Delisting offers

First published in Noerr Public M&A-Report 01/2024

Since 26 November 2015, one requirement generally placed on an issuer’s application for revocation of the admission of securities to trading on the regulated market (“delisting”) is that an offer to acquire all securities subject to the application (“delisting offer”) has been published in accordance with the provisions of the WpÜG (Section 39(2) sent. 2 no. 1 of the German Stock Exchange Act (Börsengesetz – "BörsG"). Exceptions apply if a secondary listing of the shares on a regulated market in Germany or abroad remains in effect after the delisting). The number of such offers has increased in recent years, as we noted in the Noerr Public M&A Report. In this issue, we would like to take a closer look at this development and analyse the typical price structures of delisting offers since the regulation came into force.

Legal basis

Minimum price rules

The “normal” rules of the WpÜG generally apply to delisting offers. More specific requirements apply to the calculation of the minimum consideration. In takeovers or mandatory offers, the consideration offered by the bidder must be equal to at least the Three-Month VWAP prior to the publication of the Section 10 Announcement (Section 31(1) WpÜG in connection with the first sentence of section 5(1) of the Securities Act Offer Ordinance (WpÜG-Angebotsverordnung – "WpÜG-AV")). The consideration must also correspond to at least the value of the highest consideration granted or agreed by the bidder, a person acting jointly with the bidder or their subsidiaries for the acquisition of shares in the target company within the six months prior to publication of the offer document (Section 31(1) WpÜG in connection with the first sentence of section 4(1) WpÜG-AV). These regulations apply analogously to delisting offers with the proviso that the consideration must be paid in cash and must correspond to at least the Six-Month VWAP prior to the publication of the Section 10 Announcement (instead of the Three-Month VWAP) (Section 39(3) sent. 2 BörsG).

Delisting offers:

• their purpose is to enable the company to apply for delisting,
• the consideration must be paid in cash and be equal to at least the six-month VWAP (instead of the three-month VWAP) or relevant prior acquisitions,
• otherwise, the rules of the WpÜG apply to delisting offers,
• they can be combined with a takeover or mandatory offer,
• the bidder is typically a shareholder with a significant stake or a new investor; only in rare cases is the target company itself the bidder.

Combination with takeover or mandatory offer possible

A delisting offer does not have to be made solely for the purpose of preparing for delisting. It can also be combined with a mandatory or takeover offer. In this case, however, compliance with the requirements of Sections 30 et seq. of the WpÜG and Section 39(3) BörsG, i.e., stricter regulations in each case, is required.

Person of the bidder

It is not mandatory that the delisting offer is submitted by a shareholder or an investor not yet holding an interest in the target company. In principle, the target company itself can also submit a delisting offer if it is permissible to acquire treasury shares by this means. However, in practice, it is very rare for the target company itself to act as the bidder. Since the current version of Section 39 BörsG came into force, this has only happened in three cases (Rheintex Verwaltungs AG (2017); Rocket Internet SE (2020); a.a.a. Aktiengesellschaft allgemeine Anlagenverwaltung (2022)), all of which were unusual. In all three cases, non-tender agreements were concluded with major shareholders (Rheintex (94.3 % of the share capital); Rocket Internet (49.64 %); a.a.a. (96.76 %)). As a result, the financing requirements for the offer were reduced to such an extent that the company was able to pay the consideration from its existing cash resources. In practice, delisting offers are usually submitted by investors who already hold a significant stake in the target company. In the delisting-only offers published since the entry into force of the current version of Section 39 BörsG, the average stake held by the bidder before the start of the acceptance period is around 68.89 %.

Development of the number and type of delisting offers

The number of published delisting offers shows that their share of the total number of public offers under the WpÜG has increased significantly since 2020. While this share was still below 20 % in previous years, it later hovered around 40 % of all offers. At the same time, there has also been an increase in combined delisting takeover bids. While there was not a single such offer until 2019, since then an average of over 20 % of delisting offers have been combined delisting takeover offers.

 

Price structure

An analysis of the 43 delisting offers since 2016 for which a price-related minimum price threshold can be determined (In five cases (Rheintex Verwaltungs AG (2017), WESTGRUND Aktiengesellschaft (2020), Nucletron Electronic Aktiengesellschaft (2021), GSW Immobilien AG (2022) and Schumag Aktiengesellschaft (2023)) no Six-Month VWAP could be determined. The minimum consideration in such cases is calculated in accordance with section 5(4) WpÜG-AV using the enterprise value of the target company on the basis of a company valuation) shows that an average premium of just 4.6 % of the Six-Month VWAP was paid. This figure increases just slightly to 6.2 % when only the bids combining delisting and takeover (Seven of the 43 offers analysed featured such combination) are considered. Therefore, in contrast to takeover-only bids, bidders are not, or only to a very limited extent, willing to pay a premium if the purpose of their bid is to facilitate delisting of the company. This observation becomes even more apparent in absolute figures. Of the 43 offers analysed, the premium offered in 30 of them was less than 2 %. Only six offers included premiums of 10 % or more of the SixMonth VWAP.

 

Conclusion

Delisting offers are an increasingly important type of transaction in the German public M&A market. Such offers are often made by shareholders who already hold a significant stake in the target company. High premiums on the statutory minimum price are rare.