Under German law, a majority shareholder that wants to squeeze out and delist a company from the market is required to compensate the minority shareholders of the company. In a July 2010 decision (case reference II ZB 18/09 “Stollwerck”), the BGH partially reversed its position on the method and reference period used for determining cash compensation in such cases.
The case involved an acquirer that purchased the majority shareholding in a listed company in August 2002. Thereafter, on 17 September 2002, the acquirer made a mandatory bid to the minority shareholders of the company in accordance with the German Securities Acquisition and Takeover Act. In conjunction with the mandatory bid, the acquirer also announced its intention to acquire all of the shares in the company and to squeeze-out the minority shareholders. More than seven months later, on 30 April 2003, a resolution was adopted on the squeeze-out of the minority shareholders for payment of cash compensation in the amount of EUR 295 per share. The weighted stock average in the three months preceding 17 September 2002 (the date of the mandatory bid) was determined to be EUR 275.09 per share, whereas the weighted stock average in the three months preceding 30 April 2003 (the date of the squeeze-out resolution) was determined to be EUR 308.86. Thus, the court had to decide upon the relevant reference period for determining the cash compensation, in particular, where a considerable period of time elapsed between the mandatory bid and the relevant shareholders’ resolution.
In its decision, the BGH held that the three-months period before an announcement of a structural change (in the case, the announcement of the squeeze-out) is authoritative for determining the weighted stock average. In so ruling, the BGH abandoned its previous position that the correct date was the date of the shareholders’ resolution.
If you have any questions, please contact Dr. Tim Luthra of Raupach & Wollert Elmendorff Rechtsanwaltsgesellschaft mbH.
