EU agrees the takeover directive

The European Parliament and the member states agreed early this morning a last-minute compromise on the takeover directive, setting common rules for takeover bids across the Union. The compromise, reached in a conciliation meeting, saves the directive proposed twelve years ago by the European Commission. If no agreement was reached until today, June 6, the proposed directive would have died and the whole procedure would have to start all over again with a new Commission Proposal.

After hours-long negotiations, the member states and the representatives of the European Parliament agreed on an up to five years transition period for phasing out current practices allowing companies’ boards to emit poison pills to defend against hostile takeover bids without consulting the shareholders.

On the other hand, under the current compromise, employees would have to be informed about hostile takeover bids at the same time as the shareholders, after a four years period, reports the Financial Times.

The agreement on the takeover directive gives a green light to setting common rules governing takeovers, which is seen as an important step for cross border corporate restructuring in the European Union.

The deal still has to be endorsed by the European Parliament and by the member states. Once a compromise is reached within the conciliation committee, which gathers representatives of the two institutions, approval by Parliament and the Council is seen as formal. However, Germany is still not entirely happy with the deal. Berlin made a U-turn and withdrew support for the position reached by the 15 member states in June 2000. Under pressure from industry, Germany decided to argue for allowing the board of a company to take defensive measures against hostile takeovers, including emission of poison pills, without prior obligation to consulting the shareholders, for a period of time. This was the position of the MEPs too. The European Commission criticised this position, saying this allowed for barriers to takeovers being imposed by minority company boards.

Under the compromise, member countries would be allowed to keep present rules governing takeovers for five years, including the possibility for companies’ management to use poison pills to defend against a hostile takeover bid. After five years, common rules set in the directive, forbidding poison pills, would be implemented.