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Mergers & Acquisitions 2011

Published by Global Legal Groupwith contributions from:

Albuquerque & Associados ArzingerAshurst LLPBech-BruunBoss & Young, Attorneys at LawBrando Teixeira Sociedade de AdvogadosCardenas & Cardenas AbogadosCravath, Swaine & Moore LLPDebarliev, Dameski & Kelesoska Attorneys at LawDittmar & IndreniusElvinger, Hoss & PrussenEubeliusFenech Farrugia Fiott Legal GarriguesGeorgiades & Pelides LLCGide Loyrette NouelGoltsblat BLPGuyer & RegulesHerbert Smith LLP Kalo & AssociatesKoep & PartnersLenz & StaehelinMannheimer Swartling Advokatbyr ABMeitar Liquornik Geva & Leshem BrandweinNishimura & AsahiPachiu & AssociatesPRA Law OfficesSchoenherrSelvam LLCSkadden, Arps, Slate, Meagher & Flom LLP Slaughter and MaySteenstrup Stordrange DAStikeman Elliott LLPSZA Schilling, Zutt & AnschutzUdo Udoma & Belo-Osagieuri i Partneri law firm

The International Comparative Legal Guide To

A practical cross-border insightinto mergers & acquisitions

Lenz & Staehelin

Switzerland

1 Relevant Authorities and Legislation

1.1 What regulates M&A?

Public takeovers by way of cash or exchange offers are governed by

the Federal Act on Stock Exchanges and Securities Trading

(SESTA) and its implementing ordinances. The takeover rules are

implemented by the Takeover Board (TOB), whose decisions can

be challenged before the Swiss Financial Market Supervisory

Authority (FINMA, formerly Federal Banking Commission or

FBC). The decisions of the FINMA can in turn be brought before

the Swiss Federal Administrative Tribunal. The Swiss takeover

rules, the decisions of the TOB and FINMA, as well as most offer

documents are accessible at www.takeover.ch.

Public takeovers by way of statutory mergers are governed by the

Merger Act. Statutory mergers involving public companies, and, in

particular, cross-border mergers, are rare in Switzerland and are not

specifically addressed in this country chapter.

1.2 Are there different rules for different types of publiccompany?

The Swiss takeover rules apply if the target is a company with its

registered office or de facto headquarters in Switzerland and hasequity securities listed on a stock exchange in Switzerland. In

principle, the rules do not apply: to companies whose equity

securities are exclusively listed on a stock exchange outside of

Switzerland; to companies whose shares are listed in Switzerland,

but have their registered office and de facto headquarters abroad; orto companies that have a wide shareholder base, but are not listed

on any stock exchange. However, in some cases, the TOB held the

takeover rules applicable to companies whose securities were not

listed or were listed abroad, where the target company had been

separated from a listed company shortly prior to the transaction.

1.3 Are there special rules for foreign buyers?

The takeover rules apply irrespective of whether the bidder is a

Swiss or foreign company. There are no foreign exchange control

or similar laws generally restricting investments or acquisitions in

Switzerland by persons or companies domiciled abroad.

1.4 Are there any special sector-related rules?

The principal regulated industries subject to governmental

notification or consent requirements are the banking and securities

trading, insurance, media and telecommunications industries.

Broadly speaking, the acquisition by a foreign acquirer of control of

a company holding a banking, securities trading, insurance or a radio

or television broadcasting licence is subject to prior authorisation by

the competent regulator. In most of these industries, acquisition of

minority stakes is subject to additional notification or consent

requirements. There are restrictions on permitted foreign ownership

in a number of other regulated sectors such as aviation, maritime

shipping, nuclear power generation or pipeline sectors.

1.5 What are the principal sources of liability?

The principal sources of liability of a bidder launching a public

takeover offer in Switzerland are the significant shareholding

disclosure rules, the takeover rules and the laws regarding insider

trading and market manipulation.

