KIRKLAND M&A UPDATE | 2 periods for both the launch and thereafter completion of a fully-financed (under a “funds certain” regime which requires unconditional access to the necessary cash) and largely unconditional offer following any leak or public announcement of a hostile offer. Foundation Defenses Companies incorporated in some European jurisdictions, including the Netherlands and Luxembourg, have sought to use an independent Stichting (or trust foundation) to defend against unsolicited offers. The foundation, controlled by independent trustees and with a broad statement of purposes including the preservation of the mission of the target company, may be issued “golden shares” that seek to enable it, at least temporarily, to control the voting outcome on any matter put to target shareholders. Alternatively, as was the case in the Arcelor/Mittal takeover battle, targets could try to drop “crown jewel” assets into the foundation, seeking to put those assets beyond the control of the bidder even if it succeeds, or outside its reach to facilitate required antitrust divestitures. National Interest If you have any questions about the matters addressed in this M&A Update, please contact the following Kirkland author or your regular Kirkland contact. Daniel E. Wolf Kirkland & Ellis LLP 601 Lexington Avenue New York, NY 10022 http://www.kirkland.com/dwolf +1 212-446-4884 * The author acknowledges the valuable assistance of our summer associate, Eli Shalam, in researching the subject matter. While U.S.

companies may be familiar with the CFIUS rules under which the President can block or put conditions on foreign acquisitions of U.S. targets if national security concerns are implicated, other countries have much broader national interest review regimes that empower government officials to block acquisitions of domestic companies based on their views on whether the acquisition is in the overall national interest. Political or corporate pressure may be exerted by targets to use these regimes to hamper a hostile takeover by a foreign buyer.

For example, the Investment Canada Act allows an evaluation of a foreign investment based on an assessment of the overall “net benefit” to Canada, while Australia’s Foreign Investment Review Board reviews certain acquisitions under a “national interest” standard that covers a broad range of issues including the impact on government policies, employees and creditors, as well as the identity and nationality of the buyer. Voting Power Some continental European countries, like Spain and France, have various mechanisms that address voting rights associated with a target’s shares in a manner that can hamper a hostile takeover. For example, both Spain and France have regulations that permit a company’s bylaws (on an opt-in basis) to cap the voting rights exercised by any single shareholder (or group) regardless of actual ownership percentage, thereby disincentivizing accumulation of a very large toe-hold position by a hostile bidder. Under France’s controversial Florange Law (which is subject to opt-out by shareholder approval), long term (i.e., at least two years) shareholders are granted double voting rights, thereby mitigating the voting sway of both toehold positions and post-announcement purchases by merger arbs. Reciprocity A number of European countries have enacted defense principles predicated on reciprocity of regime with the country of the hostile bidder.

Italy’s “passivity” rule that limits defensive measures that may be taken by a target without shareholder approval is suspended if the hostile offer is made by an entity that is not itself subject to equivalent passivity rules. Similarly, a French company’s articles may provide that similar “neutrality” rules do not apply if the takeover regime applicable to the bidder would not similarly constrain it if it were the target of an unsolicited offer. Given the U.S. rules that give a board substantial flexibility in defending against a hostile bid, these reciprocity provisions very well could be implicated if the bidder is a U.S.

company. **** Both the principles and practices of antitakeover regimes in foreign countries often differ significantly from those applicable to a U.S. target. U.S.

buyers pursuing unsolicited offers outside the domestic market are well-advised to understand the legal, cultural and political environment for hostile bids in the target’s home country, as well as the company-specific provisions embedded in organizational documents. Similarly, boards and shareholders of companies reincorporating from the U.S. to foreign jurisdictions, including in inversion transactions, may be surprised at the vastly different balance of legal power between the board and shareholders, as well as unique tactics and vulnerabilities, which apply in their new home countries. This communication is distributed with the understanding that the author, publisher and distributor of this communication are not rendering legal, accounting, or other professional advice or opinions on specific facts or matters and, accordingly, assume no liability whatsoever in connection with its use. Pursuant to applicable rules of professional conduct, this communication may constitute Attorney Advertising. © 2015 Kirkland & Ellis LLP.

All rights reserved. www.kirkland.com .