i Market activity
Euronext Amsterdam is the main equity market and exchange in the Netherlands. In 2016, seven companies obtained a new listing on Euronext Amsterdam:
- a Takeaway.com NV (market capitalisation: €993 million);
- b ASR Nederland NV (€2.93 billion);
- c Basic-Fit NV (€820 million);
- d Coca-Cola European Partners Plc (€16 billion);
- e Philips Lighting NV (€3 billion);
- f ForFarmers NV (€740 million); and
- g Sif Holding NV (€357 million).
Euronext Amsterdam is one of the largest exchange networks in the world, with access to a global pool of institutional and retail investors. After a period of delistings, the interest for initial public offerings (IPOs) on Euronext Amsterdam and the pipeline are currently strong for both Dutch and non-domestic issuers.
ii Regulatory bodies
The main regulator for equity markets and exchanges in the Netherlands is the Netherlands Authority for the Financial Markets (AFM). The AFM is the competent authority to, among other things, approve prospectuses, monitor ongoing obligations of listed companies and monitor the conduct of other market actors (that is, investors, brokers, etc.) on the Dutch equity markets and exchanges.
II GOVERNING RULES
i Main stock exchanges
Euronext Amsterdam (www.euronext.com), a regulated market, is the main equity market and exchange in the Netherlands. According to its website, there are currently 143 listed companies on Euronext Amsterdam (some of which are dual listed on foreign exchanges, such as the London Stock Exchange and the New York Stock Exchange). Euronext Amsterdam is segmented according to market capitalisation:
- a Compartment A: companies with a market capitalisation of more than €1 billion;
- b Compartment B: companies with a market capitalisation of between €150 million and €1 billion; and
- c Compartment C: companies with a market capitalisation of less than €150 million.
The main sectors represented in the AEX segment, the flagship index reflecting the performance of the 25 most actively traded shares listed on Euronext Amsterdam, are oil and gas (16.5 per cent); personal and household goods (13 per cent); banks (12.5 per cent); and technology (9.5 per cent).
Although the majority of the companies listed on Euronext Amsterdam are domestic, the exchange also attracts major non-domestic companies such as ArcelorMittal, Coca-Cola European Partners, Galapagos and Unibail-Rodamco.
ii Overview of listing requirements
The main requirements for admission to listing and trading on Euronext Amsterdam are as follows:
- a The company must publish a prospectus that:
- complies with all national rules and regulations (such as the Financial Supervision Act (FSA) and the rules promulgated thereunder) and with Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading (the Prospectus Directive) and any amendments thereto, including Directive 2010/73/EU, Regulation (EC) 809/2004 implementing Directive 2003/71/EC as regards prospectuses and dissemination of advertisements (the Prospectus Regulation); and
- has been approved by the AFM or passported by another competent regulator from a European Economic Area (EEA) Member State (including any EU Member State) after being approved by such regulator.
- b The legal structure of the company must comply with applicable laws and regulations, the company must be duly incorporated, and the shares must be validly issued:
- the shares must be freely transferable and negotiable;
- the company must have appointed a listing and paying agent;
- an adequate procedure must be available for the clearing and settlement of transactions with respect to the shares; and
- the application for admission to listing must cover all of the company’s shares of the same class and type issued at the time of the application.
The above is a short summary of the main requirements. Further rules may apply to different companies listing in the Netherlands.
Minimum size requirements
As opposed to many major foreign exchanges, there is no minimum market capitalisation requirement for companies listed on Euronext Amsterdam.
Trading record and accounts
In the absence of an exception, the company must, prior to listing, have audited financial statements for the preceding three financial years and the financial statements must be reported in accordance with the EU-endorsed International Financial Reporting Standards (or the equivalent Generally Accepted Accounting Principles for non-EEA issuers). If more than nine months have passed since the end of the most recently finished financial year prior to the date of the listing, the company must prepare, and disclose in its prospectus, audited semi-annual statements.