Under the significant shareholding disclosure rules, fines may be

imposed upon any person who does not notify a significant interest

in a Swiss listed company (see question 5.2). The fines may amount

to the double of the value of the undisclosed stake.

The takeover rules contain a number of provisions that may lead to

liability of a bidder, such as the mandatory offer rules (see question

2.5) or the best price rule. The takeover rules also require bidders,

targets and, under certain circumstances, the targets shareholders to

notify certain trades to the TOB and the relevant exchanges during

the offer period, with significant fines likely to be imposed in the

event of non-compliance. The publication of the offer documents

may also give rise to a prospectus liability.

The Swiss rules regarding insider trading are complex and often

unclear. However, the consensus view is that a prospective bidder

does not commit an offence if it builds up a stake ahead of an

upcoming takeover offer. Also, the disclosure of a contemplated

offer to potential co-investors or selected shareholders of the target

are permissible if the recipients undertake to abstain from using

their knowledge of the proposed transaction for trading purposes.

The Criminal Code also prohibits market manipulation, in particular

the wilful dissemination of misleading information, wash sales and

matched orders. In addition, the Federal Supreme Court held that

some form of market manipulation may be punishable as fraud.

2 Mechanics of Acquisition

2.1 What alternative means of acquisition are there?

The predominant means of acquiring a Swiss public company is a

public takeover (tender) offer. The bidder can generally offer cash,

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Lenz & Staehelin Switzerland

shares, or a combination thereof in exchange for target shares.

Alternative means of acquiring Swiss companies are statutory (i.e.single-step) mergers and asset deals, which are not specifically

discussed in this country chapter.

2.2 What advisers do the parties need?

Shares of Swiss listed companies are generally deposited with SIX

SIS AG (SIS), the Swiss central depositary organisation. The

offeror will therefore need the assistance of a SIS participant (which

will generally be a Swiss bank or securities dealer) to settle the

transaction and disseminate the offer documents through the Swiss

banking system. The bidder may, but is not required to, retain a

financial adviser.

The bidder must also retain a so-called review body, who will

opine on the accuracy and completeness of the offer prospectus, the

availability of the financing and the compliance of the offer with the

takeover rules. The review body must be a securities dealer

regulated by the FINMA or an auditing firm recognised by the

FINMA. It must be independent from the bidder, meaning that this

function cannot be assumed by the bidders advisers.

The bidder will also retain a Swiss legal adviser who will, among

other things, liaise with the TOB and draft the offer documents.

The board of directors of the target will routinely retain its own

legal and financial advisers. It may also wish, and may under

certain conditions be required to, obtain a fairness opinion to

support a recommendation of the transaction. The fairness opinion

will have to be prepared by an independent person meeting certain

qualification standards.

2.3 How long does it take?

Once announced, an offer must in principle be published within six

weeks. The publication of an offer is followed by a cooling-off

period of at least ten trading days, during which the TOB decides on

the issues that may be raised by the target or shareholders

representing more than 2% of the voting rights of the target.

In principle, an offer must remain open for acceptance for an initial

period of 20 to 40 trading days. The TOB can extend or reduce this

time period under certain circumstances. In the event of a

competing offer, the acceptance period is automatically extended to

match the acceptance period of the competing bid. After expiration

of the initial offer period, the bidder must publish the interim results

of the offer. If successful, the offer must be re-opened for

acceptance for an additional acceptance period of ten trading days.

The bidder is required to publish the final results of the offer in the

same manner as the interim results. The offer must be settled within

ten trading days following expiration of the additional acceptance

period, unless the TOB has agreed to the settlement being made

subject to conditions and these conditions having neither been

fulfilled nor waived by the date scheduled for completion.

