Litigation regarding Takeover of Postbank by Deutsche Bank still ongoing

Multiple lawsuits still deal with the takeover of Postbank by Deutsche Bank. A recent ruling by the Regional Court of Cologne (LG Köln) found its way into the media. An end to the ongoing litigation is however not in sight.

The Regional Court of Cologne (82 O 11/15 dated October 20, 2017) has granted former Postbank shareholders € 57,25 per share. In the course of its voluntary takeover bid in October 2010 Deutsche Bank had offered € 25,00 per share. The plaintiffs had accepted that offer and were now claiming the difference of € 32,25. According to the Regional Court of Cologne, Deutsche Bank already controlled Postbank as early as September 2008 with the consequence that Deutsche Bank should have submitted a compulsory bid at € 57,25 per share. The court attributed Postbank shares held by the seller Deutsche Post to Deutsche Bank because certain clauses in the share purchase agreements constituted acting in concert. Due to this attribution, Deutsche Bank exceeded the legally decisive 30% threshold constituting control. The highest price in the amount of € 57,25 paid by Deutsche Bank to Deutsche Post since September 2008 for a Postbank share would then be the basis for the equitable price. However, the statute of limitations might run out as early as year’s end 2017.

The court’s view is supported by the fact that Deutsche Post and Deutsche Bank agreed to a full sale of Postbank in September 2008. Merely the transfer of title of the Postbank shares was scheduled in a way that – at first glance – a compulsory takeover offer was not triggered. This was only possible due to a legal concept that is peculiar to German law. However, the consideration Deutsche Bank agreed to with Deutsche Post was considerably higher than the € 25 it offered minority shareholders. In economic terms the higher price represents the control premium. Yet it is the goal of both the German Takeover Code as well as the European Takeover Directive to ensure that a control premium is equally shared among all shareholders and is not transferred to one single shareholder.

The ongoing litigation goes back to our legal article “The Postbank Takeover by Deutsche Bank – a blueprint to avoid compulsory takeover bids?” (ZIP 2010, 558; see also Handelsblatt dated March 30, 2010, “Deutsche Bank likely facing litigation” – both in German only). In late 2010 the financial paper Effecten Spiegel filed litigation against Deutsche Bank claiming a higher offer price for its Postbank shares. Upon successful appeal by claimant, the Federal Court (Bundesgerichtshof, II ZR 353/12 dated July 29, 2014; see also our Newsletter discussing this case – German only) referred the case back to the Higher Regional Court of Cologne (OLG Köln). The court was ordered to determine whether the share purchase agreement between Deutsche Bank and Deutsche Post constituted acting in concert. This case is still ongoing. In their last hearing on November 8, 2017 the judges of the Higher Regional Court of Cologne mentioned that they did not share the view of the Regional Court of Cologne according to which the share purchase agreement constituted acting in concert. Given these statements, it is conceivable that the Higher Court of Cologne will reject the claim by Effecten Spiegel. Another appeal by Effecten Spiegel to the Federal Court would be likely. A judgement is scheduled for December 13, 2017.

Surprisingly, the various courts have paid little attention to the European Takeover Directive. It is settled European Court of Justice (ECJ) case law that, when applying national law, the national court called upon to interpret it is required to do so in the light of the wording and the purpose of the directive in order to achieve the result pursued by it. The ECJ has the sole jurisdiction in this respect. If in doubt, higher courts must respect the ECJ’s jurisdiction by submitting such case, lower courts can submit such cases. Such submission now seems inevitable given the different interpretations of acting in concert by the various courts.

Different judgments concerning the fair offer price are possible because these questions are being tried in civil proceedings which only take effect in between the parties. Thus, each shareholder who accepted the € 25,00 offer must file a suit against Deutsche Bank if he wants his fair share of the control premium. The procedural situation is a different one for the shareholders who did not accept the € 25 offer. The appraisal procedings are inter omnes proceedings, meaning they take effect towards all shareholders who did not accept the € 25 offer. Two appraisal proceedings (Spruchverfahren) are also being tried at the Regional Court of Cologne. One concerns the determination of the fair value per Postbank share due to the profit and loss sharing agreement (Beherrschungs- und Gewinnabführungsvertrag) which Deutsche Bank and Postbank entered into. Another proceeding determines the fair value due to the squeeze-out of the minority shareholders. In this proceeding, Deutsche Bank offered € 35,05 per Postbank share. The court offered a settlement at € 46 and suggested that it might take into account the compulsory takeover bid that Deutsche Bank should made at € 57,25.

In light of the most recent ruling by the Regional Court of Cologne, the media predicted that Deutsche Bank might incur another € 3 bn. This number is probably at the higher end. 48m Postbank shares (» 22% of Postbank’s share capital and 2/3 of the free float) were tendered into the € 25 takeover bid. However, to this day shareholders representing only 1,6m Postbank shares have filed claims against Deutsche Bank. The potential total claims amount to € 1.554bn. This compares to claims of merely € 52m that were actually filed to this day. Given that the statute of limitations runs out at the end of the year, this number might still increase.

The appraisal proceedings, however, might still end up being costly for Deutsche Bank. Such proceedings only concern the roughly 30% of Postbank shareholders who did not accept the € 25,00 offer. But given the inter omnes effect, these proceedings might end up costing Deutsche Bank in excess of € 500m – assumed the € 57,25 are taken into account.

Dr. Wienand Meilicke / Dr. J. Frédéric Meilicke

In folgendem Newsletter erschienen : Newsletter 8/17

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