Hungary Takeover Guide Contact Dr. Judit Budai Szecskay Attorneys at Law
[email protected] Co-authors: Gyorgy Wellmann, Rita Plajos
Contents
Page
INTRODUCTION
1
THE REGULATION OF TAKEOVERS: APPLICABLE LEGISLATION AND REGULATORY BODIES
1
NOTIFICATION AND DISCLOSURE REQUIREMENTS ON ACQUISITION/DISPOSAL OF VOTING INTEREST IN A PUBLIC COMPANY
2
TRIGGERING EVENTS: MANDATORY AND VOLUNTARY OFFERS
3
PRE-BID DUE DILIGENCE AND SECRECY OBLIGATIONS
4
TERMS AND CONDITIONS AND ANNOUNCEMENT OF THE PUBLIC OFFER
5
CONDITIONS THAT MAY BE ATTACHED TO AN OFFER
7
CONSIDERATION
7
TASKS AND RESPONSE OF THE TARGET
9
OFFER TIMETABLE
10
POST-BID ISSUES: SQUEEZE-OUT AND DELISTING
10
OTHER REGULATORY CONSIDERATIONS
11
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INTRODUCTION Hungarian capital markets have undergone significant changes over the last two decades and the legal framework regulating takeover bids reflects the evolving nature of local markets and participants. Investors must view the law relating to takeover bids in light of the recent transplant of the EC Directive on Takeover Bids into the Hungarian legal framework. The following pages will outline the basic principles and legal provisions regulating takeover bids in an attempt to familiarise the reader with the nature of such an undertaking in the Hungarian market. Those preparing to participate in takeover bids are advised to solicit professional advice.
THE REGULATION OF TAKEOVERS: APPLICABLE LEGISLATION AND REGULATORY BODIES Act CXX of 2001 on the Capital Markets (the “CMA”) is the primary piece of legislation regulating public takeovers in Hungary. That came into force on May 20, 2006, an amendment to the Act implements and incorporates the European Parliament and Council Directive 2004/25/EC concerning takeover bids (“Takeover Directive”) and is enforced by the Hungarian National Bank (the "HNB") as the legal successor of the Hungarian Financial Supervisory Authority (the “FSA"). In accordance with the recent merger of the HNB and the FSA as of October 1, 2013 all the rights and obligations of the FSA are exercised by the HNB. The most recently adopted act governing the new scope of exercises of the HNB is the Act CXXXIX of 2013 on the Hungarian National Bank. The HNB is the main financial authority entrusted with regulating Hungarian capital markets (including the Budapest Stock Exchange), as well as banking and insurance institutions and transactions. In particular, it:
ensures the smooth, transparent and efficient functioning of the financial intermediary system;
facilitates the prudent operation of the persons and organizations comprising the financial intermediation system and oversees the prudent exercise of owners’ rights;
discovers undesirable business and economic risks threatening individual financial organizations or individual sectors of financial organizations, mitigates or eliminates existing individual or sector-related risks, and takes preventive measures with a view to ensuring the prudent operation of individual financial organizations;
protects the interests of parties using the services rendered by financial organizations and strengthens public confidence in the financial intermediation system.
helps the settlement of disputes - via the Financial Arbitration Board - between consumers and the persons and bodies covered by different acts relating to the conclusion and performance of contracts with a view to reaching an out-of-court settlement.
Equally important provisions are found in the Civil Code (Act V of 2013 on Civil Code) (the “CC”) regarding the establishment and operation of non-public and public companies and the legal mergers of companies registered in Hungary, as well as in the Competition Act (Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market Practices) (the “Competition Act”), which contains certain merger control related provisions. The Competition Office is the regulatory body charged with enforcing the Competition Act,
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ensuring that Hungarian markets are competitive and comply with EC regulations. Sections 199 to 205 of the CMA contain regulations on insider trading laws. Information outside the public domain about, among other things, a public offer, which may have a significant influence on a public company's value or share price, is inside information under the CMA. The trading of a target's shares by a person who possesses inside information may amount to insider trading, which has administrative and criminal penalties under the Criminal Code (section 410, Criminal Code (Act C of 2012)). Listing rules of the Budapest Stock Exchange (Listing rules) also contain relevant regulations. The Budapest Stock Exchange is supervised by the HNB. The Listing Rules are approved by the HNB, and listed companies must comply with them. In the course of exercising its supervisory role, the HNB can impose a fine on the supervised body of between HUF 100.000 (approx. EUR 340) and two billion HUF (approx.: EUR 6.7 million).
