ECJ - Takeover Bids and Share Price

ECJ – Takeover Bids and Share Price

ECJ ruling in case C-735/19 Euromin Holdings (Cyprus) Limited officially published.

Overview

Latvian court referred questions to EU Court on correct application of Takeover Bids directive (TOD) and scope for national law to set rules on price of shares, methods.
Referral also asked on potential direct effect of TOD (if it gives rights to individuals) and on whether the corresponding requirement for State liability is met in this case.

Judgment

Art 5(4) TOD does not preclude national law prescribing three methods for determining equitable price at which the offeror must buy back a company’s shares.
Including method resulting from application of art 5(4) first sub-para which provides that method which leads to highest price must always be used.
Provided methods to set equitable price other than that resulting from application of cited sub-para are applied by supervisory authority in compliance with art 3(1) TOD.
Under circumstances, criteria defined by clear, precise, transparent legal framework.
But same art 5(4) TOD precludes national law providing that, for purposes of takeover bid, share value is obtained by dividing the net assets of the target company.
Including non-controlling minority interests by number of shares issued unless method to set price based on objective valuation criterion generally used in financial analysis.
That may be regarded as clearly determined, within the meaning of that provision, which is a matter for the referring national court to verify.
Re vertical direct effect. the TOD confers in takeover bid procedure rights on the offeror that may be enforced in an action for State liability.
EU law precludes national legislation providing that where a Member State is rendered liable for damage caused as result of an infringement of a rule of EU law.
By decision of administrative authority of that State, compensation for the resulting material damage may be limited to 50% of the amount of the damage.