French financial regulator tells Investindustrial to "put up or shut" up in relation to Club Med takeover

Out-Law News | 02 Jun 2014 | 4:51 pm | 3 min. read

The French financial regulator's employment of the "put up or shut up" rule in relation to Investindustrial Development's intentions for Club Mediterranee (Club Med) highlights the increased importance of confidentiality and meticulous preparation in the French takeover market today, a legal expert has said.

L'Autorité des Marchés Financiers (AMF) has told Investindustrial, which is led by Italian businessman Andrea Bonomi, that it must submit a bid for Club Med by 30 June, or it will be barred from making an offer for a period of six months from that date, Reuters has reported.

The AMF has also extended again, until an unspecified date, the deadline for Club Med shareholders to decide whether to accept a long-delayed €557 million offer by Chinese conglomerate Fosun and French private equity firm Ardian. The deadline had already previously been extended until June 6, according to Reuters.

The AMF moves come after the Bonomi family recently became Club Med's biggest shareholder after buying 400,000 shares in the holiday operator, according to a filing to France’s stock market authority, said the Financial Times. The fund, which is represented by Andrea Bonomi, said it intended to buy more shares and could raise its stake in the company to as high as 29% according to the newspaper.

Clerc said that the AMF's instruction to Investindustrial to make a bid by the end of June represents a rare employment in France of the procedure anti-rumeur, which is also known in France as the "put up or shut up" (PUSU) rule.

Under this rule, the AMF can force potential bidders to reveal their intentions if there are unusual variations in the stock price or volume of transactions of an issuer. If the potential bidder denies that it is planning a takeover, it will be barred from launching a takeover of that target company for six months following the denial. If the potential bidder confirms that it is planning a takeover, or if the AMF believes its response indicates this might be the case, it must disclose its plans within a deadline which is set by the AMF.

Christophe Clerc of Pinsent Masons, the law firm behind Out-Law.com, said that the PUSU was "imported from the UK" to France, a reference to the UK Takeover Panel's PUSU rule. Under the UK rule if a potential bidder is thinking of making a hostile offer, but not yet in a position to make a firm bid, the target company can ask the UK Takeover Panel to impose a deadline on the potential bidder by which it must clarify its intentions.

Clerc said that the Investindustrial and Club Med case is one of the very rare instances when the AMF has implemented the "put up or shut up" rule since it came into effect in France in September 2006.

Clerc said: "If you are planning a takeover you do not want to be caught by this rule, because if you are caught by it you must move very quickly and disclose your plans."

"This highlights the importance of ensuring that confidentiality is respected when planning a bid," said Clerc. "It also shows how important it is to prepare very well, in case this rule comes into play."

"When you hear rumours that a bid may be launched it creates instability for the target and also for the wider market, and this measure is part of attempts to create stability in the interests of the market and the wider economy," Clerc said.

Ardian and Fosun announced in May last year that they were planning a €557 million takeover bid for Club Med. Although Club Med's management was favourable to the deal, it has been delayed for several months after two minority shareholder groups challenged the offer on the basis that it was too low at €17.50 per share and offered favourable terms to the management. In April the Cour d'appel de Paris rejected the challenge. In May, the Bonomi family investment fund purchased its 400,000 shares, and must now make a bid before 30 June, or lose its right to bid for six months from that date.

Clerc said: "The delay of around nine months to the Ardian-Fosun bid allowed another potential bid to be developed by another company, and the delay is linked to the fact that the court is clogged with cases."

"Again, the message to companies planning to take over another company is that they must prepare well," Clerc said. "The better prepared a bid is, the less likely the bidder is to face a court challenge which could result in lengthy delays."