There may be less than 100 companies listed on the Vienna Stock Exchange but Dr Thomas Zottl, a partner in the corporate finance department in Freshfields Bruckhaus Deringer’s Vienna office, believes there are many public-to-private opportunities. Limited by its size, the Vienna exchange is not a particularly successful capital market and although it did not benefit from the stock market boom as much as London or Frankfurt it has not been as badly affected by the downturn either. Louise Cowley reports.
Most companies have not been listed for very long, 15 years at most, and the founder often still holds a majority stake. The delisting of some of the some of the most prominent public companies on the exchange, including Bank Austria, has knocked confidence in the market and shareholders are typically keen to sell their shares in what is generally a very illiquid market with few potential buyers. Zottl says there have been almost 20 public takeovers since 1999 and up to 95 per cent of these resulted in a delisting.
The privatisation programme of the Austrian government also gives rise to PTP opportunities. The state holding company, Österreichische Industrieholding AG (ÖIAG), has interests in listed companies including Austrian Airlines and Telekom Austria, as well as steel production companies, oil and gas production and a technology and service business; assets which will be disposed of in due course.
In 1996 the hostile bid by Bank Austria for Creditanstalt initiated Austria’s first legislation regulating public takeovers. The Austrian Takeover Act came into force on January 1, 1999. There have still been only a few public takeovers in Austria and hostile takeovers remain rare. In most cases bids are friendly and solicited, made with the consent of the management.
Austria was earlier out of the starting blocks than its neighbour Germany in introducing mandatory rules governing takeovers and the German code mirrors Austria’s in many ways. But as they are both still fairly new, practitioners and legislators continue to look over each other’s shoulders. The fundamental principles of the Austrian Act are the equal treatment of all shareholders, transparency during the bidding process and avoidance of market manipulation and rumour. According to Freshfields, the Takeover Commission takes a proactive role in the takeover process and uncertainties or conflicting views are normally satisfactorily resolved in advance through discussion with the Commission.
One major cultural difference in Austria is that all listed companies tend to have one dominant shareholder and a limited free-float, with owners of minority shares typically willing to tender their shares. This was the case with KTM Sportmotorcycles in 1999, when an irrevocable undertaking to tender shares was sought from the majority shareholder, giving BC Partners a 52.4 per cent stake. Zottl says the deal structure used in the KTM deal is favoured in most Austrian PTPs. This is the familiar European system, where a mandatory bid is triggered when a majority stake in a publicly listed company is acquired, and has also been adopted by Austria. As elsewhere, bids are conditional upon receiving an acceptance of the offer from 75 per cent or 90 per cent of shareholders.
KTM was the country’s first PTP after the introduction of the new Takeover Code and as such was very prominent. Freshfields worked both on this deal, advising the acquirer BC Partners, and on the only other private equity-backed PTP that has taken place in Austria; Austria Mikro Systeme, which was the target of a successful PTP bid by Schroder Ventures the following year.
The Austrian Takeover Act is potentially more favourable to private equity bidders than the German code as the minimum level of acceptance by shareholders needed to initiate a squeeze-out is a lenient 90 per cent, compared to 95 per cent in Germany. This, combined with the typically small free-float of companies listed on the Vienna stock market, means the vast majority of public takeover bids are successful. After the squeeze-out of minority shareholders a delisting is automatic.
Under Austrian legislation there is also a difference in the treatment of minority shareholders during a takeover bid. The law allows bidders to offer minority shareholders a lower price than that offered to the majority owner. The price for a mandatory offer cannot be lower than the average market price paid for target shares in the six months before the controlling interest is acquired and also may not be less than 85 per cent of the price paid for any shares bought in the 12 months leading up to the offer announcement. However, according to Zottl this 15 per cent discount is not often used by bidders for fear that the reduced price would mean the bid was less likely to succeed.