The Finnish Securities Market Association published the revised Helsinki Takeover Code (the “New Takeover Code”) on 2 September 2022. The New Takeover Code will enter into force on 1 October 2022, and it applies to public tender offers announced by and the mergers of listed companies whose merger plan is signed after the New Takeover Code enters into force.
Partner Mia Mokkila served on the Helsinki Takeover Code revision workgroup’s secretariat. Mia also served on the secretariat when the soon to be replaced takeover code (the “Old Takeover Code”) was revised in 2013. As such, Mia has been closely involved in the development of Finnish takeover practice for the last decade.
On 22 September 2022, Borenius hosted a seminar concerning the key revisions made to the Old Takeover Code. This Legal Alert provides a short summary of the key differences between the New Takeover Code and the Old Takeover Code.
Extended scope of application and increased transparency
The New Takeover Code’s scope of application now extends to statutory mergers as well as to tender offers made on a multilateral trading facility. A new recommendation 16 concerning mergers that requires the equal treatment of the holders of target securities and the disclosure of the offeror’s acquisitions outside the merger has been introduced. In addition, a merger proposal (not only a competing tender offer) is now considered a competing proposal in the New Takeover Code.
Many revisions have been made to increase transparency, such as:
- More detailed recommendations regarding the disclosure of the terms of the offeror’s financing arrangements, the combination agreement (in particular, the process relating to competing proposals) and irrevocable undertakings.
- More detailed guidance regarding disclosure in the target board statement and fairness opinion.
New or amended recommendations
The Old Takeover Code’s recommendation 3 concerning the target board’s contractual arrangements with the offeror has been amended to better reflect market practice relating to customary non-solicitation commitments and break fees. The New Takeover Code calls for the disclosure of a justified reason for entering into material contractual arrangements that limit the company’s or the board’s scope for action.
The New Takeover Code also introduces a new obligation for the offeror to adhere to its publicly stated intentions regarding the offer process (recommendation 12) and a specific requirement for the offeror to keep a project list of persons who are aware of a potential takeover (recommendation 10). The latter provision applies if the offeror is not obliged to maintain an insider list under the Market Abuse Regulation.
Additionally, certain minor revisions have been made to the wording of recommendations 1 (Ensuring prerequisites to complete a bid), 2 (Duty of the board of directors to act following a proposal relating to a bid), 7 (Due diligence review of the offeror), and 14 (Intention to acquire the remaining securities of the target company).
The New Takeover Code introduces specifications and modifications to the grounds of existing recommendations and the Notes sections at the end of the New Takeover Code e.g. due to changes in legislation and market practice.
Some of these new specifications include:
- Guidance added for situations where a potential offeror approaches a shareholder who is also on the target board.
- Rewording of the consideration around whether an irrevocable undertaking by a target board member or their background organisation affects such board member’s ability to assess the bid unconstrained by undue influences.
- A timeframe has been set for integration measures, such as implementing a merger, which must be disclosed in the offer document. This recommendation extends to measures taken during the nine months following the expiry of the offer, provided the offeror does not own 100% of the target.
Structure and wording
The structure of the New Takeover Code has been revised to more closely resemble that of the Finnish Corporate Governance Code. All interpretations of the practical application of insider and disclosure regulations in a takeover context are now included at the end of the New Takeover Code as separate Notes sections.
In addition, the preamble of the New Takeover Code now describes established market practice vis-à-vis the interpretation of the requirement of equal treatment of the holders of target securities in connection with consortium offers and arrangements outside the offer.
Guidance from the Finnish Takeover Board
The New Takeover Code encourages market participants to turn to the Finnish Takeover Board for advice in questions relating to the application of the New Takeover Code or good securities market practice. In addition, instead of having to file a formal request for a statement, market participants should be able to, in the future, anonymously ask questions regarding the interpretation of the New Takeover Code from the Finnish Takeover Board through a new Q&A document.
First North proposed to be governed by same regulations as the main market
The Finnish Securities Market Association has initiated a bill whose purpose is to expand the scope of application of the Finnish Securities Market Act’s chapter governing public tender offers. The provisions of this chapter currently apply, to a large extent, only to the main market, but the bill seeks to extend its coverage to tender offers made on a multilateral trading facility (MTF), i.e. Nasdaq First North Growth Market Finland.
If you have any questions about the Takeover Code or Finnish takeover practice, please contact the undersigned or your regular Borenius contact. We welcome any private discussions on the topic with issuers, advisors, or potential bidders.
Borenius has recently advised:
- Netflix, Inc. on a recommended voluntary public cash tender offer of Next Games Corporation (2022)
- West Street Global Infrastructure Partners (an infrastructure fund managed by Goldman Sachs Asset Management) on its voluntary public cash tender offer of Adapteo Plc (2021)
- Goldman Sachs and the other mandated lead arrangers on the financing of the public cash tender offer of Ahlstrom-Munksjö Oyj by a consortium led by Bain (2020)