NOTIFICATION AND DISCLOSURE REQUIREMENTS ON ACQUISITION/DISPOSAL OF VOTING INTEREST IN A PUBLIC COMPANY The CMA contains special provisions on notification and disclosure requirements relating to the acquisition and disposal of voting interests in public companies limited by shares and sets forth exemptions from such notification and disclosure obligations. Holders of shares or voting rights in a public limited company shall notify the issuer and the Authority at the time of reaching or exceeding a determined threshold relating to voting rights, or shares to which voting rights are attached, held directly or indirectly, including when such holdings of shares or voting rights fall below the said threshold without delay. The notification of holdings applies to the following percentages: five, ten, fifteen, twenty, twenty-five, thirty, thirty-five, forty, forty-five, fifty, seventy-five, eighty, eighty-five, ninety, ninety-one, ninety-two, ninety-three, ninety-four, ninety-five, ninety-six, ninety-seven, ninety-eight and ninety-nine. The voting rights shall be calculated - irrespective of any provisions for restrictions on voting rights - on the basis of all the shares to which voting rights are attached according to the issuer’s charter document. In determining the proportion, the scope of the voting rights held by the shareholder shall be interpreted in a broad way, i.e. voting rights attached to shares shall be recognized as the voting right of the applicant if e.g. voting right is exercised by the shareholder under an agreement providing for the temporary transfer of the voting rights in question, or under the right of beneficial interest, etc. Similarly in determining the proportion, the voting rights of any fund management company shall also be taken into account, if the fund management company is controlled by the shareholder and if it is able to exercise the voting rights attached to the securities it manages, of those of any investment firm or credit institution, if the investment firm or credit institution is controlled by the shareholder and if able to exercise the voting rights attached to the portfolio it manages, – under direct or indirect instructions from the shareholder or another controlled company of the shareholder, or in any other way. However, in determining the proportion referred to above, voting rights held by a company exercising the voting rights of a collective investment trust, investment firm or credit institution that is controlled by the shareholder, shall not be taken into consideration if the company exercising the voting rights of a collective investment trust, investment firm or credit institution is authorized to provide portfolio management services, and it is permitted to exercise the voting rights attached to the portfolio it manages under instructions received on paper or by way of electronic means, independently from the shareholder. In such cases as well there are additional administrative requirements that shall be fulfilled.
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Notwithstanding the above the shareholder shall not be required to comply with the obligation of notification, if the notification requirement is satisfied by its parent company, or if the parent company is controlled by others, by that parent company. If further requirements are also met, credit institutions and investment firms (in connection with shares shown in the trading book) and market makers shall not be required to comply with the obligation of notification. In the event of non-compliance with the above obligation of notification and disclosure, the person involved may not exercise his voting rights in the target company until the notification is submitted. Further implementing regulations concerning the notification and disclosure requirements may be expected in the near future. The provisions of section 201 (2) of the CMA determine who qualifies as insider. Pursuant to its paragraph c) any entity or business association lacking the legal status of an entity including its directors, executive officers and supervisory board members - that holds, directly or indirectly, a share or voting rights of 10% or more in an issuer shall be considered as insider. Moreover, according to Section 201 (1) d), the conduct (i.e. any transaction including the acquisition of direct or indirect voting rights in the issuer) of a person or entity which knows, or ought to have known under normal and reasonable circumstances, that the information possessed is inside information (i.e. not yet published) shall be deemed insider trading. Irrespective of whether the trading is insider or not, each and every transaction, concerning any shares in connection with which he is considered an insider, or concerning any financial instruments whose value is contingent upon the value or price of such shares, of any company in which the insider person has a qualifying interest must be reported to the HNB, regardless of whether the transaction is carried out by the insider itself or via an agent. Shareholders of limited liability companies and private companies limited by shares must report a 75% interest to the Court of Registration. The Court of Registration can apply judicial supervisory sanctions, e.g. order the target's acquirers or management to comply with the reporting duty, or fine them for a failure to do so.
