European Parliament Backs Measures That May End Hostile Takeoversin EU

Yoshie Furuhashi furuhashi.1 at
Thu Dec 14 23:11:49 MST 2000

*****   Financial Times (London)
December 14, 2000, Thursday USA Edition 1
HEADLINE: LEADER: European parliament backs measures that may end
hostile takeovers in EU

The European parliament yesterday passed controversial changes to
planned European Union legislation on company takeovers that could
spell the end of hostile bids in the EU.

The changes would allow the management of a target company to take
defensive action against a hostile bid without consulting

They will be challenged by EU governments and the European
Commission. But it is unclear what room there is for compromise.

The takeover directive has been under discussion for the past 10
years. Without a compromise between EU governments and parliament in
the formal conciliation period that follows, the Commission fears the
measure will have to be abandoned.

"It is not the time for more political compromise. Everyone wants
this directive, but there comes a point when it becomes much more
damaging than none at all," said one financial services lobbyist.

The Commission had argued strongly against the changes. Officials say
they defeat the main object of the directive, which is to protect
shareholders and ensure that all investors are treated equally.

Frits Bolkestein, internal market commissioner, said he was
disappointed. "The Commission will of course try to foster a
compromise in the process of conciliation . .. but such fundamental
changes from the text agreed by the council could put adoption of the
proposal at risk."

Arlene McCarthy, a Labour MEP who voted against the changes, said:
"We cannot accept 10 years' negotiation to be overturned and wrecked
by a 10-minute debate in the European parliament."

Many of the changes were put forward by Klaus-Heiner Lehne, a German
Christian Democrat MEP who was concerned that EU companies should
have the chance to defend themselves against hostile bids from the US.

MEPs rejected a proposal that would have introduced more clarity into
the compromise text reached among EU governments. This amendment
would have specified the lead regulator in a hostile bid, while the
current text says there should be shared responsibility between
regulators on cross-border bids. Financial services representatives
say the measure is unworkable.

Another amendment introduced by MEPs states that when a company has
30 per cent of another's shares, it has effective control and must
make a mandatory bid for the rest of the shares at the highest price
over the past year. This is unlikely to be accepted by most
governments.   *****

*****   The New York Times
December 14, 2000, Thursday, Late Edition - Final
SECTION: Section W; Page 1; Column 6; Business/Financial Desk
HEADLINE: Europe Move On Hostile Takeovers Is Faulted

A ground-breaking law intended to speed up industrial integration in
Europe was stymied today when the European Parliament approved a
measure that would permit the managers of a European company to fend
off a hostile takeover bid without the permission of the shareholders.

The Parliament also passed an amendment that would force companies to
consult with unions or with their work forces before responding to a
hostile bid and one that would oblige a target company to safeguard
jobs when negotiating with an acquirer.

Members of the European Parliament have argued that empowering
managers to fend off hostile approaches without the consent of
shareholders is simply providing them with defensive measures similar
to so-called poison pills that United States companies are allowed to
use. They also argued that the measure would deter speculators from
bidding up or down the price of the target company.

But those arguments were challenged by representatives of the
investment industry, the European Commission and the British takeover
watchdog, the Takeover Panel.

The measure was an amendment to a Europe-wide directive that had been
approved by the European Council of Ministers to ease cross-border
mergers and acquisitions in Europe.

"The European Parliament has adopted measures that would curb
takeover activity in Europe, limit Europe's ability to adjust to
becoming one single market, and in the long run harm the European
economy" said Peter Montagnon, head of investment affairs at the
Association of British Insurers, whose members together hold more
than $1.6 trillion in investments around the world.

"It is deeply disappointing that the European Parliament has voted
today to introduce fundamental changes to the long overdue takeovers
directive" said the European Commissioner for the Internal Market,
Frits Bolkestein.

By granting company managements the right to fend off hostile
takeovers without shareholder approval, "management could act to
defend their own, potentially narrower interests rather than being
obliged to act in the interests of the target company's shareholders
as a whole," Mr. Bolkestein said. "This could effectively hinder
company restructuring on a pan-European level."

Tim Cargill, a lawyer working for the Takeover Panel, said he was
disappointed with the vote in the European Parliament. The amendment
empowering company managers in a takeover situation "runs contrary to
one of the fundamental elements of the directive," he said.

The European Commission will act as arbitrator between the Parliament
and the Council of Ministers in a conciliation process aimed at
reaching a compromise. But because the two sides' positions are so
far apart, that looks unlikely.

"Such fundamental changes from the text agreed by the council could
put adoption of the proposal at risk," Mr. Bolkestein said. "We would
then have to throw away more than 10 year's work and start all over

A stalemate would mean that the patchwork of national codes that
exists across the 15-member European Union would remain in place.

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