Swedes hold key to outcome of takeover directive battle

Date: 22/02/01

Sweden'S presidency will lead a conciliation committee this spring in a bid to overturn changes tabled by MEPs to proposals designed to smooth the way for cross-border corporate takeovers.

After more than a decade of on-off talks, member states agreed in principle on common ground rules for takeovers that would be overseen by national regulators.

The legislation seeks to protect the interests of investors in target companies - particularly minority shareholders - while removing barriers thwarting corporate takeovers in the Union.

But in a move that angered Internal Market Commissioner Frits Bolkestein, MEPs voted late last year to turn the spirit of the directive on its head. They chose to hand the boards of target companies a medicine cabinet of 'poison pills' to deflect hostile bids without seeking permission from shareholders.

German MEP Klaus-Heiner Lehne, the assembly's rapporteur on the issue, said the Parliament wanted to ensure EU firms could fight off foreign predators - notably raiders from the US.

Stockholm refuses to give up hope that it can undo the damage - although officials admit that the job will be a tough one in draft legislation "where every comma means something".

Meanwhile, the financial community admits it has serious concerns.

Patrick Drayton, director general of the UK's takeover panel, widely seen as the role model for all other EU regulators, says the changes tabled by MEPs would harm investors and create barriers. He adds that the original deal agreed by member states would only allow a company to sell its "crown jewels in a frustrating action" if it had shareholder approval.

But the MEPs' amendments would allow a board to thwart a hostile bidder by selling shares to a 'white knight' - without the prior approval of shareholders. If this change became law, the directors would only have to clear such a move with the national takeover authority.

Drayton says this would cause endless litigation and undo the whole spirit of the plan to set up an EU-wide rulebook for the sector.

Takeovers - or the risk of them - are seen by economists as a huge catalyst to increased cost efficiency and effective management.

Sweden's presidency will lead a conciliation committee in spring 2001 in a bid to overturn changes tabled by MEPs to proposals designed to smooth the way for cross-border corporate takeovers.