TRIGGERING EVENTS: MANDATORY AND VOLUNTARY OFFERS A mandatory public offer must be made for all remaining voting shares if the shareholding of a person (or persons acting in concert) in a public company exceeds the following thresholds:
33% of the voting rights;
25% of the voting rights, if there are no other shareholders (excluding the bidder or bidder group) holding, either directly or indirectly, more than 10% of the voting rights.
If a mandatory bid, contrary to the requirement of the CMA, is not made and the HNB declares such non-compliance, any shareholding exceeding 33% (or 25%) must be eliminated within 60 days of the HNB's declaration. The takeover bid must be made in advance of the intended acquisition. However, if a person's shareholding reaches and exceeds 33% (or 25% if no other shareholder holds more than 10%) of the target's voting shares in any of the following ways, it must be notified to the HNB, and the acquisition triggers a mandatory public offer subsequently within 15 days of notification:
by a method other than a bid (for example, through an inheritance);
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by exercising a call or repurchase option;
as a result of a privatisation of a company held partly or entirely by the state; or
by acting in concert with other shareholders.
A voluntary offer may be made for less than all of the shares of the target, therefore, it is often made for the remaining voting shares if the bidder has exceeded the thresholds and made a mandatory offer, but has not yet acquired 90% of the voting rights, and wishes to squeeze out minority shareholders. In case of a voluntary offer a counter-offer may not be made and a voluntary offer may not be made once a mandatory offer is announced until its completion.
PRE-BID DUE DILIGENCE AND SECRECY OBLIGATIONS While in a number of jurisdictions friendly bidders may gain access to high levels of confidential information on a target prior to the public announcement of a takeover bid, in others, even in the case of recommended bids, management is generally reluctant to provide information on the target, citing the duty not to disclose confidential information on the corporation and not to serve insider information to third parties. The CMA permits prior to the announcement of the draft public takeover bid, the board of directors of the target to, upon request by the offerer, convey any information to the offerer (or consultants) on the operation of the target, provided that the offerer must treat such information confidentially in line with rules regarding the confidential treatment of business secrets and securities secrets, as well as the prohibition on insider trading. There is a general requirement of equal treatment of potential bidders, if other bidders also wish to seek pre-announcement due diligence information, for example for the purposes of making a counter-offer, even if the management of the target may not find them equally friendly. Another issue to be considered by any potential bidder is that if pre-announcement due diligence is made and ultimately the published takeover bid is not made (for example, as a result of market leaks, sudden volatility of prices and large volume trades which within a relatively short period of time cause a significant mandatory bid price increase) all potential subsequent transactions of such potential bidder are exposed to being deemed insider trading. This means that, although in Hungary the legislation and the HNB supports preannouncement due diligence, potential bidders must carefully consider whether they may provoke a potential sudden price increase on such a relatively closed market. It should be noted, however, that information in the public domain includes a wide variety of items. Information in the public domain includes:
Regular and special reports, which must be published by public companies (under the CMA) and listed companies (under the Listing Rules), to disclose essential details about their financial position and the general development of their business. Regular disclosure is made by submitting yearly and half-yearly (or quarterly for listed category A companies) reports, and annual accounts. Disclosure requirements of the CMA are harmonized with the Prospectus Directive and the Transparency Directive.
Documents available at public registries, including the court of registration, land registry and notarial registry (on floating and other registered charges).
The scope of information kept at public registries includes:
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o
Bye-laws of public companies.
o
Details from the corporate register, including details of directors, share capital and direct and indirect shareholders holding more than 75% of the share capital.
o
Annual audited accounts.
o
Market, financial or business information on public (including listed) companies, disclosed under special reporting rules (see above).
o
Previous Competition Office decisions.
o
Floating charges or other registered charges.
o
Records on shareholders with voting rights of more than 5% in public companies.
