factors:
1) Increased constraints imposed upon listed
companies:
Financial constraints:
The market’s financial expectations in terms of profitability
and liquidity.
Potential litigation risks resulting from the listing.
18

Regulatory g y constraints resulting g from the need to
improve the transparency of the market and protect the
interests of investors:
IFRS;
Prospectus, Market Abuse, Transparency and Takeover bid
Directi Directives; es
Compliance with a corporate governance code of best
practices practices.
Greater impact on SMEs.
Estimated annual costs: 0.6% 0 6% to 11.5 5 % of the listing ii.e. e
€100,000 to €300,000.
19

2) ) Poor liquidity q y and low valuation of smallcaps- p
midcaps:
Analysts’ Analysts and institutional investors’ investors relative lack of
interest in SMEs.
Resulting in weak trading levels; low liquidity;
highly volatile market values; chronic undervaluing.
g
Difficulties for shareholders and the company’s
development. p
20

3) ) Availability y of alternative sources of finance:
development of private equity
Main advantages of private equity over stock
markets: proximity, valuation and information.
21

In this context, appeal of a going private transaction
for all parties involved:
target’s shareholders: better price for their shares;
managers: less time spent on financial communications;
focus on managing the company; more emphasis on
strategic t t i long l and d medium-term di t decisions; d i i executive ti
profit-sharing mechanisms;
companies: reduction of agency conflicts and costs
within the firm; non-disclosure of sensitive information to
competitors; simplification of certain transactions
(mergers; dissolution without liquidation; transfer of
registered g office overseas). )
22

Reactions of the financial markets: increased
competition with regards to technical listing costs;
restructuring transactions between markets;
development of alternative markets.
Reactions of the French government:
proposals made by the Ministre de l’Economie on 12
October 2009 to make Alternext more attractive to
SMEs;
proposal for a "Small BBusiness siness Act" before the
European Commission.
23

CONDITIONS OF VOLUNTARY
CONDITIONS OF VOLUNTARY
DELISTING

Restrictive conditions in France:
No equivalent of a US cash-out merger, a UK scheme of
arrangement arrangement, or a German cash-out cash out procedure approved
at a shareholders’ meeting.
Two situations unfold:
Voluntary delisting as a consequence: when the issuer
ceases tto exist i t as a legal l l entity; tit
Voluntary delisting as the main focus.
25

Voluntary delisting resulting from the issuer ceasing
to exist
1) Through merger rather than simple voluntary dissolution.
Infrequent in practice:
2002 2003 2004 2005 2006 2007 2008
8 3 9 6 2 14 4
i.e. on average, less than 10% of all delistings.
Modus operandi:
1) ) Exchange g for shares merger g
All mergers in France take the form of an exchange
for shares merger g ( (expression p of ggeneral pprotection
of
shareholders against expropriation measures).
26

2) A prior buyout offer?
Principle: the merger can be carried out autonomously,
without requiring a prior buyout offer.
EException: i the h requirement i of f a prior i bbuyout offer: ff
Originally, under limited conditions:
1) merger of the issuer into its controlling company;
and 2) such acquisition is likely to affect the rights and interests of
minority i it shareholders.
h h ld
Extension of scope to all sorts of mergers by the Law of August 4,
2008 2008.
Interpretation: legislative mismatch? or foreseeable rectification?
27

3) ) More often, merger g is used as a subsidiary y means of
delisting, where recourse to the squeeze-out happens to
be impossible.
Examples:
NYSE / Euronext;
Allianz SE / AGF;
Mittal / Arcelor.
28

Voluntary delisting as the main focus
Issuer’s initiative: delistingg granted g by y the stock
market operator at the request of an issuer, due to
the illiquidity of the market for the issuer’s shares:
Possible but rare situation.
CControlling t lli shareholders’ h h ld ’ initiative: i iti ti use of f several l
particular buyout/squeeze-out procedures,
depending on the type of stock market. market
Most common way of delisting.
29

A) ON REGULATED MARKETS
Two o procedures p ocedu es are a e used in tthe e go going g pprivate ate pprocess: ocess tthe e
buyout offer and the squeeze-out.
Percentage of the total number of delistings:
2002 2003 2004 2005 2006 2007 2008
40% 54% 60% 44% 46% 32% 65%
Common features:
Stock exchange procedures (not company law procedures):
controlling shareholder and minority shareholders face to face.
No approval from the shareholders at a general meeting meeting.
Common objectives: not to gain control but to take the
company private.
30

