EU close to clinching take-over rules deal

Date: 03/06/1999

By Peter Chapman

BONN is confident that a decade-long dispute over planned new EU-wide rules to govern take-overs will be settled at a meeting of internal market ministers later this month.

Hopes of a deal have risen amid signs that the UK is ready to drop its long-running opposition to the proposals and accept the compromise formula drafted by the German presidency. A British government source said London "was unlikely to sing and dance about the compromise", but hinted that it would not block the directive.

A German diplomat said only the Netherlands, which operates a similar regime to that in the UK, and Finland, which already has tough take-over legislation, were opposed to the current compromise. This means that the deal could be pushed through by qualified majority vote at the 21 June meeting.

The proposed new rules are aimed at ensuring that all shareholders in companies have equal rights during take-overs.

The UK, where half of the EU's company take-overs take place, originally said it neither wanted nor needed the directive.

It feared the planned Union-wide legal framework would force it to dismantle a successful voluntary code of conduct policed by the City of London-based Take-over Panel.

In some countries, firms can win control of target companies through negotiated deals with big stakeholders, with small shareholders only informed afterwards that control of their company has changed hands.

The proposed directive, like the UK system, aims to ensure big institutions and firms cannot ride roughshod over the rights of minority shareholders when they launch take-over bids.

It will increase transparency by forcing large shareholders building up their holdings in a company to make a formal offer for the whole firm once they have a controlling stake.

London has long argued that a legally binding EU directive would result in a spiral of timely and costly 'spoiling litigation' either in national courts or at European level.

But German diplomats say the compromise proposal addresses these fears, while still ensuring EU shareholders have the right to legal redress if they believe a take-over has been incorrectly handled.

" In Britain, the Take-over Panel apparently works very well. The problem is that in the directive we want to give shareholders the opportunity to use the courts against decisions. In London, this is only possible in very restrictive cases," said a Bonn diplomat. "The compromise could be that you choose a formulation where you mention that it should be possible to sue against a decision and that you have a wording that allows Britain to continue with its system."

Early drafts of the compromise text stated that member states would be allowed to decide "whether and under what circumstances parties to the bid are entitled to bring administrative or judicial proceedings".