The bid must be kept secret until it is announced. If the target's board has given information to the bidder or its representatives about the company's operations before a public offer is announced, the bidder and its representatives must keep this information strictly confidential to comply with the regulations on:
Business secrets (section 2:46-2:47 of the Civil Code, Act V of 2013 and section 4, Competition Act) and, if applicable due to the nature of the business, state or service secrets.
Securities secrets (sections 369 to 371, CMA).
Insider trading (sections 199 to 205, CMA).
The bidder must keep undisclosed information about the company's operations confidential, regardless of the announcement or closing of the public offer, and cannot use it unlawfully (for example, by passing it on to third parties or using it for insider trading).
TERMS AND CONDITIONS AND ANNOUNCEMENT OF THE PUBLIC OFFER The bidder must engage an investment service provider (a broker) to make a public takeover bid. The launching of a public takeover bid requires the following actions and performance of the following tasks, which must be carried out simultaneously by the bidder and its broker:
announce the draft bid to the HNB and file the offer documents with it, to be approved;
send the target's board a copy of the offer document; and
publish the announcement and the offer document in a national daily newspaper, or the website of the target and the broker, or the website of the BSE, if the target company is a listed company, or the website of the HNB or in its Official Gazette. The announcement must state that the HNB's approval of the offer document is pending and that the bidder has applied for competition clearance, if applicable.
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The bidder must initiate the publication of the HNB's decision, the offer document and the first and last day of the offer period in the same manner as the draft offer was published immediately after it has received the HNB's approval (or the deadline for the HNB's response). If the same announcement is made in the above mentioned different publications and at different times, all deadlines commence as of the date of the latest publication. The bidder does not have to send copies of the offer document to the target's shareholders. The public takeover offer must include the following elements on the basis of data required pursuant to the CMA: The description of the offer must specify:
the bidder's name and residence or business address;
the interest (direct or indirect) already held in the target by the bidder and any close relative of the bidder, if the bidder is a natural person, and any other persons acting in concert with the bidder;
the following information about the offer consideration: o
its amount;
o
its composition (for example, the ratio of cash and securities, and a description of any securities offered);
o
the formula for calculating it; and
o
its payment terms.
the end of the acceptance period;
the designated place and method of accepting the offer (the declaration of acceptance), and the conditions in which a proxy or an intermediary can be involved;
the corporate name and address of the participating investment service provider;
The place where the bidder's future plans for the target (operating plan) and a report of the bidder's business operations (bidder's business report) are open for inspection.
if the bid is submitted jointly, the amount of shares to be sold to each bidder;
if applicable, a condition reserving the right to withdraw the offer if the interest acquired as a result of the acceptance declarations is representing less than 50% of all voting rights;
a description of the relationship between the bidder and the target;
details about the compensation for potential loss of rights by voting preferential shareholders as a result of implementing certain "break-through rights".
the potential consequences of the public takeover on the target's employees.
governing law and forum in the sale and purchase agreement to be concluded by the offeror and the shareholders accepting the offer.
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other material circumstances that may influence the bid.
The bidder and the investment service provider must attach the following to the offer document for the HNB's approval:
the Operational plan and Description of Offerer’s business activities;
a EU or OECD resident bank's certificate on a cash deposit or deposit, or bank guarantee or treasury bonds issues by EU Member States or OECD countries proving that the bidder has sufficient funds to pay the consideration;
if the bid is aimed at obtaining more than 90% control, the bidder's declaration of its intention regarding the exercise of a call option for the remaining shareholdings in the target;
if the acquisition takes place by persons acting in concert and there is only one bidder, the consortium agreement appointing the bidder.
if the offer is mandatory subsequent to exercising an option, repurchase right or other forward right, the agreement on which basis such right have been exercised by the bidder.
