Capital Markets, M&A & Private Equity / 2 Sep 2019

Borenius advised Yleiselektroniikka Oyj on the mandatory public tender offer by Preato Capital AB

We represented the independent committee of Yleiselektroniikka Oyj’s board of directors in connection with a mandatory public tender offer of Preato Capital AB. Preato Capital AB commenced the mandatory public tender offer for all the issued and outstanding shares in Yleiselektroniikka as a result of shares purchase from the former main shareholders. In the tender offer, Preato Capital AB offered a cash consideration of EUR 8.70 per share in Yleiselektroniikka. The offer period begun on 24 July 2019 and ended on 15 August 2019.

Typically, premiums in mandatory tender offers have been lower in comparison to the recommended voluntary tender offers. The premiums in three 2019 mandatory tender offers have varied between 7.4% and 14.5%, whereas the premiums in voluntary tender offers announced this year have varied between 13.7% and 65.4% (compared to the closing price of the target’s shares on the last trading day before announcement). Since 2005, the median premium in recommended voluntary tender offers has been approximately 30%.

The mandatory tender offer situation usually arises as a result of a block trade, in which more than 30% of the target company’s shares are acquired. The mandatory tender offer may be suitable for some investors who wish to use their control through a majority shareholding or by participating in the target company’s board. However, traditionally the private equity investors want to obtain full control, and in voluntary tender offers the completion of the tender offer is subject to condition of the offeror gaining control of more than 90% of the outstanding shares and votes in the target company. In mandatory tender offers, such conditions are not possible, and for example in the mandatory tender offer for Yleiselektroniikka, the offeror announced its plan to keep the target company listed. Eventually, the offeror acquired 17.5% of the shares of Yleiselektroniikka during the mandatory tender offer period, and held approximately 79% of all the issued and outstanding shares at the end of the tender offer period. The board of directors considered the offer price for the shares too low and could not recommend the tender offer to the shareholders.

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