CMS Expert Guide to Public Takeovers in Czech Republic

Yes, by the Czech Act on Takeover Offers.  

• Voluntary Takeover offers to acquire control (i.e. not those where the offeror already has control) in a Czech company listed on a Czech stock exchange or European stock exchange, 
• a foreign EU company, shares of which are traded only on a Czech stock exchange, 
• a foreign EU company, shares of which are traded on more European stock exchanges (but not the one where the company is registered) provided the shares were first accepted for trading on a Czech stock exchange or the target company has designated the Czech National Bank as the supervisory authority in respect of the takeover offer. 
• Mandatory offers, where the obligation to submit the bid is triggered upon the offeror acquiring 30% of voting rights (“threshold shareholding”) or more in the target and controlling the target. 

No. 

Yes, once the shareholder acquires at least 30% of voting rights (“threshold shareholding”) or more in the target company and controls the target company. A mandatory takeover offer must be for all publicly traded shares of the target company and cannot be conditional. 

Yes, there are exceptions, including when the threshold shareholding was acquired as a result of a merger within a group, as a result of a group restructuring or as a result of a previous unconditional offer for all shares in the target company. The Czech National Bank can stipulate further exceptions. 

Takeover offers are still not very common in the Czech market, partially due to there not being many listed companies, and it is therefore hard to derive any common practices. 

Yes, it is possible to make the voluntary offer conditional upon acquisition of 100% of the target company, or to only submit a partial takeover offer. Mandatory offers must be unconditional and for all shares. Under Czech law, there is no takeover process that would be equivalent to the scheme of arrangement process in the UK involving a court approved takeover.  

Yes, the offeror may approach the target company prior to making the takeover offer public and negotiate with it. This is subject to maintaining confidentiality.  

Yes, the offer may not be used to artificially influence the price for the shares of the target company.  

A voluntary takeover offer can be made conditional on a condition which must not depend on the offeror or its affiliates.  

Mandatory offers cannot be conditional. 

The offer must include information on the sources and type of financing enabling the takeover offer. Furthermore, the offer cannot be made public by the offeror prior to it ensuring it has sufficient finances to satisfy the consideration payable under the offer in full. 

There are no such rules in respect of voluntary takeover offers.  

However, mandatory takeover offers require that the price be at least the price the offeror has paid for the shares during previous 12 months. If this price cannot be determined, the average price of the listed shares in the 6 months preceding the month in which the obligation to make a mandatory takeover offer is used. 

Furthermore, the Czech National Bank can change the price offered as part of a mandatory takeover offer in certain rare cases (mainly to redress serious market deficiencies or changes in the business of the target company) and can (but is not required to) invoke a requirement for an expert valuation to determine the price of the shares. 

Generally not – shareholders holding shares to which the same rights are attached must be offered the same deal and must be treated equally. 

However, to the extent there are different classes of shares in the target company with different rights attaching to them, shareholders holding shares of a different class may be offered different deals. The Czech Act on Takeover Offers does not govern how these deals may differ but the commentary literature derives that the difference in the deals offered to the different classes of the shares must be justified by the different types of rights attaching to the different class of shares. 

The target company is not prohibited from providing information for due diligence, to the extent this is in the interests of the target company. A target company cannot be forced to provide information for due diligence, unless the Czech National Bank requires a mandatory expert valuation in connection with a mandatory takeover offer, in which case the target company must cooperate with the valuation expert to enable him to prepare the valuation report. 

The target company is bound to act neutrally following the publication of the intention of the offeror to submit the takeover offer. As such, the target company must not implement any measures that limit the shareholders right in deciding on the takeover offer. They must also avoid taking any actions that may thwart the takeover offer unless such actions have been approved by a general meeting of the shareholders of the target company. 

The target company directors do not need to engage with a potential offeror but may decide to do so.  

From the moment the target company can reasonably expect the takeover offer to be made, the directors: 

• must not implement measures limiting the rights of the shareholders to decide on the takeover offer, 
• must avoid taking any acts that could thwart the takeover offer unless such acts have been approved by the target company shareholders general meeting. 

Board members and members of the supervisory board are not restricted from seeking competitive offers or making such a takeover offer themselves. 

Yes. Generally, after a takeover offer has been submitted, the offeror and its affiliates must not take any actions to acquire shares in the target company under conditions different to those undern the takeover offer or to sell shares in target company. 

Generally, yes, however, arranging such commitments from the shareholder may itself constitute the takeover offer under Czech law and lead to the obligation of the offeror to submit the takeover offer. 

Shareholders can sell to the offeror outside of the takeover offer process, but only on the conditions that are identical to those in the takeover offer documentation. The sanction for breaching this provision is that for a period of 3 years following the acquisition of the shares, the offeror will not be entitled to exercise any rights in respect of the shares acquired. Additionally, should it offer better conditions to any of the sellers outside of the takeover offer it will be obliged to top up the offer in respect of all the other shareholders. 

During the period for accepting the takeover offer, the offeror and its affiliates must not take any actions leading to contractual acquisition of the shares in the target company under conditions differing to those in the takeover offer, generally with the exception of such acquisition being a result of a contractual arrangement in place before the publication of the takeover offer (before it was intended to be made by the offeror). Any such dealings must be reported to the Czech National Bank within 5Business Days (BD) after taking place. 

T: the offeror shall publish that it has decided to make a takeover offer 

T+15BD: the offeror submits the draft takeover offer to the Czech National Bank 

T+20BD: the offeror submits the takeover offer to the target company 

T+21BD: the target company informs its employees of the takeover offer 

T+25BD: the target company submits its opinion to the takeover offer to the offeror and to Czech National Bank (together with the opinion of the employees, if it is prepared) 

T+30BD: the offeror makes the takeover offer public 

T+30BD+4W: the lapse of the period for accepting the takeover offer 

T+30BD+4W+5BD: the publication of the results of the takeover offer 

• The takeover offer document, which among others includes the reasons for the offer being made, the description of how the consideration was determined, description of what shares were acquired in the target company by the offeror during the previous 12 months (if any), and the actual share purchase agreement to acquire the shares in the target company 
• Publication of the results of the takeover offer 

Yes, a competitive offer is an offer published by another offeror during the original period for accepting any original takeover offer. The target company is obliged to treat all takeover offers equally.  

Once the competitive offer is submitted, the competitive offer is treated as a new offer and deadlines are prolonged, so that the original offeror can update its offer by offering a higher purchase price and so that the target company may submit a new opinion comparing the original and the competitive offer 

The offeror may increase the price offered. The takeover offer may otherwise be withdrawn or modified only if this is anticipated by the takeover offer, if such conduct is not against the spirit of the law on takeover offers and if this is reasonable (and not depending solely on the consideration of the offeror). 

Yes if the offeror/majority shareholder increases its shareholding to 90 % in which case it may squeeze the minority shareholders out. If it decides to squeeze the minority shareholders out within 3 months after a successful (voluntary or mandatory) take over offer, it must offer the price paid as part of that offer.  

After the lapse of the period for accepting the takeover offer, the offeror and its affiliate must not, during the following 1 year, make any new takeover offer in respect of the same target company (with the exception of the obligation to submit a mandatory takeover offer or with the exception of a competitive offer). 

For de-listing, the approval of the shareholders of the target company in general meeting which requires the consent of 3/4 (75%) of shareholders who vote at the meeting (i.e. not 3/4 of all shareholders). Once de-listing is approved, the company is obliged to offer consideration to the shareholders whose shares are delisted. This consideration must be supported by an expert opinion.