Public to Private in Spain

Question 1

What is the purpose of delisting?

Answer 1

It aims to exlcude the Company’s shares from the Stock Exchanges.

The delisting may be executed:

• ex officio by the CNMV
• By the Company whose shares are listed in the Stock Exchanges

Question 2

When may the CNMV decide to exclude from listing?

Answer 2

When the securities do not reach the legal minimum level of frequency, trading volume or ownership distribution.

Question 3

If a SGM decides to delist the Company, what are the two alternative routes to do so?

Answer 3

1. Intermediate Procedure
2. Delisting takeover bids

(both need to be approved by the CNMV)

Question 4

Which circumstances need to be considered by the CNMV to authorize a delist through the intermediate procedure?

Answer 4

1. High percentage of votes in favor of the delisting resolution.
2. Number of shares held by non-controlling shareholders.
3. Number of non-controlling shareholders
4. Previous takeover bid
5. Existence of valuation report on the Company prepared by independent auditors.

Question 5

How is the intermediate procedure carried out?

Answer 5

1. The CNMV opens a 1 or 2 months hearing period to follow shareholder that did not vote in favour of the delisting resolution to express their opinion.
2. If few shareholders oppose, the CNMV may allow the dissenting shareholders to agree witht the Company to have their shares bought-out in cash
3. CNMV may request majority shareholder of the Company to place a permanent buy order over the Company shares until delisting is completed or, in certain cases, for a certain period of time after delisting.
4. Procedure always at discretion of the CNMV.

Question 6

What are the conditions that must be met to carry out a TOB?

Answer 6

-The offeror must be the company.
-It must delist 100%
-It must have a consideration cash
-The price authorised by the CNMV> not lower than the price resulting criteria:
a) average trading price for the last 6 months
b) book value
c) liquidation value
d) prior takeover (12 months)
or
a) comparable companies analysis
b) comparable transactions analysis
c) discounted cashflows
d) consideration in the last takeover bid

• There must a valuation by an expert.
• Launched over the share capital that did not vote in favour of the delist resolutions, and for the convertible bonds or other securities entitling its holders to suscribe or acquire shares.
• If, with the acquisition, the Company contravenes the treasure stock limits, any share acquired over 10% of the capital must be redeemed.

Question 7

What happens if the offeror is different from the Company in a TOB?

Answer 7

-Consideration has to meet the delisting rules on price.
- Disclosure of intentions:
the Offeror has to indicate its intentions to delist the Company on a ceertain term in case a large number of share are acquired through the takeover bid.

Question 8

When can the squeeze out of minority shareholders take place?

Answer 8

• When the offeror must hold over 90% of the share capital and voting rights following the takeover bid
• The takeover bid must have been accepted by over 90% of the shareholders (holding over 90% of the voting rights) to which it has been addressed.

Question 9

How is squeeze out carried out?

Answer 9

• It is carried out through the granting of a put option i favour of the offeror to buy the shares of the minority shareholder at a fair price. The price offered in the previous TOB will be considered a fair price.
• Likewise, the minority shareholders will have a call option that will allow to require the offeror to purchase their shares in such scenario.

Question 10

What is capital reduction by redemption of shares?

Answer 10

It is a cancelleation of the rights of individual shareholders. A capital reduction by redemption of shares can be executed in two ways:
either by redemption subsequent to the company’s purchase of shares or by compulsory redemption.

Question 11

How can capital reduction by redemption of shares help a TOB?

Answer 11

It allows a company to reduce its share capital by redeeming solely the shares held by minority shareholders BUT.

• The capital reduction must be approved (seperately) by:
• Resolution of the SGM
• Resolution of the minority shareholders

AND consideration must be fair

PLUS: minority shareholders must receive complete information on the procedure.