Minimum shares in public hands
Following the IPO, as a general matter, Euronext Amsterdam requires a minimum free float of 25 per cent of the issued shares in the capital of the issuer. Under certain conditions, the free float can be lower, for instance when a large number of shares are available to the public, ensuring enough liquidity for that particular share in the market. The percentage of free float can never be lower than 5 per cent, and at that minimum percentage, the free float must represent at least €5 million (based on the offering price).
iii Overview of law and regulations
Most of the rules and regulations governing the Dutch equity markets and exchanges originate from European Union legislation (e.g., the Prospectus Directive and the Prospectus Regulation). Such EU legislation has been implemented into Dutch law or, in the case of regulations, is directly applicable in the Netherlands. The FSA is the main body of law governing the Dutch equity markets and exchanges. The FSA mainly contains regulatory law, such as periodic and ongoing obligations, and incidental disclosure obligations for listed companies and insider trading prohibition. Additional rules and regulations applicable to listed companies can be found in a variety of other laws, governmental decrees and regulations. Certain legislation is only applicable to listed companies that have their registered seat in the Netherlands, such as the Dutch Corporate Governance Code (which applies on a comply or explain basis to Netherlands incorporated companies listed in the Netherlands or abroad). Certain other rules (such as market rules applicable in a public takeover bid) apply only to companies listed in the Netherlands, irrespective of their jurisdiction of incorporation.
Separately, Euronext has certain specific rules and regulations in place for companies listed on one of their markets. Euronext Rule Book I contains harmonised rules, applicable to all companies listed on any of the Euronext markets (that is, Amsterdam, Brussels, Lisbon, London or Paris). Euronext also has a non-harmonised rule book for each separate market it operates. The non-harmonised rule book for a particular market only applies to the companies listed on that particular market (that is, the rule book for Euronext Amsterdam is only applicable to companies listed on Euronext Amsterdam).
III THE OFFERING PROCESS
i General overview of the IPO process
Elements of the offering process are given below.
The common transaction team consists of:
- a management and selected key employees of the company;
- b the company’s legal counsel;
- c the (lead) underwriters;
- d the underwriters’ legal counsel;
- e the accountants;
- f listing and paying agent;
- g financial communication consultants; and
- h other specialists.
The exact composition depends on the nature of the deal and the business of the company. The company itself (typically, assisted by its counsel) plays an important role in supplying other members of the transaction team with necessary information.
The lead underwriters’ role is to:
- a coordinate the overall process, especially the book-building process;
- b advise on the structure and size of the offering; and
- c perform and coordinate all marketing activities necessary to make the deal a success, such as road shows.
A bank (registered for that purpose) must act as listing, paying and settlement agent.
Owing to the specific rules and regulations applicable to listed companies in the Netherlands, company legal counsel advises on all legal aspects of the equity offering. Company legal counsel, among other things:
- a assists with bringing the governance structure of the company in line with the legal, regulatory and trading requirements (and, typically (subject to company-specific tailoring), current best practices);
- b performs the legal due diligence required to draft a (non-misleading) prospectus;
- c assists with drafting the main documents required for the deal (e.g., the prospectus and the underwriting agreement);
- d maintains contact with the AFM to facilitate the prospectus approval process; and
- e advises the company on all ongoing obligations to be complied with by the company following listing.
The underwriters’ legal counsel assists with drafting of the main documents, such as the prospectus, and takes the lead on the underwriting agreement.
The accountant is responsible for the audit of the financials in the prospectus and must give comfort to the other advisers involved in the transaction team, using comfort letters in line with international practice.
The main documents generally produced in any equity offering are the prospectus and the underwriting agreement; however, certain deal specifics may make such documents superfluous (a pure technical listing will not require an underwriting agreement, while a private placement to qualified investors does not require a prospectus if certain conditions are met). Apart from the main documents, ancillary documents (including, in particular, public company articles of association; board and committee rules and regulations; anti-corruption and bribery policy; policy on bilateral contacts with shareholders; remuneration policy; related party and conflict policy; whistle-blower policy; code of ethics and business conduct; share dealing code; director and officer (D&O) insurance (and, possibly, IPO insurance); D&O questionnaires; publicity guidelines; research guidelines and legal opinions) and corporate approvals (including approval of the offering; the prospectus; the underwriting agreement; the share issuance (if any); any foreseen or prospective post-IPO share issuances, buybacks or redemptions; delegations to the board and the establishment of an IPO pricing committee and pricing committee resolutions) are produced. In addition, deal- or company-specific documentation may be produced (e.g., an agreement with a substantial or controlling shareholder).
