Lobbyists blamed for U-turn on take-over code

Date: 03/05/01

By Dennis Abbott

FAT-CAT lobbyists acting for company giants like Volkswagen were behind this week's surprise decision by Germany to renege on a deal to establish an EU take-over code, according to European Commission sources.

The sudden U-turn puts at risk a plan which has been under discussion for 12 years.

Barely three weeks ago, member states unanimously supported the code, which would make it compulsory for target companies to consult their shareholders before attempting to ward off hostile bidders with defensive measures.

They would most likely do this through a 'poison pill' - such as issuing shares to a friendly investor known as a white knight, who would then use his voting rights to reject a take-over.

German companies are believed to have toughened their stance in the wake of last year's successful smash-and-grab raid on Mannesman by the UK's Vodafone.

They fear the take-over directive in its present guise would make it easier for European rivals to launch bids on German household names.

Lobbying firms there are said to have the "Champagne on ice" in anticipation of stopping the directive.

But the EU executive sees the take-over deal as vital to the restructuring of European industry - it was identified as a priority at the 2000 Lisbon summit.

Jonathan Todd, spokesman for Internal Market Commissioner Frits Bolkestein, said it was "very unusual" for member states to break away from a unanimously agreed position.

"The German position now is incompatible with its own draft legislation," he continued. "Narrow vested interests are being put before the broader interests of the EU.

"If the Council or Parliament doesn't endorse [the code], we're back to square one."

The issue will be discussed by EU ambassadors at a Coreper meeting next Tuesday (8 May) as part of an ongoing conciliation process to thrash out the fine details of the take-over measure.

That process is due to end on 6 June; if there is no decision by then the directive will fail.

Commission insiders say it is now up to the Swedish presidency to "stand up to Germany" and persuade them to stick with the previously agreed position. "It would be an extremely bad precedent if they don't," said one.

One factor in the Swedes' favour is that the take-over code is subject to qualified majority voting - so Germany alone could not block its progress.

Berlin is thought to be lobbying countries such as the UK to back their change of heart - but they will need more than London's support to stop the measure.

Head of the Swedish negotiating team Rolf Skog told European Voice that there was still time to save the directive.

"We won't know until Tuesday what the German position will be," he said, "but we are looking for a solution. Our main objective is to reach an agreement."

Fat-cat lobbyists acting for company giants like Volkswagen were behind the surprise decision by Germany to renege on a deal to establish an EU take-over code, according to European Commission sources.