2.4 What are the main hurdles?

The principal milestones for execution of a public takeover offer are

the following:

execution of a confidentiality and stand still agreement

between the potential bidder and the target;

due diligence;

as the case may be, approach by the bidder of the main

shareholders of the target to obtain irrevocables or purchase

shares prior to the offer;

execution of a transaction agreement between the bidder and

the target; and

announcement of the offer, publication of the offer

prospectus, etc. (see question 2.3 for details).

2.5 How much flexibility is there over deal terms and price?

Voluntary offers can in principle be made for any number of

securities of the target (partial offers being consequently permitted),

at any price, and be subject to conditions (see question 7.1).

However, where a voluntary offer would, if successful, result in the

bidder exceeding the threshold for a mandatory offer, the bid must

extend to all listed shares (whether voting or not) of the target and

comply with the minimum price rules applicable to mandatory

offers.

SESTA provides for a mandatory offer regime. Whoever acquires

more than one third of the voting rights, whether exercisable or not,

of a Swiss company whose equity securities are listed on a stock

exchange in Switzerland, is required to make an offer for all the

listed shares of the company. The TOB may grant ad hocexemptions from the duty to make an offer. Issuers may also opt

out of the mandatory offer regime, or increase the threshold

triggering the duty to make an offer up to 49% of their voting rights

(although this can in principle not be made in anticipation of a

specific transaction). The price of a mandatory offer must be at

least equal to the market price, being in principle the volume-

weighted average of the prices paid on a Swiss stock exchange

during the 60 trading days preceding the announcement of the offer,

or, if higher, 75% of the highest price paid by the bidder and the

persons acting in concert with it within the last twelve months. A

mandatory bid must also be made for cash or contain a cash

alternative and, subject to certain exceptions, be unconditional.

2.6 What differences are there between offering cash andother considerations?

The securities offered in a share-for-share bid do not need to be

listed. If they are not listed or if their market is illiquid, their value

has to be determined by a review body (see question 2.2). In an

exchange offer, the prospectus has to include more detailed

information about the bidder, its operations and results, as well as

information about the shares offered in exchange. Mandatory offers

must either be made for cash or contain a cash alternative.

2.7 Do the same terms have to be offered to allshareholders?

In principle, the bidder is required to treat all target shareholders

equally. In particular:

if the target has several classes of listed shares (whether voting

or non-voting), the offer must extend to each such class;

if a partial bid is over-accepted, all acceptances must be

scaled down proportionally;

if the offer extends to several classes of securities, a

reasonable ratio must exist between the prices offered for

each class; and

pursuant to the so-called best price rule, a bidder must

increase the offer price if it acquires equity securities of the

target above that price (see question 5.3).

The takeover rules, however, allow a bidder to purchase shares of

the target above the offer price prior to the launch of the offer,

provided such purchases are not conditional upon the success of, or

otherwise linked to, the subsequent public takeover offer.

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2.8 Are there any limits to agreeing on terms withemployees?

As opposed to statutory mergers, employees do not need to approve

or be consulted on public takeover offers.

The best price rule (see question 5.3) is also applicable in

connection with employee shares or stock options. This may raise

issues if share or option plans are amended, or shares or options are

repurchased in the context of an offer.

On one occasion, severance payments negotiated between the target

and its executives in the context of a hostile offer were

characterised as illegal defensive tactics.

The bidder may in principle agree on future terms of employment

with selected employees of the target in case the offer is successful.

However, the target boards report in relation to the offer will have

to disclose the main terms of such agreements as well as any other

material, financial and other consequences that the offer will have

for the target board members and senior management.

2.9 What documentation is needed?

The bidder and the target normally execute a confidentiality (and

stand still) agreement before the bidder is granted access to due

diligence materials, and a transaction agreement before the offer is

announced. The bidder may also collect tender commitments from

significant shareholders or enter into share purchase agreements

prior to the bid.

A public takeover offer typically starts with the announcement of

the offer. An announcement is a short document which sets out the

main terms of the offer (scope, price, kind of consideration,

timetable and conditions). The announcement must be followed, in

principle within six weeks, by an offer prospectus. The board of

directors of the target company must publish a report on the offer.