Distinction and independence:
Two different mechanisms:
Buyout: introduced in 1989, to protect minority shareholders
in circumstances where their interests in the company y are
negatively affected;
Squeeze-out: introduced in 1993, consisting of a legitimate
expropriation i ti of f minority i it shareholders h h ld bby th the controlling t lli
shareholder.
But long associated in French law:
Up until 2006, squeeze-out could only follow a buyout offer
triggered gg by y a 95% holding g in the target g company; p y;
Removal of this prerequisite in the 2006 Law implementing
the European Takeover bid Directive.
31

A) Duality of going private procedures
1) The traditional procedure: a squeeze-out preceded by a buyout
offer
Two possibilities for the controlling shareholder:
1) Reservation of the right to proceed with a squeeze-out after the offer, depending on
the results;
2) Automatic implementation on the closing of the buyout offer, whatever the results.
Impact on the conditions of the buyout offer:
Buyout offer in cash;
Guarantees on the valuation of securities.
IIn practice: ti
25% of cases: the controlling shareholder had held the 95% for some time;
75% of cases: buyout and squeeze-out preceded by a recent increase in the controlling
shareholder’s h h ld ’ hholding ldi iin the h company.
32

2) The new approach: squeeze-out within three months of any public
offer ff
Simplified conditions and procedure:
Possibility y of indemnification in securities (with ( a cash alternative); );
No new AMF authorisation required under certain conditions (squeeze-out in
cash, prior multiple criteria assessment, or squeeze-out following a voluntary
offer for control).
In practice: increase in this new type of squeeze-out:
2007 2008
Old-style squeezeout
7 8
New-style squeezeout
9 20
33

B) ) Shared problems p
1) The holding of 95% of the capital or voting rights of the issuer
Recent criticism regarding the level of the 95% threshold:
Grounds: increased financial costs, risk of greenmail.
Same criticism of the 95% threshold applied for tax consolidation.
So far, rejection of the proposal to lower it to 90%.
34

The search for practical means to secure the 95% or
alleviate the risk of falling short:
Large array of potential solutions, but all limited by law.
1° Public offer conditional upon the acquisition of the 95%:
Double limit: in law (for some kinds of offers) and in practice (for other
offers).
2° Price adjustments:
Decrease of the block price if the 95% threshold is not reached.
Problem of fairness.
Financial kicker for all shareholders if the 95% threshold is reached.
Accepted by the AMF in certain circumstances: cross-border industrial
transaction (Alcan on Pechiney, 2003); even in an LBO, under certain
conditions (Médiannuaire on Yellow Pages, 2006).
35

THE HOLDING OF 95% OF THE CAPITAL OR VOTING
RIGHTS OF THE ISSUER (Cont.) ( )
3° Filing a new public offer at a higher price;
4° Recourse to contribution agreements:
Key to success of PtoP transactions.
Not prohibited but efficacy constrained by the principle of the free play of offers
and counteroffers.
5° Acquisitions q of shares by y the controlling g shareholder outside the
offer period:
Great practical importance, when analysing PtoP precedents.
AAcquisitions i iti made d either ith th through h bl block k trades t d prior i tto a public bli offer; ff or on th the
stock market (stake-building).
Risk of greenmail from investment funds:
Several cases: Legris Industries (2003); Paribas Affaires Industrielles /
Grandvision (2003); Axa Private Equity / Camaïeu (2005); Buffalo Grill
(2005); APRR (2006); Alain Afflelou (2006)...
36

PUBLIC TO PUBLIC TRANSACTIONS
16
Selected “Failed” Transactions
TARGET
AFFLELOU
(Fili d M h 14th (Filing date: March 14 2006) th 2006)
APRR
(Filing date: February 24th 2006)
BUFFALO GRILL
(Filing date: October 7th 2005)
III P TO P CASE STUDIES
REASON FOR NOT REACHING 95%
UPFRONT SUBSEQUENT DEVELOPMENTS COMMENTS
Interlopers (hedge funds) holding
10% to 12% of the capital before
tender offer starts / other
interlopers buying in during tender
offer period
Interloper (US hedge fund group
Elliott Management Corp) bought
7.01% economic rights during the
offer ff period i d
Interloper (Amber Fund)
increased its stake from 8.59% to
10.17% during tender offer period
None so far Inconvenience mitigated by tax
structure with two holdings
allowing for tax consolidation
and financing structure such that
no dividend payment is needed
for an interim period
None so far EMC is now holding a stake of
10,3%
In December 2005, Amber Fund sold its stake
against a stake in Colbison (acquisition holding)
Acquisition vehicle announced holding 94.19%
of the share capital and 96.94% of voting
rights rights, not including 1.33% 1 33% treasury shares
Squeeze-out offer was held “non recevable” by
AMF (March 22, 2006) on the basis that the
propose squeeze-out price did not reflect
potential real estate upside
Amber Fund stake in Buffalo
Grill was publicly known before
the launch
CAMAÏEU Interloper (Sandell) increased its In January 2006, acquisition vehicle filed a new Average cost to bidder: €112
(Filing date: February 14th p ( )
J y , q
g
2005) stake from 4.21% to 10.4% during tender offer at €130/share (vs. €85 in the initial per share vs. €85 initial price
offer period
offer)
Offer pending
16
37