CONDITIONS THAT MAY BE ATTACHED TO AN OFFER Under Hungarian takeover rules, the only explicit and permitted cancellation condition pursuant to the CMA is that a takeover bid must contain the declaration of the bidder - if intended by the bidder - on reserving the right to cancel the bid, if on the basis of the acceptance declarations the bidder would not acquire influence exceeding 50% in the target. As a result of the implementation of the Takeover Directive, the CMA, has been modified and an additional mandatory element of the bid has been inserted, which states, that “the takeover bid must include any other [than explicit other mandatory conditions] substantial circumstances that may influence the takeover offer”. Potentially, material adverse changes (MACs), in the cases of voluntary offers are increasingly common in European markets. These conditions, however, must be objective, otherwise the HNB may argue that they should be interpreted as a waiver that is only effective if less than 50% of the shareholders accept the offer. The HNB also takes into account the duty to treat all the target's shareholders equally when assessing any MACs. Pursuant to Act V of 2013 on the Civil Code, if the parties have stipulated that the condition of the entering into force of their contract is an uncertain future event (suspending condition), the contract shall become effective upon that event taking place. It is open to doubt whether a material adverse change clause is effective under Hungarian Law.
CONSIDERATION Cash remains the most common form of consideration in takeover bids. With respect to listed securities, the relevant regulatory requirements stipulate that consideration must be at least the higher of:
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the volume weighted average stock market price for the one-hundred-and-eightyday period preceding the date when the bid was submitted to the Authority for approval,
the highest price contracted for the transfer of the offeree company’s shares by the offeror and affiliated persons within the one-hundred-and-eighty-day period preceding the date when the bid was submitted,
if available, the volume weighted average stock market price for the threehundred-and-sixty-day period preceding the date when the bid was submitted to the Authority for approval,
the aggregate of the contracted call price and the commission for a purchase or repurchase option exercised by the offeror and affiliated persons within the onehundred-and-eighty-day period preceding the date when the bid was submitted,
the aggregate of the contracted call price and the commission for a purchase or repurchase option fixed in an agreement by the offeror and affiliated persons concluded within the one-hundred-and-eighty-day period preceding the date when the bid was submitted,
the consideration received for exercising the voting rights fixed in an agreement by the offeror and affiliated persons concluded within the one-hundred-andeighty-day period preceding the date when the bid was submitted, and
the amount of equity capital per share.
For non-listed securities, the consideration in a public offer must be at least the higher of:
the volume weighted average price for the one-hundred-and-eighty-day period preceding the date when the bid was submitted to the Authority for approval,
the highest price contracted for the transfer of the offeree company’s shares by the offeror and the affiliated persons within the one-hundred-and-eighty-day period preceding the date when the takeover bid was submitted,
the aggregate of the contracted call price and the commission for a purchase or repurchase option exercised by the offeror and affiliated persons within the onehundred-and-eighty-day period preceding the date when the bid was submitted,
the aggregate of the contracted call price and the commission for a purchase or repurchase option fixed in an agreement by the offeror and affiliated persons concluded within the one-hundred-and-eighty-day period preceding the date when the bid was submitted,
the consideration received for exercising the voting rights fixed in an agreement by the offeror and affiliated persons concluded within the one-hundred-andeighty-day period preceding the date when the bid was submitted, and
the amount of equity capital per share.
In interpreting the above, according to the CMA equity capital means:
the shareholder equity, as shown in the last audited annual account approved by the general meeting, or
if the offeree company does not have audited annual accounts, the figures contained in the yearly or half-yearly flash report submitted to the proper authority
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shall be applied, with the exception that if the offeree company is required to file consolidated annual accounts in accordance with the Accounting Act, equity capital means the consolidated shareholder equity. Offering a price range in the offer is not possible, but it is possible to increase the offer price during the acceptance period, if duly announced.
