The following article is adapted and reprinted from the M&A Tax Report, Vol. 9, No. 12, July 2001, Panel Publishers, New York, NY.


By Robert W. Wood

The European Union Commission recently settled a squabble over the long-fought battle about hostile takeover bids throughout the European Union. The EU (as we've noted before in The M&A Tax Report) has had a miscellany of rules, and for twelve years now (wow!) a Special Conciliation Committee of the Counsel of EU Member States, and two other institutions, have been squabbling. Now, they've agreed to a transitional period of up to five years before the phasing out of poison pill defenses against hostile bids without the consultation of shareholders. See Norman, "EU Agrees on Takeover Directive," Financial Times, June 6, 2001, p. 2. This was certainly the most important change (albeit subject to a five-year phase-out), agreed to by the Committee. There were other minor changes to existing proposals covering the consultation of employees. Id.

Giving Up?

Interestingly, this compromise agreement came together less than 24 hours from the applicable deadline for the Committee finishing its work. Id. Other publications had flatly noted that the EU had failed to agree, and that takeover rules were likely not to be harmonized for quite some time (the implication being, forever). Interestingly, in an issue dated just a few days before the EU agreement, Business Week noted that it was alarming that the EU had failed to agree on takeover rules, and might simply give up.

Even more alarming, said Business Week, was that Germany was preparing to go its own way, with the German legislature expected to pass a law expanding the powers to fend off hostile bids through poison pills. The French, meanwhile, have been accusing the Germans of being "spoilers" to a deal. Yet, according to Business Week, the French cling to arcane rules that grant disproportionate voting rights to privileged investors. See Ewing, "Takeovers: Europe's Hypocrisy," Business Week, June 4, 2001, p. 57.

Anyway, although the harmonization of rules on every topic may not exist yet, the last-ditch poison pill agreement — despite its phase-in period — is an enormously positive development.

European Takeovers, Vol. 9, No. 12, The M&A Tax Report (July 2001), p. 6.