IPO process and time frame
In general, in stable market conditions, the entire IPO process takes approximately four to six months. The various steps in the timetable below broadly outline the required steps and timing of the IPO process.
At the start of the IPO process, the relevant advisers are engaged by the issuer. During the initial weeks, the relevant members of the transaction team will draft the equity story of the company and, in some instances, start with a pilot-fishing exercise, usually for a week or two, to test the interest for the equity in the market.
The due diligence process begins. The issuer, together with the issuer’s legal counsel, starts preparing the post-IPO governance structure for the company. In the meantime, the relevant members of the transaction team initiate the process of drafting the prospectus. The AFM is preliminarily (and confidentially) notified of the intention of the issuer. Key members of the transaction team may meet the AFM review team for a brief introductory meeting on the proposed offering.
A first draft of the prospectus is submitted to the AFM. The members of the transaction team continue to work on the relevant documentation. Euronext Amsterdam is engaged (to the extent that confidential discussions have not begun and there has been no interaction earlier in the process) near the end of the third month. Arrangements are made with the selected listing or paying agent. When the documents are ready, the issuer announces its intention to float in a press release.
All documents are close to the final form. The marketing process is initiated. Two weeks before the actual IPO, the prospectus is approved by the AFM and published by the issuer. The marketing process is accelerated; however, the blackout period regarding research reports also starts. The book-building procedure is initiated.
One day prior to the IPO, the underwriting agreement is signed and the introduction price is determined. On the IPO date, the introduction price, together with the entire offer, is published in a press release (Euronext Amsterdam opens at 09:00 Central European Time). Any stabilisation and exercise of overallotment options can be executed up to 30 calendar days after the IPO.
A secondary offering will typically require less time from a marketing perspective, as the issuer and its proposition will already be well known to the market. In addition, in certain instances, due to the fact that there is no requirement for a prospectus, the secondary offering can be completed in a substantially shorter period of time (that is, weeks instead of months).
ii Pitfalls and considerations
The IPO is not an end in itself, it is a new beginning. IPOs are complex undertakings. It is critical to acknowledge that there are many continuously moving parts that need to be managed – including the costs and IPO process itself. Before companies begin the preparation phase of the IPO process, it is important that they reflect on their decision to take the company public. All advantages and disadvantages should be considered and an IPO should meet the company’s long-term strategic objectives. Companies need to make sure that they understand the financial reporting and regulatory requirements. Making a mistake once a company is public has much more serious consequences than making the same error while private. Bringing together the appropriate corporate, management and risk management structure will help to avoid costly IPO mistakes.
iii Considerations for foreign issuers
The procedure for a foreign company is equivalent to the process for a primary listing of a Dutch company, although in certain instances, such as a secondary listing, a separate prospectus would not be required.
Issuers based in an EEA country can use a prospectus approved in their home country as a ‘passport’ for offers or listings in the Netherlands, without further review or the imposition of further disclosure requirements by the AFM, thereby avoiding inherent delay and cost that such further proceedings cause. The issuer simply files a request with the authority in its own country to notify the AFM. The home authority then provides the AFM with a statement that the prospectus has been drawn up in accordance with the Prospectus Directive.
The shares of a foreign company can be directly listed, traded, cleared and settled in Amsterdam; there is no need to list depositary receipts. If depositary receipts are listed (whether by a Dutch issuer or by a non-domestic issuer), the reason will typically be either to align the listed security with securities traded elsewhere in the world, or to implement particular governance or defence features that in some jurisdictions, including the Netherlands, may to some extent be achievable through the creation and listing of depositary receipts.