TASKS AND RESPONSE OF THE TARGET While the target's shareholders can obtain the offer document as published by the bidder, there is no obligation on the target's board to inform shareholders individually. The target's board must form an opinion on the offer and make this opinion open to inspection by its shareholders, at the same place where the Operational plan and Description of Offerer’s business activities are kept before the first day of the acceptance period. If the HNB changes the offer document when approving it, the target's board can revise its response if necessary and make it open for inspection in a similar way to the original opinion. The target's board can also recommend its shareholders not to accept the bid when giving an opinion on the offer. The target's board may engage an independent financial expert to report on the public offer. The expert's report must be made open for inspection by the target's board to its shareholders, in a similar way to the original opinion. On receipt of a bid, the target's board must forward a copy to the Employees' Representatives and must attach the opinion of the Employees’ Representatives on the bid to its own opinion. After the bid is announced (or once informed of the intent to bid, if earlier) and during the acceptance period, the target's board cannot make any decisions that could frustrate the bid, except for the following:
the target's board can seek a white knight (that is, an alternative bidder which the target's board recommends) to make a competing bid;
the target's board can implement decisions of the general meeting made before the announcement (or being informed of the intent to bid), provided that the decisions relate to the target's normal course of business.
In addition, the bid is not deemed frustrated if the target's board acts according to the resolutions adopted by its general meeting called under the Company Act after either:
the takeover bid is launched;
receiving information about the bid.
The bye-laws of public companies can contain poison pills against hostile bids (Company Act). For example, restrictions can be imposed on the voting rights that a shareholder can exercise (maximum level of voting rights) or the general meeting can be allowed to pass resolutions to frustrate a bid (such as introducing a capital increase). Since almost all major stock exchange companies contain poison pills in their bye-laws, hostile bids are not common. However, breakthrough rights, which are allowed under Directive 2004/25/EC on takeover bids (Takeover Directive), can be incorporated into the target's bye-laws (sections 76/A and 76/B, CMA). For example, provisions can be included to prevent the following applying during the offer period:
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Transfer restrictions on the target's shares (specified in the bye-laws or shareholders' agreements).
Multiple voting rights or restrictions on exercising voting rights in connection with decisions on defence measures at the target's general meeting.
Other provisions can also be included in the target's bye-laws, for example, so that if the bidder has acquired 75% of all shares granting voting rights during the takeover procedure and convenes the general meeting to propose the amendment of the bye-laws, or appoint or remove a director or supervisory board member:
Multiple voting rights represent one vote.
Special appointment or removal rights do not apply.
OFFER TIMETABLE The HNB has 15 days to approve the offer, provided that if additional documents are requested, or if the HNB requires the revision of the draft bid, the bidder has five days to submit and the HNB has a further five days to approve. Immediately upon receipt of approval by the HNB (or by the expiration of the deadline for the HNB's response, which is not precedented, as the HNB always responds on the submission of a draft bid or suspends the response time with good reasons), the bidder must publish the HNB's decision, and the final offer document, by indicating the first and last day of the acceptance period, similarly as the draft offer was published. The bidder does not have to send copies of the offer document to the target's shareholders. The starting date of the acceptance period must be within two to five days of the publication. The duration of the acceptance period must be at least 30 days and no more than 65 days, including any potential extension, as the HNB may approve the extension of the acceptance period once with a maximum of 15 days. The contents of the target's statutes are determinative of its response to a bid and response strategies are discussed below. However, competing bids may be submitted if the competing offer price exceeds the original bid by at least 5% (in Hungarian Forint). A competing bid must be made at least 15 days before the acceptance period ends and it must be similarly sent to the HNB and the Board of the target and announced as the original offer. If a new competing bid is made which only differs from the previous competing bid in terms of the consideration offered, the HNB decides whether to approve it within three days of the new competing bid being filed. To avoid running through the acceptance period of the original offer, the HNB would most probably suspend the original acceptance period to assess the counter offer. The target's board can support a competing bid. As a result of an approved counter offer the original offer and all acceptance declarations become ineffective. There is no limitation on the number of counter-offers that may be made. The bidder must notify the HNB and publish the outcome of the public offer within two days after the end of the acceptance period.
