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Takeover Directive Approved By EU Parliament

by Ulrika Lomas, for LawAndTax-News.com, Brussels

18 December 2003


The European Parliament has approved a watered-down version of the Takeover Directive at the first reading, and with no amendments, a state of affairs which is likely to have angered EU Internal Market Commissioner, Frits Bolkestein, who sponsored the legislation.

Under the terms of the EU law, which was approved by the European Council last month, companies will be able to opt out of article 9 of the Takeover Directive, which prohibits the use of tactics such as poison pills and multiple votes to frustrate hostile takeovers.

According to reports, the provision making article 9 optional was added as a result of pressure from member states such as Germany, which is determined to prevent foreign takeovers of key companies, including Volkswagen.

The Internal Markets Commissioner was reportedly furious at the amendment, arguing at the time that:

"By making article 9 optional, you are emptying the proposal of its content." He added: "The Takeover Directive has fallen victim to horse-trading and unholy alliances."

However, other European politicians are slightly less pessimistic with regard to the likely effects of the watered-down Directive.

Speaking to the AFX news agency, UK Liberal Democrat MEP, Chris Huhne suggested that although the legislation as it now stands will not go very far towards creating a level playing field, it "will provide important protection for minority shareholders and this will encourage cross-border ownership of shares".

He went on to observe that attitudes towards foreign takeovers vary significantly between member states, pointing out that:

"In some member states - notably Germany - foreign takeovers are regarded as a disaster to be resisted while in others - like Britain - we see foreign companies as a benefit for investment and jobs."


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