This report is often supported by a fairness opinion prepared by an

independent third party. If the offer is a recommended one, the

board report is generally reproduced in the offer prospectus. The

interim and final results must be published by means of a press

release and commercial announcement.

SESTA requires the key offer documents to be drafted in French and

German. In case of discrepancies between the different versions of

the offer documents, the version which is the most unfavourable to

its author prevails.

2.10 Are there any special accounting procedures?

If the closing date of the latest financial statements of the target

dates back more than six months at the end of the offer period, the

target board has to publish interim financial statements in its report

on the offer. Otherwise it must confirm that there has been no

material change in the financial situation of the company since the

closing date of the last published financial statements.

2.11 What are the key costs?

In addition to advisory fees, a public takeover offer may give rise

for the bidder to: printing and publication costs of roughly CHF

100,000 or more; fees of the review body of roughly CHF 80,000 to

150,000; a fee of the TOB between CHF 25,000 and CHF 250,000;

a commission per tendered share payable to the depository banks

that depends on the magnitude of the contemplated transaction; and

fees payable to the provider of the fairness opinion (if any).

In addition, the acquisition of the shares of the target company is

subject to a Swiss transfer stamp duty of 1.5 and an additional

levy of the SIX Swiss Exchange (SIX). If securities are being

offered in exchange for the shares of the target company, an

additional duty of 1.5 (3.0 if the security is issued by a foreign

issuer) will be assessed, although exemptions from the Swiss

transfer stamp duty may be available. Tendering shareholders

brokers are generally required to pay half of these duties. However,

it is customary that the bidder assumes this payment as well, at least

in the context of a voluntary offer.

2.12 What consents are needed?

Apart from antitrust and regulatory clearances, the TOB will have

to approve the offer prospectus and the report of the target. The

TOBs approval is generally applied for and obtained prior to

publication of the offer documents, although the TOB may

reconsider its decision if it is subsequently contested by the targets

shareholders (see question 3.3). Prior approval by the TOB is

typically a three-week process.

2.13 What levels of approval or acceptance are needed?

The takeover regulations do not require public takeover offers to be

subject to a minimum acceptance level. An offer can consequently

be declared successful, even if the bidder holds less than 50% of the

targets shares upon expiration of the offer period.

The launch of a public takeover offer in principle does not require any

shareholder approval under Swiss law. However, in the event of an

exchange offer, shareholders of the bidder may need to increase the

share capital of the company to issue the shares offered in exchange.

Also, if the articles of association of the target company contain

defensive devices (e.g. share transfer or voting rights restrictions), the

bidder will generally wish to make its bid conditional upon the

shareholders of the target company abrogating these provisions.

2.14 When does cash consideration need to be available?

If successful, a public takeover offer must be settled within 10 trading

days following expiration of the additional acceptance period, unless

the TOB has agreed to the settlement being made subject to

conditions (see question 7.1) and these conditions have neither been

fulfilled nor waived by the date scheduled for completion.

The cash consideration must be available at the settlement date.

However, the offeror must establish at the date of the offer

prospectus that it has taken all required steps to ensure that the

consideration will be available at the settlement date, which must be

confirmed by the independent review body in its report to the

shareholders.

3 Friendly or Hostile

3.1 Is there a choice?

There is no requirement to notify the target board or the TOB of an

offer before announcing it publicly. Also, the number of unfriendly

offers has increased in Switzerland in recent years.

3.2 How relevant is the target board?

One reason for securing the support of the target board prior to

launching an offer is due diligence. Once announced, an offer

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cannot in principle be withdrawn, and the offer price can in

principle not be reduced. Due diligence, if any, must therefore be

conducted before the offer is made.