PUBLIC TO PUBLIC TRANSACTIONS
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Selected “Failed” Transactions (cont'd)
TARGET
MECATHERM
(Filing date: November 19 th 2003)
GRANDVISION
(Filing date: July 23 rd 2003)
LEGRIS INDUSTRIES
(Filing date: November 28 th 2003)
III P TO P CASE STUDIES
REASON FOR NOT REACHING 95%
UPFRONT SUBSEQUENT DEVELOPMENTS COMMENTS
Low premium perceived by market Following acquisitions on and off market
Financière Impala launched squeeze-out at €35
per share December 15th 2004 (vs. €27 in the
initial offer)
Interloper (Hal) increased its stake
from 8.95% to 32.95% during offer
period
Interlopers holding 5.1% (A
Bleichroeder) and 20.5%(Guy
Wyser Pratte) threatened not to
tender to the offer
Delisting of Mecatherm January 14 th 2005
Initial offer failed
In February 2004, Hal and founders filed new
tender offer at €25.50/share (vs. €21 in the initial
offer) ff )
Squeeze-out achieved
T.O. price was raised from €23 initially
announced to €26.2.
GWP sold its block to acquisition q vehicle just j
before the offer
AS Bleichroeder were offered convertible bonds
in acquisition vehicle (4.1%)
AS Bleichroeder tender their shares to the offer
Squeeze-out achieved
Note: Groupe Philippe Bosc and BD Lease excluded from sample due to minimal size
Provimi excluded from sample as stated upfront no intention to delist
Legris Industries included in the sample although successful due to specificities of transaction (interlopers, increase from initial announced offer price)
Average extra cost to bidder: €29
vs. €27 initial price
Hal initial stake of 8.95% was
known to the bidder before the
launch
A&B and GWP initial stakes
were known to bidder at the time
of the launch
17
38

Involvement of interlopers in 8 out of 9 failed transactions.
Limited reactions of bidders:
- Financial advantages offered to interlopers (reinvestment in the holding company);
but vigilance by the AMF (principle of equal treatment of shareholders);
- Premium offered ex ante to all shareholders;
- Reduction in share liquidity and dividends.
39

6° Sh Share buy-backs:
b b k
Automatic “relution” of controlling shareholders.
Possibility severely constrained by company law and securities regulation:
Company law (2 nd EU Directive): consent of the general meeting of
shareholders; limit of 10%;
Securities regulation (Market Abuse Directive): closed windows (insider trading);
limits in terms of daily volumes and prices (on or off-market) (market
manipulation).
2) Problems related to securities giving access to capital and stock
options: opt o s
With respect to securities giving access to capital:
Until 2006, such securities were squeeze-out resistant:
Only solution: to get a unanimous waiver of their rights of access from their holders
(Marionnaud case).
2006 reform: possible inclusion in the squeeze-out, up to a maximum total of 5%.
No similar provision for stock-options.
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B) ON NON NON-REGULATED REGU ATED MARKETS
A) Voluntary delisting on Alternext
Principle: a simple “purchase offer”
Newly introduced exception (law of October 19, 2009) for
companies whose shares have been transferred from
NYSE-Euronext: continued application of NYSE-Euronext
takeover rules for a period p of three yyears.
Recent proposal for a specific squeeze-out procedure on
Alternext
B) Voluntary delisting on Marché Libre
Principle: p a simple p “purchase p offer”
Exception for companies whose shares have been delisted from a
regulated market: possible implementation of a buyout offer
followed by a squeeze-out.
squeeze-out
41