Legal Merger As A Substitute For Mandatory Redemption

There has been a recent surge of public M&A transactions in Sweden. One of the aspects that have been widely debated in connection with several recent public bids have been the use of legal mergers as a substitute for mandatory redemption procedures to reach 100% ownership following a takeover bid. In the ongoing public takeover bid for Capio AB (publ), the bidder, Opica AB, has reserved the right to carry out a legal merger at an acceptance level below 90+% of the shares. Institutional investors opposed to the bid requested that the Securities Council give a statement on whether such use of legal mergers is in accordance with good stock market practice.

Traditionally, the majority shareholder has requested mandatory redemption after completion of the takeover bid, which requires that 90+% of the shares have been acquired. However, the Swedish rules on legal mergers have since changes in the tax legislation a few years back been used in a few cases as an alternative to mandatory