Regulation on takeovers to be started from scratch? The European Parliament rapporteur on the draft Directive regulating takeovers, Klaus-Heiner Lehne, no longer believes in an agreement between the Parliament and Council before the deadline/cut-off date of 6 June, imposed by the procedures in place. In his opinion, the present draft is destined to disappear and it will be necessary to start from scratch. In an interview, Mr Lehne put figures to these chances: 80% for failure, 20% for a compromise within the time. Also the future compromise should take place after a surgical operation: the elimination of Article 9 of the Directive, that which concerns the defence measures for a company attacked by a hostile takeover, main issue of the divergences between the two institution. There will then only remain a group of general standards framing the details of takeovers, leaving aside most of the underlining economic issues.
I tried to show that the quarrel over this Directive, under its technical appearance, in reality represents an aspect of the discussion over the "European company model". For example, the Article cited in the draft will partly determine the balance between the interests of the shareholders in a company, on the one hand, the interests of the management and personnel, on the other, and that (in the formulation favoured by the EP) it protects the traditional national character of certain economic activities (see this section dated 15 May). In the meantime, the case of the massive share acquisition in Montedison (Italy) by EDF (Electricite de France) added a new element, even if this is not a takeover, and the debate is in the process of gaining, for understandable reasons, a emotional and passionate tone.
The pieces of the puzzle. We must recall that the institutional divergences do not only take place between the Council (supported by the Commission) and the Parliament, but also within the Council itself. In fact Germany modified its position by siding with the Parliament on the defence measures. The reversal of the German position does not change, legally, the Council's "common position" (which, in this field, is agreed through majority), but its weight exceeds the legal aspect, as this reversal arose for fundamental reasons, answering more of a national logic that a "single market" logic. