Major transactions dominate the German M&A market in 2018. While valuations remain at high levels, in the midmarket segment, the number of transactions declined. The big bangs in 2018 include the announced reorganization of RWE and E.ON, which involves a significant asset swap and breaking up of innogy. The construction material group Knauf is taking over its US competitor USG. HSH Nordbank is the first Landesbank to be privatized. SAP manages two US takeovers, acquiring Qualtrics and Callidus, while Merck found a buyer for its OTC business in Procter & Gamble. Signa and Hudson`s Bay agree to merge Karstadt and Kaufhof, and Thor Industries acquires the Hymer RV business. Continue Reading
The German Government published a draft legislation which would facilitate the dismissal of so-called “risk takers” in the German financial sector. This is one of various measures by which the German Government intends to address upcoming Brexit challenges and to increase the attractiveness of Germany as business location for financial institutions currently based in the UK.
Current Legal Situation
German employees are benefitting from extensive protection against dismissal. Under German labor law, the termination of an employment relationship requires a valid justification (e.g., redundancy or misconduct) for which the German labor courts have set high standards. Therefore, the affected employee is often in a good position to challenge the validity of the termination and claim the continuation of the employment relationship before court.
Voting rights held by shareholders who are “acting in concert” are mutually attributed for purposes of the German Securities Trading Act (“WpHG”) and the German Takeover Act (“WpÜG”). Such attribution may thus not only trigger (additional) voting rights notifications, if the relevant voting rights thresholds are reached or crossed, but also the obligation to launch a mandatory offer, if based on the voting rights so attributed a shareholder acquires control of a company. In light of these implications, the question of what type of behavior constitutes acting in concert is of high practical relevance. Unfortunately, the definition in statutory law is open-ended, and several details are heavily disputed. In its decision of September 25, 2018 (II ZR 190/17), the German Federal Court of Justice (“FCJ”) had the opportunity to clarify two important questions:
First, the coordination of shareholder behavior in an individual case does not qualify as acting in concert. According to the FCJ, the question of whether coordination among shareholders is limited to an “individual case” is to be determined applying a formal rather than substantive test. Second, mutual coordination of conduct among shareholders does not constitute acting in concert if it is aimed at maintaining an existing corporate strategy (or defining it for the first time), rather than at bringing about a permanent and material change to an existing corporate strategy. Continue Reading German Federal Court of Justice on Acting in Concert of Shareholders
Foreign investors who, for many years, eagerly awaited the ability to establish majority or wholly owned businesses in the United Arab Emirates (“UAE”) outside the free zones can prepare their bait—but cannot go fishing yet.
Following an announcement made by the UAE Council of Ministers earlier this year, the long-awaited Foreign Direct Investment Law was issued in September 2018 through federal Legislative Decree No. 19 of 2018 (the “Foreign Direct Investment Law”). While not repealing the restrictions on foreign ownership under the federal Commercial Companies Law No. 2 of 2015 (the “Commercial Companies Law”), the Foreign Direct Investment Law sets forth a framework entitling foreign investors to apply for a special status for their UAE-based investment vehicles that would accord them certain derogations from the provisions of the Commercial Companies Law, including in relation to the limit on foreign ownership. The new law does not relax foreign ownership limitations across the board.
In the memorandum, we summarize the key provisions introduced by the new Foreign Direct Investment Law and analyze the potential impact on the investment landscape in the UAE.
As both shareholder activists, and the companies they target, become more geographically diverse, it is increasingly important for legal and corporate practitioners to understand the legal framework and emerging trends of shareholder activism in the various international jurisdictions facing activism. The Shareholder Rights and Activism Review is designed as a primer on these aspects of shareholder activism in such jurisdictions.
Please click here to read Cleary partner Michael J. Ulmer’s chapter on Germany.
On October 10, 2018, the Department of the Treasury issued interim regulations (“Interim Regulations”) for the Committee on Foreign Investment in the United States (“CFIUS”) to conduct a pilot program implementing provisions relating to critical technologies of the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), which recently amended the Exon-Florio amendments to the Defense Production Act of 1950 (together, “Exon-Florio”). The Department of the Treasury also released amendments to CFIUS’s regulations effective October 11, 2018 to implement the immediately effective portions of FIRRMA.
Section 1727(c) of FIRRMA authorizes CFIUS to conduct one or more pilot programs to implement any authority provided pursuant to any provision of, or amendment made by, FIRRMA that did not take effect immediately upon enactment. The newly issued Interim Regulations bring into effect a pilot program implementing enhanced, and in many cases mandatory, review of transactions involving “critical technologies” (generally, export-controlled technologies) used by the target in, or designed by the target for, one or more of a list of specified industries. The pilot program takes effect on November 10, 2018.
Please click here to read the full alert memorandum.
The record breaking heat this past summer left M&A activities cold. Signa and Hudson’s Bay agree on a merger between Karstadt and Kaufhof. Signa takes over the lead role. In addition, Signa acquires significant real estate properties from Hudson’s Bay. Via Warwick, Morgan Stanley submits a takeover offer for all shares of the logistics company VTG. Haniel prepares its withdrawal from retailer group Metro with the disposal of a 7.3% share participation and the granting of a call option for an additional 15.2% of the group’s shares to the Czech firm EP Global Commerce. The acquirer secures an additional 9% Metro package from the co-shareholder Ceconomy. The Hymer family sells its RV business, valued at approx. EUR 2.1 billion, to its competitor Thor Industries. Schwarz Group’s entry into Tönsmeier, a waste disposal company, could alter the recycling business in Germany. Continue Reading
German law corporate acquisition agreements and real estate purchase agreements often include broad exclusions of liability. However, pursuant to Section 444 of the German Civil Code (Bürgerliches Gesetzbuch), a seller is subject to statutory (non-excludable) liability if and to the extent the seller fraudulently concealed a defect of the sold asset. To that end, it is often decisive whether the seller was required to inform the buyer about the defect in question. Continue Reading German Federal Court of Justice on Seller Disclosure Obligations: Extensive Disclosure Required in Environmental Context
On July 24, 2018, the UK Government published proposals for legislative reform that would give it significantly greater powers to intervene in UK transactions on national security grounds.
This Alert Memorandum summarizes the proposals and the possible implications.
On August 1, 2018 the U.S. Senate joined the U.S. House of Representatives in agreeing to a conference report that sent the National Defense Authorization Act for Fiscal Year 2019 (“NDAA”), which incorporated a version of the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), to the U.S. President for his signature. The President is expected to sign the NDAA.
FIRRMA updates the statute authorizing reviews of foreign investment by the Committee on Foreign Investment in the United States (“CFIUS”) to reflect changes in CFIUS’s practice over the ten years since the last significant reform, expands CFIUS’s jurisdiction, and makes significant procedural alterations to the CFIUS process. Introduced to “modernize and strengthen” review of foreign investment in the United States, FIRRMA cements a relatively aggressive approach to foreign investment review. However, ultimately, FIRRMA’s changes to current CFIUS practice are modest, and many of the changes merely codify practices in place since the later years of the Obama Administration.
Please click here to read the full alert memorandum.