Takeover Squeeze-Out - 95% threshold and presumption of appropriateness (Frankfurt Regional Court, decision of October 27, 2022 (3-5 O 19/22) (Grifols, S.A. / Biotest AG))

The decision of the Frankfurt Regional Court of October 27, 2022 (3-5 O 19/22) deals with various issues relating to the squeeze-out under takeover law pursuant to Section 39a WpÜG. The decision relates to the squeeze-out under takeover law of the ordinary shareholders of Biotest AG applied for by Grifols, S.A. On October 26, 2021, Grifols, S.A. made a public tender offer to the shareholders of Biotest AG to acquire the ordinary shares of Biotest AG for a cash consideration of EUR 43.00 per ordinary share and to acquire the preference shares of Biotest AG for a cash consideration of EUR 37.00 per preference share. Already in September 2021, Grifols, S.A. had entered into an agreement with the principal shareholder of Biotest AG for the indirect acquisition of approx. 89.8818% of the ordinary shares of Biotest AG and of approximately 1.08% of the preference shares of Biotest AG. Both the completion of the tender offer and the completion of the share purchase agreement were subject to various regulatory conditions. By the end of the additional acceptance period, the tender offer was accepted for approx. 6.3192% of the ordinary shares, so that Grifols, S.A. was entitled to acquire (directly and indirectly) more than 95% of the ordinary shares of Biotest AG under the tender offer and the share purchase agreement.

On March 28, 2022, Grifols, S.A. filed an application with the competent Frankfurt Regional Court, to transfer the ordinary shares in Biotest AG that it does not own directly or indirectly to Grifols, S.A. against payment of a compensation in the amount of EUR 43.00 per ordinary share pursuant to Sections 39a (1) sentence 1, 39b (5) sentence 3 WpÜG. The closing of the tender offer and the share purchase agreement was still pending at the time of filing the application and took place in the course of April 2022, after the last outstanding closing condition had been satisfied on April 7, 2022.

The Frankfurt Regional Court has deemed the application of Grifols, S.A. to be admissible and justified. In examining the admissibility of the application, the court first clarifies that it is sufficient that the bidder owns 95% of the voting share capital at the time of the court decision, so that the outstanding completion of the share purchases does not prevent the application from being filed. The court then addresses the question of whether share purchases made outside the offer after expiry of the (further) acceptance period are also to be taken into account for the purpose of reaching the 95% threshold. The court assumes that all share acquisitions that take place up to the filing of the application are to be taken into account for reaching the 95% threshold. This is surprising because, according to the case law of the Federal Court of Justice, share acquisitions that take place after the expiry of the further acceptance period are not to be taken into account for the 95% threshold (BGH, judgment of December 18, 2012 - II ZR 198/11 (KG)) and because Grifols, S.A. had already exceeded the 95% threshold during the acceptance period, so that the issue was not even relevant in the present case. Moreover, the court assumes without further discussion that the application pursuant to Section 39a (4) sentence 2 WpÜG may also be filed prior to the completion and ownership of at least 95% of the voting share capital if the acquisition of the required shareholding is not exclusively based on the acceptance of the offer (as suggested by the wording of Section 39a (4) sentence 2 WpÜG) and furthermore confirms that it is irrelevant for reaching the 95% threshold whether the offeror has violated notification obligations pursuant to Sections 33 et seq. WpHG or 20 AktG.

In examining the justification of the application, the court deals in particular with the presumption of appropriateness pursuant to section 39a (3) sentence 2 WpÜG and agrees with the prevailing opinion (see, for example, Hasselbach in Kölner Kommentar zum WpÜG, 3rd ed. 2022, Section 39a WpÜG marginal no. 76 with further references) that share acquisitions outside the offer are also to be taken into account when determining the 90% threshold pursuant to Section 39a (3) sentence 2 WpÜG if the share acquisition is closely related in time to the offer. The court argues that the market test intended by the 90% threshold is also successfully passed if a major shareholder sells its block of shares to the offeror at or below the offer price in close factual and temporal connection with the offer and therefore also takes into account the acquisition of the ordinary shares on the basis of the share purchase agreement for the purpose of reaching the 90% threshold. Whether the consideration of block acquisitions outside the offer is correct in this generality is, however, doubtful. After all, the decision of a major shareholder to sell his block of shares to a particular purchaser may be based to a large extent on non-price-related considerations, such as the founder's wish to maintain the company as an independent enterprise.

Finally, the court leaves open whether it regards the presumption of reasonableness – in line with its earlier decisions – as rebuttable, but clarifies that the presumption can only be shaken if it can be established that the stock market price on which the offer is based has been manipulated, for which the court sees no indications in the present case. Nevertheless, the court takes the opportunity to present in relative detail the arguments for a market-oriented valuation based on stock market prices instead of a fundamental-analytical valuation. In this respect, the court's indication – not prompted by the facts of the case – that stock exchange prices determined in the over-the-counter market may also be used to determine the share value is interesting.