Exceptional regime on voluntary takeover bids under extraordinary circumstances

Article 137(2) and (3) of the Spanish Securities Market Act (“LMV”) provides a specific regime for voluntary takeover bids. Under this regime, the offeror (i) has limited freedom to set the offer price under certain extraordinary circumstances; and (ii) must submit a valuation report.

The offeror must submit this report when, e.g., within two years prior to announcing the voluntary bid, “market prices in general, or market prices of the company involved in particular, be affected by exceptional occurrences such as natural disasters, war or other force majeure events”.

The Spanish Securities and Exchange Commission (“CNMV”) has been forced to apply this exceptional regime because of the negative impact of the health crisis on the share prices of many listed Spanish companies. After examining the various market events from the start of the COVID-19 pandemic, the CNMV considered that this exceptional regime should apply from March 12, 2020. On that date, the Ibex 35 index lost 14.06%, its greatest fall since it was created. The CNMV also considered that the exceptional regime should cease to apply from March 12, 2022, unless new COVID-19 related events led the CNMV to reconsider its decision. So far, the CNMV has made no comments in this regard.

The voluntary takeover bids made over the last two years have included a valuation report prepared by an independent expert. Also, these bids could not be made exclusively as an exchange of securities. Rather, offerors had to include an alternative consideration in cash, at least financially equivalent to the value of the offered exchange.

Finally, note that article 137 LMV lists the “exceptional occurrences” by way of example, i.e., it does not provide an exhaustive list. It mentions, e.g., “natural disasters, war or other force majeure events.” Given the current context, we should not rule out the possibility that this exceptional regime be applicable again due to circumstances like the Russian invasion of Ukraine, the energy crisis or the existing supply chain disruptions.