04 December 2017

Greatest diligence due with shareholder disclosures

On 22 December 2016, the Chinese aviation conglomerate HNA Group completed the public takeover of gategroup Holding AG (launched about eight months before) by  paying the offer price of CHF 53 per share to the accepting shareholders. Shareholders rejecting the offer were compensated by way of a stock exchange squeeze-out. The total offer price paid by HNA in the takeover of gategroup amounts to approx. CHF 1.4 billion. On 27 April 2017, the gategroup shares were delisted from the Swiss stock exchange. After Swissport and SR Technics, this was the third former Swissair subsidiary taken over by HNA in Switzerland, in addition to HNA building up a substantial stake in Dufry.

So far, everything had gone to plan for HNA. Yet months later, ultimately triggered by research by the Financial Times ("Who owns HNA, China's most aggressive dealmaker?", 2 June 2017), HNA was taught an unpleasant, yet all the more so educative lesson.

By decree dated 22 November 2017, the Swiss Takeover Board (TOB) established that HNA made untrue, respectively incomplete, statements in the gategroup offer prospectus regarding the shareholding structure and its shareholders. Notably, certain beneficial owners of HNA did not appear in the prospectus but merely the direct shareholders holding the shares in trust for such beneficial owners. HNA could not be fined due to the lack of a legal basis (this can be seen as a legislative gap) and the takeover offer could not be (and should not have been) undone. However, not only does HNA now need to publish the decision of the TOB in three languages ("naming and shaming"), but it must also, at its own cost, have additional verifications of compliance with the takeover rules (minimum price and best price) performed by the review body and bear the costs of the proceedings.

From an outside perspective, the mistakes for which HNA was rebuked by the TOB may seem small and ultimately meaningless, particularly in a seemingly technical document like the offer prospectus. Moreover, when the additional acceptance period (Nachfrist) lapsed 96.10 per cent of the gategroup shareholders had accepted the financially attractive offer and neither financial damage or illicit intent were in any way established. Nevertheless, the TOB decree (630/03) constitutes a clear message to all market participants that, when drafting an offer prospectus in general, and with respect to disclosure of shareholdings in particular, the greatest diligence is due. The same applies, for example, to "regular" disclosure notifications due by significant shareholders to the SIX and the respective issuer when certain thresholds in listed companies are fallen below or exceeded. Also in this field, supervision by the regulators (SIX, FINMA, FDF – Federal Department of Finance) has intensified over the years, resulting in an increased number of criminal proceedings. The basis therefore is the legislative concept that the trust of market participants in the integrity of a financial market is a key driver for its success.

For further questions, please contact our Banking and Finance Team.

Authors: Jana Essebier, Peter Kühn

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