MEPs poised to ‘wreck’ EU take-over plan

Date: 07/12/00

By Peter Chapman

THE European Commission, member states and industry are calling on MEPs to reject planned changes to EU-wide legislation governing company take-overs, claiming they would fatally undermine its aims by giving bosses too much power to ward off hostile bids.

Internal Market Commissioner Frits Bolkestein says the changes called for by the assembly's legal affairs committee would "throw away more than ten years of work". He added: "We would have to start all over again."

Union governments reached agreement in principle this summer on common ground rules for take-overs which would be overseen by regulators in each member state.

The linchpin of the eagerly awaited legislation is a carefully crafted combination of measures to protect the oft-ignored interests of investors in target companies - particularly minority shareholders - whilst removing institutional barriers which thwart corporate take-overs in the EU.

But critics fear that the radical changes to the directive due to be voted on by the full Parliament next Tuesday (12 December) could hand the boards of target companies a medicine cabinet of 'poison pills' to deflect hostile bids without seeking prior permission from shareholders.

Swedish officials are also warning the assembly that it faces a battle with governments if it backs the changes demanded by committee members. Stockholm fears the whole deal could unravel during its Union presidency in the first half of next year unless MEPs back down.

"Of course the Parliament has every right to make these amendments," said one diplomat. "But this is a text that was negotiated intensively for a year by experts in take-over regulation. Each comma means something and cannot be substituted by something else. This is a complicated piece of legislation, but the costs of being wrong are very high."

He added that any measure which made take-overs more difficult would harm shareholders and stop the vital restructuring of European industry in its tracks.

UK government sources said they were talking to MEPs this week in a last-ditch attempt to shift opinion over the draft amendments, which are sending a chill down the spine of the EU's financial community. "The directive is intended to protect investors and break down barriers to take-overs. But the amendments run completely counter to these objectives," said Patrick Drayton, director-general of the UK's take-over panel, which is widely seen as the role model for all other Union regulators.

Take-overs - or the threat of them - are seen by economists and financial analysts as a massive catalyst to increased economic efficiency and effective management. They say that without that risk, there would be far fewer incentives for company bosses to perform.

UK Liberal Democrat MEP and economist Christopher Huhne said the legal affairs committee's report was the work of "dinosaurs" who did not understand the negative impact their proposals could have on EU business. These include the committee's rapporteur Klaus-Heiner Lehne, whose home town of Dusseldorf hosts the head office of Mannesman, the industrial giant recently taken-over after an acrimonious battle by the UK's Vodafone.

Huhne said that if the report won the support of the full Parliament next week, this would inevitably spark lengthy conciliation talks between the assembly and the Council of Ministers to try to bridge the gulf. "The effect of this report, if it is voted through, is for Parliament to go to the Council with a restrictive report that will slow down the merger boom in Europe and dramatically reduce a lot of the impetus that the euro has created," he added.

The European Commission, Member States and industry are calling on MEPs to reject planned changes to EU-wide legislation governing company take-overs, claiming they would fatally undermine its aims by giving bosses too much power to ward off hostile bids.