In a significant move, the German Federal Court of Justice (FCJ) recently bolstered minimum offer price rules under the German Securities Acquisitions and Takeover Act. This has been evidenced by two separate judgments, case numbers II ZR 219/21 and II ZR 220/21.
In these judgments, the court awarded payment claims to former shareholders of a target company that accepted a takeover offer. This compensation is specifically for the difference between the amount of consideration of the takeover offer and the minimum amount that the bidder agreed within the framework of a separate agreement, said agreement being relevant to the finalization of a domination and profit and loss transfer agreement (DPLTA).
These developments highlight the FCJ’s commitment to protecting shareholders and ensuring transparency in the business acquisition processes, by addressing significant differences in the predicted vs received prices during the takeover.
The latter is particularly important in cases where a DPLTA is concluded between the bidder and the target company after the takeover. In such scenarios, the agreed minimum compensation for the shareholders can often be greater than the amount offered during the takeover. Therefore, the FCJ’s judgment of awarding shareholders the compensation difference provides an essential safeguard.
The act of monitoring and ensuring similar, if not the same, pricing during separate but interlinked business transactions further strengthens investor protection and maintains a trusted business environment. It also instils a sense of security among the stakeholders who might accept takeover offers in the future.
For a detailed understanding, refer to Morgan Lewis’s documentation of the cases.