Top-up claims pursuant to Sec. 31 (5) Sentence 1, (6) Sentence 1 WpÜG (Federal Court of Justice, ruling of May 23, 2023 (II ZR 219/21) (Stada Arzneimittel AG)

In the decision of the BGH of May 23, 2023, a significant minority shareholder of Stada Arzneimittel AG had undertaken vis-à-vis the bidder, Nidda Healthcare GmbH, to support the conclusion of a domination and profit and loss transfer agreement between Stada Arzneimittel AG and Nidda Healthcare GmbH, provided that the agreement would provide for a compensation of at least EUR 74.40 per share for the minority shareholders of Stada Arzneimittel AG. The corresponding agreement between the bidder and the  minority shareholder was concluded within the one-year period of Section 31 (5) sentence 1 WpÜG.

In February 2018, the Annual General Meeting of Stada Arzneimittel AG approved the conclusion of a domination and profit and loss transfer agreement with Nidda Healthcare GmbH with the votes of the package shareholder. The domination and profit and loss transfer agreement provided for compensation of EUR 74.40 per share. It was entered in the commercial register on March 20, 2018. The minority shareholder did not exercise the right to tender under the domination and profit and loss transfer agreement.

As a result of the agreement with the minority shareholder, former shareholders of Stada Arzneimittel AG who had accepted the takeover offer asserted a top-up claim against the bidder pursuant to section 31 (5) sentence 1, (6) sentence 1 WpÜG in the amount of the difference between the minimum compensation agreed with the minority shareholder and the offer consideration of EUR 66.25 per share. In contrast to the previous instances (LG Frankfurt a. M., judgment of March 21, 2019 - 3-05 O 138/18 and OLG Frankfurt OLG Frankfurt a. M., judgment of July 7, 2020 - 5 U 71/19), the Federal Court of Justice upheld the claims and ordered the bidder to pay a corresponding top-up. The decision once again demonstrates the Federal Court of Justice's efforts to put a stop to alleged circumventions of the parallel and subsequent acquisition provisions.

In the reasons for its decision, the Federal Court of Justice first deals in detail with the question of whether it is necessary for the application of section 35 (6) sentence 1 WpÜG that the bidder can demand the transfer of shares in the target company under the agreement. Unlike the lower courts and in contrast to the prevailing opinion in literature (see, for example, Kremer/Kulenkamp in Kölner Kommentar zum WpÜG, 3rd ed. 2022, Section 31 WpÜG para. 107), the Federal Court of Justice concludes that there is no such requirement and that it is sufficient that "the agreement contains a legal disposition of the bidder directed towards the acquisition of shares, in which it is expressed that he is willing to pay a consideration for the acquisition of shares that exceeds the consideration offered pursuant to section 11 para. 2 sentence 1 no. 4 WpÜG". On this basis, section 31 para. 6 sentence 1 WpÜG also covers, in particular, the granting of a put option by the bidder, irrespective of whether the put option is "in the money" and thus "conceals" a purchase agreement, which is not very convincing in view of the wording and systematics of section 31 para. 6 WpÜG. The Federal Court of Justice also considers the agreement between the Bidder and the minority shareholder to be an agreement within the meaning of section 35 para. 6 sentence 1 WpÜG. In the opinion of the Federal Court of Justice, the fact that the tender right of the package shareholder requires the domination and profit and loss transfer agreement to take effect and that it is based on this agreement does not preclude this conclusion.

Next, the Federal Court of Justice refuses to apply the exemption provision in Section 31 (5) sentence 2 WpÜG to the agreement with the package shareholder. In the opinion of the Federal Court of Justice, the provision does not apply if the offeror and a minority shareholder prematurely negotiate a settlement in excess of the offer consideration. In this respect, too, the Federal Court of Justice, giving detailed reasons, deviates from the OLG Frankfurt and the LG Frankfurt, which had assumed that the agreement with the minority shareholder is covered by Section 31 (5) sentence 2 because it relates to a statutory obligation to grant compensation to shareholders of the target company. The decision of the Federal Court of Justice does not directly affect agreements on the amount of compensation which are concluded with minority shareholders after the domination and profit and loss transfer agreement has become effective, for example to avert appraisal proceedings. To date, the majority view in legal literature is that such agreements are in connection with a statutory obligation to grant compensation and therefore fall within the scope of Section 31 (5) sentence 2 WpÜG (see, for example, Kremer/Kulenkamp in Kölner Kommentar zum WpÜG, 3rd ed. 2022, Section 31 WpÜG no. 99).

Finally, the Federal Court of Justice expressly leaves open in the decision whether a top-up claim arises if an off-market acquisition takes place at a price that does not exceed the stock exchange price. In literature, the non-application of Section 31 (5) sentence 1 WpÜG is advocated for this case (see, for example, Krause in Assmann/Pötzsch/Schneider, WpÜG, 3rd ed. 2020, Section 31 no. 135). The Federal Court of Justice believes that the question is not relevant to the decision because the agreement with the minority shareholder "did not result in an acquisition at the stock exchange price". It remains unclear whether this statement of the Federal Court of Justice is to be understood to mean that a restrictive interpretation can at most be considered in case of (in rem) acquisitions or if the acquisition is made at the stock exchange price. At the time of the conclusion of the agreement with the package shareholder, the stock exchange price was in any case higher than the minimum compensation of EUR 74.40 agreed with the minority shareholder.