On 26 April 2017, a consortium of bidders led by Cathay Fortune International Company (CFIC), China, published a voluntary takeover offer for Epigenomics, a biotech company listed in the Prime Standard. IR.on acted as the advisor of the target in the takeover process.
Cologne, 11 August 2017 – The takeover offer was preceded by a Business Combination Agreement between the company and the investor, which was designed to give Epigenomics AG access to the financial resources needed for the international marketing of its products, especially in the US market. Consequently, the Executive Board and the Supervisory Board approved the takeover. The offer price corresponds to a premium of approx. 52% on the closing price on the eve of the publication and of approx. 49% on the volume-weighted 3-month average price. Shortly after the publication, a group of retail investors expressed their resistance in online forums and considered the takeover price as too low. By contrast, the offer received nothing but positive feedback from analysts and the few institutional investors.
The main challenges for the communication activities were the very high free float of roughly 85% of the share capital, with retail investors holding a good 70%, the fact that the Chinese bidder had previously been virtually unknown as well as the short deadline for acceptance of only four weeks. Moreover, the bidder specified a minimum acceptance threshold of 75% of all shares.
The main challenges for the communication activities were the very high free float of roughly 85% of the share capital, with retail investors holding a good 70%
The registered shares of Epigenomics AG facilitated the communication, as they allowed the retail investors to be addressed directly. The communication strategy developed by IR.on aimed to generate the highest possible acceptance ratio and to explain the benefits of the offer and the strategic logic of the takeover with the help of PR measures. The fact that the Annual General Meeting of the company took place shortly before the start of the acceptance period was helpful as it gave the Executive Board the opportunity to outline their view of the takeover offer in a direct exchange with the opponents to the takeover. Other communication tools included the company’s website, which served as the official information platform, dialogue-based measures such as mailings to investors as well as a keyword-based online advertising campaign.
The takeover process was additionally adversely affected by the fact that several media published critical reports about takeovers of promising German technologies by Chinese investors. This increased the retail investors’ scepticism about whether the price was appropriate and whether the bidder was the right partner to take Epigenomics forward. In this respect, more active communication on the part of the bidder, who merely made the required statutory publications during the process, would have been helpful to remove resistance among the shareholders.
In the end, some 62% of the shares were offered during the acceptance period, which means that the minimum acceptance threshold of 75% was not reached and the takeover attempt failed. The transaction shows that, especially where companies with a long “volatile” capital market history and a high percentage of private shareholders are concerned, emotional aspects often play a more important role than the financial reason of an attractive takeover premium. This is all the more true for an unknown foreign bidder whose takeover intentions are formally made known but ultimately fail to convince the investors due to a lack of openness and transparency.