IV POST-IPO REQUIREMENTS
Within four months following the end of the financial year, any company listed in the Netherlands must publish its annual report together with its audited annual accounts. They must file the annual report and annual accounts with the AFM. Any listed company must also publish semi-annual financial results (within two months after the first half of each financial year). It must file the financial results with the AFM. The annual and semi-annual financial results must be drawn up in accordance with EU-endorsed International Financial Reporting Standards (or equivalent Generally Accepted Accounting Principles). The semi-annual financial results do not have to be audited. However, if they have been audited or reviewed, the auditor’s statement must be published together with the semi-annual report. The mandatory quarterly financial reporting was abolished as a result of the implementation of Directive 2013/50/EU, amending Directive 2004/109/EU on transparency requirements for issuers whose securities are admitted to trading on a regulated market (the Transparency Directive), into Dutch law.
There are also incidental disclosure requirements. The issuer must disclose inside information to the public without delay and file such information with the AFM. However, such disclosure may be delayed if all of the following apply:
- a immediate disclosure is likely to prejudice the legitimate interests of the issuer;
- b delay of disclosure is not likely to mislead the public; and
- c the issuer is able to ensure the confidentiality of the inside information (which will no longer be the case in the event of a leak, which will, accordingly, trigger a prompt disclosure obligation).
Inside information is defined as information of a precise nature that has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and that, if it were made public, would be likely to have a significant effect on the price of those financial instruments or on the price of related derivative financial instruments.
The issuer must also disclose to both the public and the AFM if there are any changes in either:
- a the rights attached to shares; or
- b the rights following a rights issue.
Transactions in shares of the issuer by members of the executive board, members of the supervisory board, certain members of senior management and related persons (mainly relatives) must be disclosed. Such persons are required to notify the AFM of transactions in the company’s shares or in those of an affiliated company that is a public company, listed on a regulated market (such as Euronext Amsterdam), which either:
- a is part of the same group as the company or in which the company has an interest and the most recently adopted turnover of which is at least 10 per cent of the consolidated turnover of the company; or
- b directly or indirectly provides more than 25 per cent of the company’s capital.
Major shareholders (holding more than 3 per cent of the shares in the capital of a company) are also required to promptly disclose their holdings to the AFM. Increases and decreases in their shareholdings that exceed or fall below the following ownership or voting thresholds must be disclosed with the AFM: 3, 5, 10, 15, 20, 25, 30, 40, 50, 60, 75 and 95 per cent.
The above shareholding notifications made to the AFM are published on the AFM’s website (www.afm.nl). Notifications are to be made in AFM standardised form. Absence of or non-timely notification to the AFM can lead to penalties.
The disclosure obligations apply to issuers that are listed on any EEA-regulated market that have chosen the Netherlands as their home Member State.
Any violation of the provisions of the FSA constitutes an economic offence. Moreover, the AFM is authorised to use certain investigation and enforcement powers. The AFM may, for example, impose fines, request information, impose instructions under penalty, issue binding directions, suspend trading and reverse trades.
V OUTLOOK AND CONCLUSION
On 13 February 2017, Avantium announced its intention to raise new funds through an initial public offering and listing of all shares on Euronext Amsterdam (and Euronext Brussels). Avantium is a leading chemical technology company developing chemical technologies and production processes to convert bio-based food stock into building blocks for materials such as plastic bottles for beverages. Avantium anticipates to raise up to €100 million in capital. The offering is expected to take place before the end of the first quarter of 2017, subject to market conditions.
On 3 March 2017, Avantium published its prospectus for raising new funds through an initial public offering and listing of all shares on Euronext Amsterdam (and Euronext Brussels). Avantium is a leading chemical technology company, developing chemical technologies and production processes to convert bio-based food stock into building blocks for materials such as plastic bottles for beverages. Avantium anticipates to raise up to €90 million in capital. Settlement is expected to take place on 16 March 2017, subject to market conditions.
In addition, it is expected that construction company VolkerWessels will return to Euronext Amsterdam before the summer of 2017. VolkerWessels was listed in Amsterdam from 1990–2003. VolkerWessels is currently wholly owned by the Wessels family, after having bought out private equity firm CVC in 2013. For its initial public offering, a market cap between €1.5 and €2 billion is envisaged.
1 Alexander Kaarls is a partner and Jetty Tukker is an associate-partner at Houthoff Buruma Coöperatief UA.