The regulator points out that “there are indications, although not evidence” of a possible market distortion


The National Securities Market Commission (CNMV) has decided to provisionally prohibit the acquisition of new shares of Applus at a price higher than 12.51 euros to the funds that signed contracts for the purchase and sale of securities of the aforementioned company with Apollo (a through its instrumental company Manzana Spain BidCo) within the framework of the war of public acquisition bids (OPAs) that Apollo maintains with ISQ and TDR (through Amber EquityCo) until their liquidation.

In this context, it is worth remembering that at the beginning of last February Apollo completed the acquisition of 21.85% of Applus at a price of 10.65 euros per share after signing various share purchase agreements with the RWC Asset Management funds, Harris Associates, Maven Investment Partners, Samson Rock Capital, Sand Grove Capital, TIG Advisors, The Segantii Asia-Pacific Equity Multi-Strategy Fund, Melqart Asset Management, Millenium Partners, Man GLG Event Driven Alternative and Boldhaven Management.

However, in a statement issued on Monday night, the regulator has highlighted that Apollo’s takeover prospectus for Applus includes compensation clauses (called ‘earnout’) to the funds that sold its shares.

These clauses stipulate that if Apollo’s takeover bid is ‘successful’, the funds that signed these purchase and sale contracts will receive 12.51 euros per share instead of the 10.65 euros initially signed, because the final proposal proposed by Apollo regarding Applus last Friday was 12.51 euros (1.86 euros per share more than the initial 10.65 euros per share).

However, there is another clause (called anti-embarrassment) that stipulates that if the ISQ and TDR takeover bid (of 12.78 euros per share) were finally imposed and Apollo decided to sell its 21.85% to ISQ and TDR, the funds Those who signed those purchase and sale agreements with Apollo would only receive 75% of the difference between the 10.65 euros at which they sold their participation to Apollo and the 12.78 that ISQ and TDR propose, that is, their additional profit would be 1.5975 euros per share, instead of 1.86 euros.

Another reason why these funds are interested in the success of Apollo’s takeover bid is that there is another scenario that contemplates that, if the ISQ and TDR takeover bid were finally imposed and Apollo decided to maintain its participation in Applus, the funds with the that Apollo signed the aforementioned purchase and sale agreements would not receive any additional profits.

In this context, the CNMV has clarified that “the only interpretation of the term ‘successful'” for the Apollo takeover bid that, in its opinion, would be compatible with current regulations on takeover bids is that by “successful” it is understood that the Apollo’s offer “is not withdrawn and ends up being liquidated”, whatever the final percentage it reaches.

“That is the interpretation that the CNMV has given to this term in its verification of the takeover prospectus. However, Manzana (Apollo) has communicated today, at the request of the CNMV, that given the progress of its offer and the offer competitor (that of the ISQ and TDR funds), the offeror interprets that ‘successful’ must be understood as the percentage acquired in the takeover bid granting it the majority of the capital,” the CNMV has stressed.

According to the regulator, in this context there could be an “anomalous operation” by which some funds that sold to Apollo and that would benefit from this ‘earnout’ in the event that Apollo’s takeover bid was successful, bought Applus shares on the market. at “higher prices” than those of the Apollo takeover bid (12.51 euros) or even those of the ISQ and TDR takeover bid (12.78 euros).

This circumstance would occur, as explained by the CNMV, with the objective of selling said shares to Apollo in the subsequent process of acceptance of the offers.

“With this, although the funds would incur a loss between the market price (which was higher than 12.51 euros at market close on Friday, April 26) and the sale/acceptance price of the Manzana (Apollo) takeover bid , they would obtain from the aforementioned offeror (Apollo) privately a greater compensation (‘earnout’) for their shares sold,” the regulator explained.

In the opinion of the CNMV, this operation could constitute “a concert to acquire control” of Applus, “to the extent that several entities, with a contractual link and a clear economic incentive, would collaborate tacitly or expressly so that Manzana ( “Apollo) would obtain control (of Applus), which would otherwise be difficult for it to acquire as it was the bid that offered the lowest price.”

Thus, the regulator considers that this would generate a “distortion” of the takeover war because it would mean that Apollo would be indirectly acquiring through the aforementioned funds “shares at a price higher than its takeover bid or even that of Amber (ISQ and TDR), issue expressly prohibited in the current regulations.”

In the opinion of the CNMV it would also “seriously affect the strict competition in price of both takeover bids” and “could cause the failure of the takeover bid that offers the highest price (that of ISQ and TDR), so that investors who had exclusively accepted the takeover bid of Amber (ISQ and TDR) would be harmed and would not be able to sell their shares.

“There are indications, although not evidence, in light of the trading on the afternoon of Friday, April 26, that said operation could be taking place,” the CNMV noted.

Thus, although there are still a few days left before investors can accept the latest offers raised after the eventual authorization of the improvements sent last Friday by both Apollo and the ISQ and TDR consortium, “there is a possibility that said would very severely distort the competitive procedure and produce disorderly negotiation while the acceptance process is developing.

For all these reasons, the CNMV has decided, on the one hand, to prohibit the acquisition of more Applus shares at a price higher than 12.51 euros by the funds that signed purchase and sale contracts with Apollo so that it could obtain 21.85 % of the shareholding of the Spanish industrial certification and ITV company.

“Specifically, the CNMV has agreed to address these funds and impose the following restriction on their operations: they will not be able to purchase Applus shares at prices higher than that of the Manzana (Apollo) takeover bid if they have the intention or commitment to sell said shares directly or through third parties to Manzana (Apollo) or present them as acceptances of the Manzana (Apollo) takeover bid,” the regulator has detailed.

Furthermore, they will not be able to transfer to Apollo, either directly or through acceptances of the takeover bid, shares that they have purchased on the market at prices higher than 12.51 euros.

“These restrictions will be maintained at least until the CNMV pronounces on the request for improvement of Manzana’s takeover bid and will be reviewed on the occasion of the same,” the CNMV added.

On the other hand, the CNMV has warned Apollo that “both raising the term ‘successful’ takeover bid in the sense of acquisition of control, and incentivizing, encouraging or requesting the funds with which it has contracts to acquire shares at prices higher than 12 .51 euros from Manzana (Apollo) could be contrary to its duties as a bidder.”

“Among them, acting within the framework of current regulations and limiting themselves to competing on price, through the established mechanisms, which ended with the envelope phase on Friday, April 26. All of this could affect the decision that the CNMV must take the corresponding authorization or denial of your improvement request,” the regulator has warned.