In a landmark decision relating to the buy-out of minority shareholders in Unit 4, the Enterprise Chamber of the Amsterdam Court of Appeal has changed its position on the reference date for price determination in buy-out proceedings following a tender offer. Under the new approach of the Enterprise Chamber, the buy-out price is no longer determined by reference to the date of the final Enterprise Chamber decision ordering the buy-out, but by reference to the settlement date of the tender offer. The new approach also extends to buy-out proceedings that are not preceded by a successful tender offer.

New approach 

In its 7 July 2015 decision on buy-out proceedings relating to the minority shareholders of Unit4 N.V., the Enterprise Chamber held that the settlement date under a tender offer should normally be the reference date for determining the buy-out price following a tender offer (click here for the original decision in Dutch). Buy-out proceedings are available to a shareholder holding at least 95% of the issued share capital of the target company. 

It is not a precondition for this new reference date to apply, that buy-out proceedings are commenced within a specific time period after the tender period or after the settlement date. However, it remains advisable to initiate buy-out proceedings as soon as possible following the settlement date (as explained below). 

In its prior decisions, dating back to the year 2000 (now abandoned) the Enterprise Chamber held that the reference date for price determination in buy-out proceedings following a tender offer was the date of its final decision in which the buy-out was ordered. This case law gave rise to several complications that are identified by the Enterprise Chamber in its decision regarding Unit 4. These include the following:

  • It was uncertain whether the period between the date on which the tender offer was declared unconditional and the date of the final decision of the Enterprise Chamber ordering the buy-out was sufficiently "limited", so that the buy-out price could still be equated with the offer price;
  • Dividend payments and distributions in the period until the final decision of the Enterprise Chamber were not automatically deductible from the buy-out price; and
  • In many cases where the offer price could not or no longer be used as determining the buy-out price, the determination of the buy-out price had to rely on up to date information concerning the target. This information, including any company sensitive data, had to be shared with the minority shareholders, potentially competitors of the majority shareholder or the target. 

Price determination in buy-out proceedings without a prior tender offer and in other circumstances 

The Enterprise Chamber's new approach extends to buy-out proceedings without a prior tender offer. In the absence of a tender offer, the Enterprise Chamber said that it may give an interim ruling early on in the proceedings (e.g. to appoint an expert to advise on the buy-out price), the date of which will serve as the reference date for determining the buy-out price. 

The date of an interim decision can also serve as the reference date in other circumstances, for instance when the period between the settlement date of a tender offer (or the date on which the 95% threshold is reached) and the day of commencement of the buy-out proceedings is considerably lengthy. Therefore, in order to avoid an interim ruling with a later reference date than the settlement date (in case of a preceding tender offer), buy-out proceedings should be commenced as soon as possible following the settlement date. 

Some remaining questions 

A few questions remain. First, at one point the Enterprise Chamber appears to say that it is a condition for the settlement date to be the reference date of the buy-out price, that the 95% threshold is reached on the settlement date. A bit further on in the ruling, however, the Enterprise Chamber suggests that the 95% threshold may also be reached sometime after the settlement date. 

Second, the Enterprise Chamber does not make a clear distinction between the shares acquired during the tender period and those acquired during the post-completion tender period. 

In our view, the Enterprise Chamber will probably be prepared to apply the new approach more broadly in order to resolve these remaining issues. The settlement date would in that case also serve as the reference date for determining the buy-out price if the majority shareholder (i) to a large extent acquired shares before the expiry of the post-completion tender period on the same terms as the tender offer, and (ii) the 95% threshold is reached within a reasonably short time after the expiry of the post-completion tender period. If too much time has lapsed, the Enterprise Chamber may revert to applying the date of an interim ruling as reference date (see above).