The target board is restricted by law in its ability to frustrate the

offer or take defensive measures. However, the target board will

often play an active role in the event of an unsolicited offer, most

importantly by searching for a white knight. The target board will

publish a detailed report in relation to the offer, in which it will give

a recommendation to accept or not accept the offer or simply

summarise the advantages and disadvantages of the offer. The

importance of the board will generally increase if the targets

articles of association contain defensive mechanisms. The removal

of such devices will require a general meeting, which is a forum

where the board has an advantage.

3.3 Does the choice affect process?

The TOB generally reviews agreed offers prior to publication,

whereas this is not always the case with hostile bids. Also, the

target board will not issue its report regarding a hostile offer

simultaneously with the offer prospectus, but within fifteen trading

days from the prospectus date. As a result, the review of the offer

documents takes longer in a hostile situation than in an agreed bid.

4 Information

4.1 What information is available to a buyer?

The Swiss commercial register contains basic information that the

public can access (e.g. corporate name, share capital, etc.). In

particular, the companys articles of association and any document

relating to a registration in the commercial register are publicly

available.

Any entry in the commercial register is published in the Swiss

Official Gazette of Commerce along with any information required

by law (e.g. notices to creditors in case of share capital reductions

or liquidation). Notices of significant shareholdings (see question

5.2) are also published in the Gazette or on an internet platform of

the stock exchange where the shares are listed.

Swiss listed companies are required to make their annual reports

(including financial statements and the auditors report) publicly

available. Moreover, companies listed on the SIX are required to

include a corporate governance report in their annual report.

Under the listing rules of the SIX, issuers are required to publish

price-sensitive information by means of press release (see question

4.2). The relevant releases must be posted on the issuers website

and remain available there for two years. Information on issuers is

also available on the website of the SIX.

Other sources of information include the patent register and

trademark register, which can be searched in relation to intellectual

property rights. Land and debt enforcement proceedings registers

may be consulted under certain circumstances. Access to the tax

register depends on the regulations of each Swiss canton.

Finally, under the Swiss takeover regulations, any bidder must be

given reasonable access to the due diligence materials that the target

has provided to (actual or prospective) competing bidders.

4.2 Is negotiation confidential?

Pursuant to the listing rules of the SIX, issuers are generally

required to promptly disclose price-sensitive, non-public

information relating to their business activities.

However, the listing rules allow issuers to postpone disclosure

while significant transactions such as takeovers are being

negotiated on the condition that confidentiality be strictly

maintained. Immediate disclosure is required if confidential price-

sensitive information leaks.

4.3 What will become public?

The bidder is required to disclose in the offer prospectus the main

terms of the agreements that it has entered into with the target

company, its directors, senior officers or shareholders. The bidder

must also certify in the offer prospectus that it has not received from

the target company, directly or indirectly, information relating to the

target that is not publicly available and could have a material

influence on the decision of shareholders to accept the offer.

4.4 What if the information is wrong or changes?

The bidder and the target are under an ongoing duty to supplement

the offer documents until expiration of the acceptance period to

reflect new information material to the offer.

The offer, once announced, can usually not be withdrawn or

amended to the detriment of the shareholders of the target company.

However, the TOB allows bidders, within certain boundaries, to

make their offers conditional upon the absence of material adverse

changes in the targets business (see question 7.1).

5 Stakebuilding

5.1 Can shares be bought outside the offer process?

Yes, shares can be bought outside the offer process. In an exchange

offer, cash purchases may force the bidder to add a cash alternative

to its offer.

5.2 What are the disclosure triggers?

Under the Swiss significant shareholding rules, any person must

notify the relevant company and stock exchange if it reaches,

exceeds or falls below 3, 5, 10, 15, 20, 25, 331/3, 50 or 66 % of

the voting rights of the target. In addition, once the offer is

announced, the bidder, the persons acting in concert with the bidder,

the target, the other persons taking part in the proceedings before

the TOB (see question 2.3 above) and, under certain circumstances,

the significant shareholders of the target or of the company whose

securities are being offered in exchange, must notify the TOB and

the relevant exchange within one trading day of any trade in the

equity securities of the target or in the securities offered in

exchange. The notices are published on the website of the TOB.

