Newspaper article The Evening Standard (London, England)

Directive That Has Europe on Course with America; INSIDE BRUSSELS

Newspaper article The Evening Standard (London, England)

Directive That Has Europe on Course with America; INSIDE BRUSSELS

Article excerpt


AFTER 12 years of fitful negotiation, the European Union looks as if it finally has a takeover directive. The compromise will protect minority shareholders, encourage cross-border mergers and thereby help to deliver EU-wide economies of scale. The agreement between the Council, Commission and Parliament, concluded in the early hours of yesterday, also breaks new constitutional ground.

The provisions, to be approved in July, apply to hostile bids. For the first time, minority shareholders in every member State will be protected in a similar way to those in Britain. At present, under German and Dutch law, companies do not have to launch a full bid for their target even if they take overall control.

As a result, investors rightly fear they may be squeezed out by a majority shareholder able to dispose of the firms' assets at whatever price it agrees.

Under the takeover directive, any acquiring firm will have to make an offer for the whole company, thereby ensuring that minority shareholders can exit on the same terms as everyone else.

Similarly, shareholders have to be paid in shares quoted on a stock exchange or in cash, not in illiquid forms of payment.

Another provision of the directive will forbid management from taking defensive or "poison pill" measures against a bid - for example by issuing new shares to a third party, or conditionally selling a core asset - without shareholders' agreement. All the provisions provide reassurance to investors and should help to encourage an equity culture.

The directive has been the subject of a fierce and unprecedented rearguard action, thanks largely to the concerns in Germany over Vodafone's hostile takeover of Mannesmann and the likely sale by banks there of large stakes in German industrial firms when their tax rules change.

In this respect, the Germans are the mirror image of the British, who are relaxed about foreign purchases of UK companies but distrust political integration.

Klaus Lehne, a German Christian Democrat MEP, played to popular fears by attempting to sabotage the directive which had already been agreed by the Council of Ministers. …

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