21 February 2002

HB: German Government to block Takeover Directive?

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Germany is set to block the European Commission's new proposed takeover guidelines, just as it did last year's proposal. Germany's reason for blocking the rules is twofold. First, they would force Germany to change the special takeover protection afforded to Volkswagen AG. Second, to conform to the new EU law, Germany would have to revise its own recently passed takeover guidelines.

Germany's opposition to the new rules is based on its objection to the planned eradication of national boundaries in the case of hostile takeovers. Making boundaries invalid would also make guidelines specific to member countries invalid.

Germany's reason for blocking the rules is twofold. First, they would force Germany to change the special takeover protection afforded to Volkswagen AG, and second Germany would have to revise its own recently passed takeover guidelines, which allow management boards to adopt poison-pill defense measures enabling them to fend off hostile takeovers.

German legal experts are not unsympathetic to the government's position on this issue. 'As long as Internal Market Commissioner Frits Bolkestein does not succeed in getting other EU member-states such as Sweden and France to drop their takeover obstacles, there's no reason for Germany to drop its,' said Theodor Baum who advised Chancellor Gerhard Schröder on the drawing-up of Germany's takeover code.

But Germany isn't the only member-state opposed to the new draft: broad-based opposition is rapidly forming within the Council. At present, only the U.K. appears to be behind the revised rules. 'For the commission, the reaction from the members is a disaster,' according to people close to the situation, who said the commission will scrap any proposal that is not capable of securing a majority.

Germany’s stance is causing the most consternation in Brussels. This is because it was Germany's opposition that caused the European Parliament to scrap its takeover guidelines last year. The main complaint from Germany then was that the rules did not provide for the eradication of special defenses such as those afforded by the golden share mechanism and therefore did not bring about a level playing field within the European internal market.

See full HB article on Germany Set to Block New EU Takeover Guidelines
and on Experts Back Government's Position on EU Takeover Proposals

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