POST-BID ISSUES: SQUEEZE-OUT AND DELISTING Payment of the price to the shareholders accepting the offer must be made within five working days after the acceptance period ends, or on the day on which the Competition Office grants clearance (if applicable), whichever is later. If the accepting shareholders are not paid within 30 days of the payment deadline, they may rescind their acceptance
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declarations. If the contract is rescinded by the seller the bidder shall so notify the HNB within two working days. The offeror may exercise its purchase option within three months from the date of closure of the takeover bid (voluntary bid) over the remaining shares of the offeree company, provided that it:
indicated in the bid that it wishes to squeeze out minorities; and
acquires at least 90% of all voting interest in the target within three months of the successful completion of the bid; and
publicly announces its intention to exercise a call option; and
provides evidence to the HNB that it has sufficient funds to exercise the squeeze out.
The price payable for the shares obtained by way of exercising the purchase option shall be the price quoted in the takeover bid or the amount of equity capital per share, whichever is higher. The notification and publication of the intention of the bidder to exercise the call option must specify the:
place, date and terms of the takeover of shares;
offer price;
date and payment terms of the consideration.
The bidder must also deposit the consideration at a bank registered in any EU member state. If as a result of a successful takeover bid the bidder acquired 90% voting interest, the minority shareholders, within 90 days of announcement by the bidder of acquiring 90% shareholding, may exercise a put option at the price of the original offer price or the equity capital per share price (based on the latest published audited annual balance sheet of the target) whichever is higher. De-listing can take place at the target's request or automatically. According to the Listing Rules of the BSE, the target can file an application for de-listing with the BSE if a public offer or stock exchange offer for all its listed shares has been made. If a bidder acquires more than 90% of the voting rights in a listed target and exercises its squeeze-out right as outlined above, the listed target is automatically de-listed.
OTHER REGULATORY CONSIDERATIONS The CMA stipulates the concentration thresholds, which, if exceeded, necessitate the attainment of merger control clearance. Such concentrations include:
a merger of previously independent undertakings (or part of them);
an acquisition of direct or indirect control in a previously independent undertaking (or part of it) or;
creation of a concentrative joint venture.
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In the case of a merger, if certain conditions are met, the authorization of the HCO is required for the merger. These conditions are in connection with the turnover of the parties taking part in the process and the HCO's permission is required if both tests' result is positive. The two turnover tests that must be satisfied are as follows: First Test Whether the combined net turnover in Hungary, during the previous financial year of the following, exceeds HUF15 billion (~ 226.92 HUF = 1 USD):
all the groups of undertakings concerned; and
undertakings that are jointly controlled by members of the group companies concerned with other undertakings.
Second Test Whether the combined net turnover in Hungary, during the previous financial year of the following exceeds, HUF 500 million (~ 226.92 HUF = 1 USD):
at least two groups of undertakings; and
undertakings that are jointly controlled by members of the group companies concerned with other undertakings.
A 150 million forint threshold shall cover the mergers - that took place during the two-year period preceding the merger and which were not subject to authorization - between companies that used to be part of the group that lost control due to the merger, with companies of the group that acquired control. The Competition Office must receive notification if the above thresholds are met. The substantive test applied by the Competition Office is whether the merger creates or strengthens a dominant position, which would impede the formation, development or continuation of effective competition in the relevant market. As regards the control of company, mergers the final decision in conclusion of the proceedings shall be adopted by the HCO within forty-five days in simple cases (e.g. where authorization cannot be denied) or within four months in complex cases. If necessary, the Competition Office can extend these deadlines by 60 days. As clearance is required for a merger to be valid (the contract is non-existent without such authorization), it is not advisable to implement a transaction before this is obtained. If there is a serious problem, the transaction can be delayed by the period of time needed for clearance, depending on whether the bidder has notified the Competition Office in a timely manner. Further governmental approvals may be necessary to acquire shares in certain companies, such as banks, insurance companies and various companies belonging to the energy industry. However, the CMA does not specify the effect of obtaining these approvals on the public offer timetable. Nevertheless, it should be noted, that without some of these approvals, the acquisition may be invalid and the time taken to obtain them (if necessary) must therefore be considered as well as that for receiving merger control clearance.
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