26 June 2002

FT: Germany goes on attack to shore up company defences

Excerpt

(…)
The German criticism (to the new draft proposal on the Takeover Directive) are not aimed at the many rules that are identical to the ones defeated last year but at a new provision.

According to the Commission's draft, companies would be unable to use most anti-takeover defences, such as voting caps and restriction to the transfer of shares, to thwart hostile bids. However, they would be able to retain multiple voting rights, which give some shareholders more voting powers than others.

For the Germans, which use some of the banned defences, this could leave domestic companies open to foreign takeovers. Even Volkswagen, the carmaker that is protected from takeovers by a special law, could lose its bid-proof status. By contrast, companies in countries such as Sweden and France, where multiple voting rights are widespread, would retain a powerful weapon against hostile bidders.

'This is a mess,' says Peter Wiesner of the Federation of German Industries. 'You either have a level playing field for takeovers in Europe or you don't. You can't be just a little bit pregnant.'

Despite the German anger, Frits Bolkestein, the European Commissioner responsible for the takeover code, can take heart from the fact that most of the 29-page proposal is uncontroversial.

Few governments and chief executives would quibble, for example, with the Commission's proposal that bidders should be forced to pay a good price to all shareholders - a clear attempt to protect small investors.

The demands that companies disclose their shareholding structure - including opaque arrangements such as pyramid structures - in their annual reports would also meet with little resistance.

In order to get the takeover code approved, Mr Bolkestein needs the support of all the three European Union institutions: the Commission, European Parliament and the Council of national governments.

The Commission should be the easiest hurdle to overcome. Although German industry is preparing to lobby the 20 commissioners, Mr Bolkestein's colleagues are expected to approve the measures next month.

The European Parliament, which killed off last year's plans, looks a tougher opponent. German MEPs are the largest national group and have shown a remarkable ability to disregard political affiliations and vote in block on issues of strategic importance for Berlin.

As for the Council, in which the member governments meet, Mr Bolkestein can expect a real battle with Gerhard Schröder. With a difficult election coming up in September, the German chancellor is likely to mount a vigorous opposition on such a sensitive issue.

FT article: Germany goes on attack to shore up company defences

© Financial Times