5.3 What are the limitations?

The price paid by the offeror for shares outside the offer should not

exceed the offer consideration. If the bidder pays a higher price

outside the offer, it must increase the offer price accordingly (best

price rule). The best price rule applies in principle between the

announcement of the offer and the date that is six months from the

expiration of the offers acceptance period.

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6 Deal Protection

6.1 Are break fees available?

The bidder and the target can agree on a break fee, provided that

this does not result in coercing shareholders to accept the offer. As

a general guideline, break fees should not substantially exceed the

cost incurred by the bidder in connection with the offer. In the past,

break fees have ranged from CHF 800,000 (Forbo) to CHF 20

million (Centerpulse/Smith & Nephew). Break fees must be

disclosed in the offer documents.

6.2 Can the target agree not to shop the company or itsassets?

The general perception is that the target company and its board may

agree to refrain from soliciting third party offers or similar proposals

in competition with a recommended bid (no shop). However, the

target board should retain the right to respond to unsolicited proposals

to the extent required by its fiduciary duties, including by way of

disclosing non-public information to, or entering into negotiations

with, the third party making such proposal.

6.3 Can the target agree to issue shares or sell assets?

Any agreements or undertakings by which the target board

prejudices potential competing offers are critical both under the

takeover rules and the boards fiduciary duties. The target board

cannot therefore in principle agree to issue shares or sell assets to

support the preferred bidder, neither in advance nor upon

announcement of a competing bid, except if approved by the

shareholders meeting or under certain other conditions.

6.4 What commitments are available to tie up a deal?

The ability of a bidder to protect his transaction is limited under

Swiss law. In principle, the target board cannot enter into

agreements frustrating potential or actual competing bids without

shareholder approval. Undertakings from shareholders to accept an

offer can be revoked in the event of a competing bid. The ability of

the target company to pay break fees is limited (see question 6.1).

One route for a bidder to fend-off potential competitors is to build

up a stake in the target.

7 Bidder Protection

7.1 What deal conditions are permitted?

Voluntary bids may be subject to conditions, the fulfilment of which

is beyond the bidders control, can be assessed objectively, and does

not require actions from the target that could be held as unlawful (in

particular a violation of the boards fiduciary duties). The TOB may

also strike out conditions that it finds over-protective for the bidder.

The most typical kind of permissible conditions are acceptance

conditions (typically two thirds of the targets issued shares),

competition clearance, removal of share transfer or voting right

restrictions in the articles of association of the target, absence of

material adverse changes and valid issuance or listing of securities

offered in exchange.

In principle, conditions must be either fulfilled or waived upon

expiration of the offers initial acceptance period. However, the

TOB may authorise a bidder to make its offer subject to conditions

that will only be fulfilled or waived at a later point in time prior to

settlement. This is typically the case where the settlement of the

offer requires antitrust clearance, regulatory approval, or the

issuance and/or listing of the securities offered in exchange.

7.2 What control does the bidder have over the target duringthe process?

The ability of the target board to take frustrating actions during the

offer period is restricted by law (see question 8.2). Also, the bidder

may identify certain assets as the main subject matter of its offer.

Assets so identified cannot be disposed of or encumbered without

shareholder approval. The bidder may also make its offer subject to

the absence of certain material adverse changes in the target

companys business. In a friendly transaction, the target will

generally undertake not to take any action outside the ordinary

course of business until settlement of the offer.

7.3 When does control pass to the bidder?

Public takeover offers are usually structured so that effective

control passes to the bidder upon settlement of the offer.

