Takeover directive battle goes to the wire

Date: 15/02/01

By Peter Chapman

MEMBER states are on collision course with Euro-MPs over the assembly's demands for radical changes to the European Commission's draft takeover directive.

The measure was designed to cut national red tape and protect the interests of minority shareholders. But MEPs voted for changes which critics say would make it much easier for company directors to ward off hostile raiders.

Diplomats will hold final talks on the issue next week before the Swedish presidency and the Parliament attempt to thrash out a deal on one of the most eagerly-awaited pieces of EU legislation.

But sources already say governments will be unwilling to allow MEPs to keep the raft of radical changes they want before the takeover code becomes law.

"It is clear that we are going to try to stay with the main points of the common position," said one Stockholm official, adding that formal conciliation talks could begin in the spring if a deal looks close. At that point the parties will have six weeks to forge a final compromise - which could still be vetoed by member states or the Commission.

After more than a decade of on-off discussions, EU governments reached agreement in principle last year on common ground rules for takeovers that would be overseen by regulators in each member state.

The linchpin of the legislation is a combination of measures to protect investors in targeted companies - particularly minority shareholders - while removing institutional barriers thwarting corporate takeovers.

But in a move that perplexed governments and also drew fire from Internal Market Commissioner Frits Bolkestein, MEPs voted to turn the spirit of the directive on its head. They chose to hand the boards of target companies the right to deploy 'poison pills' to deflect hostile bids - without seeking permission from shareholders.

For instance, a board could thwart a takeover by selling new shares to a friendly 'white knight'. If the Parliament's recommendations become law, a threatened board would have to seek approval for such a move only from the national takeover authority and not from shareholders. Investors wanting to sell-out to the hostile bidder would have to go to court to try to stop the white knight.

But German MEP Klaus-Heiner Lehne, the assembly's rapporteur on the issue, says the Parliament's changes reflected the need to ensure firms have effective tools to fight foreign predators - notably US multinationals which he claims benefit from domestic rules protecting them from similar hostile bids.

Member States are on a collision course with Euro-MPs over the assembly's demands for radical changes to the European Commission's draft takeover directive.