Lowballing under the EU Takeover Bid Directive : strategies, concerns, and gold-plating remedies

Abstract

This paper investigates the phenomenon of lowballing within the context of the EU Takeover Bid Directive (TBD), where offerors set bid prices typically below the current market price. It delves into the key features of the TBD’s mandatory bid regime and examines the varied implementation approaches by Member States, including ‘gold-plating’ practices. The analysis encompasses strategies employed in both mandatory and voluntary bids, with prominent cases such as Porsche/VW and ACS/Hochtief serving as illustrative examples. The paper critically assesses the implications of low-cost control transactions, the pressure exerted on shareholders to accept undervalued offers, and the circumvention of or maneuvering around the TBD’s mandatory bid rule. The impact of lowballing on the Directive’s objectives, particularly the protection of minority shareholders, is thoroughly evaluated. Additionally, the study reviews gold-plating remedies adopted by Member States, such as supplementary bid requirements and mandatory minimum acceptance thresholds, and assesses their effectiveness and legal viability. The paper concludes with a discussion on the adequacy of current regulations in safeguarding minority shareholders and mentions potential reforms to address the persistent issue of lowballing within the EU framework.