7.4 How can the bidder get 100% control?

Pursuant to SESTA, a bidder that holds 98% or more of the voting

rights of the target following completion of a public takeover offer

may apply for a court decision cancelling the remaining equity

securities of the target. The request must be made within three

months after expiration of the offers acceptance period. Obtaining

the appropriate court decision takes approximately six months. The

right to squeeze out minority shareholders is a right of the bidder.

Swiss law does not entitle minority shareholders to be bought out

after a successful offer.

A bidder holding 90% of the share capital and voting rights of the

target may also carry out a squeeze-out merger. In such a case, the

remaining shareholders can be forced to accept cash or any other

kind of assets in exchange for their shares of the target.

Shareholders of the target do not have an appraisal right in a

squeeze-out process carried out pursuant to SESTA, but do have

such a right in the event of a squeeze-out merger.

8 Target Defences

8.1 Does the board of the target have to tell its shareholdersif it gets an offer?

The listing rules of the SIX require issuers to promptly disclose

price-sensitive, non-public information relating to their business

activities (see question 4.2). An unsolicited approach is generally

deemed price-sensitive. It is generally considered that no

disclosure is required if the offer is being made subject to certain

conditions such as satisfactory due diligence and that the board

of directors rejects the approach. However, disclosure may be

required if a hostile bid is to be expected.

8.2 What can the target do to resist change of control?

Under the Swiss takeover rules, the board of directors is prevented

from taking frustrating actions during an offer period without

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shareholder approval. Frustrating actions include, without

limitation, the sale of corporate assets representing more than 10%

of the latest annual balance sheet total or which contribute by more

than 10% to the companys profitability, the sale or encumbrance of

any part of the company or intangible asset that has been identified

by the bidder as the main subject matter of the offer, as well as

execution of agreements with members of the board of directors or

senior management providing for unusually high severance

payments. The takeover rules also restrict the ability of the targets

board of directors to issue new equity securities without pre-

emptive rights or to repurchase own shares during the offer period.

The Swiss takeover rules also prohibit defensive measures that

are in manifest violation of Swiss company law. In the past, the

TOB and the FBC (now the FINMA) held illegal severance

agreements that were entered into shortly prior to a hostile takeover

approach, exempting senior executives from their duties to work for

and not to compete with the company during the notice period if

such executives were terminated following a change of control.

8.3 Is it a fair fight?

The mandatory offer rules protect minority shareholders against the

most obvious coercive tactics that can be implemented by bidders

(e.g. two-tiered, front-end loaded offers). Conversely, the target

board is restricted in its ability to take frustrating actions or to

implement defensive tactics. Also, by limiting the ability of the

target to pay break fees and of the bidder to obtain hard

irrevocables, the takeover regulations and the TOB are

endeavouring to create a level playing field in the market for

corporate control. This principle, however, is not always

implemented consistently. For example, under the practice of the

TOB, the FBC (now the FINMA) and the Swiss Supreme Court,

targets must provide bidders with all the diligence materials

transmitted to potential competing bidders even before a competing

bid is made. This practice may hinder the targets efforts to identify

white knights and to successfully create an auction for the company.

The question of whether the limited degree of deal protection

available to bidders and the difficulty for targets to search for white

knights is beneficial or detrimental to the targets shareholders is a

matter of debate in Switzerland.

9 Other Useful Facts

9.1 What are the major influences on the success of anacquisition?

The existence of shareholders holding more than 10% of the shares

of the target (thereby potentially preventing any subsequent

squeeze-out merger) can arguably help in deflecting unsolicited

takeover approaches. The presence of defensive devices in the

articles of association of the target (e.g. share transfer or voting

right restrictions) is also an important factor.

Absent any majority shareholder, companies that have adopted

opting out or opting up provisions (see question 2.5) tend to be

more vulnerable to hostile approaches than companies that have not

adopted such provisions.

9.2 What happens if it fails?

A bidder will generally gain effective control over a Swiss target

(including the right to appoint and remove directors) if it acquires

50% of the voting rights represented at the companys general

meetings. However, at least 66 % of the voting rights and the

majority of the stated share capital represented at a shareholder

meeting is generally required to pass certain resolutions, such as

creating an authorised or conditional share capital, increasing the

existing share capital by way of capitalisation of reserves or against

contributions in kind, and restricting or terminating shareholders

pre-emptive rights or merging the company with or into another

entity. Absent any blocking minority, the fact of not being able to

squeeze out minority shareholders will generally result in requiring

the bidder to share any dividend payments with minority

shareholders, limiting the flexibility to hold shareholders meetings

of the target, and creating a risk of litigation with minority

shareholders.

10 Updates

10.1 Please provide, in no more than 300 words, a summary ofany relevant new law or practices in M&A in Switzerland.

The Swiss rules on public tender offers were amended with effect

as of 1 January 2009. The most significant change that was

introduced on this occasion was the ability of shareholders holding

2% or more of the voting rights of the target to participate to the

TOBs proceedings and to challenge the TOBs rulings. This new

regime significantly changed the nature of the takeover

proceedings. In the past, the TOBs rulings could in principle only

be challenged by bidders and targets. This provided certainty to the

parties in agreed bids and predictability to the takeover process.

The participation of shareholders to the proceedings has, however,

changed this situation. Bidders must now take into account that the

legality of their bid can be challenged after its publication. This can

impact on the financial terms of the offer if an infringement of the

rules governing the minimum price of the offer or the best price

rule is alleged. The unsolicited offer of the French insurer MMA

for the company Harwanne at the beginning of 2009 demonstrated

that this risk is not only theoretical. It remains to be seen whether

this new situation will affect the Swiss market for corporate control.

The recent drop in the number of public takeover offers in

Switzerland seems to be more related to the current economic

situation than to the changes to the regulatory environment.

The new rules also allow the TOB to issue put up or shut up

statements, and to order a person who has publicly announced to be

considering an offer, to clarify its intentions within a certain period

of time. The change is welcome, since its brings some clarity to the

regime applicable where a bid is threatened without being actually

made.

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Jacques Iffland

Lenz & StaehelinRoute de Chne 301211 Geneva 17Switzerland

Tel: +41 58 450 70 00Fax: +41 58 450 70 01Email: [email protected]: www.lenzstaehelin.com

Jacques Iffland is a partner in the Corporate and M&A practicegroup of the Geneva office of Lenz & Staehelin. He specialisesin securities regulations and general corporate matters, with anemphasis on public takeovers. He advises both bidders andtargets on a regular basis. Before joining Lenz & Staehelin, heworked for several years as a legal adviser with the SwissTakeover Board. He studied Law at the University of Lausanne,Switzerland, where he obtained a doctoral degree with a thesis onmarket manipulations.

Hans-Jakob Diem

Lenz & StaehelinBleicherweg 588027 ZrichSwitzerland

Tel: +41 58 450 80 00Fax: +41 58 450 80 01Email: [email protected]: www.lenzstaehelin.com

Hans-Jakob Diem is a partner in the Corporate and M&A practicegroup of the Zurich office of Lenz & Staehelin. He studied Law atthe University of Basel, Switzerland, and is a graduate of theLL.M. programme at the London School of Economics, London(1998). Hans-Jakob Diem specialises in Mergers & Acquisitionsand general corporate matters, with an emphasis on publictakeovers. He advises both bidders and targets on a regularbasis.

Lenz & Staehelin is the largest law firm in Switzerland with offices in Zurich, Geneva and Lausanne. The firm comprises morethan 150 qualified lawyers and provides advice mainly to larger corporate clients in Switzerland and abroad on a wide range oflegal matters. Lenz & Staehelin operates at both the national and international level. In Switzerland, it has a prominent positionin the two main language areas, and is equipped to provide its international clients with advice on all relevant domestic and cross-boarder legal matters.

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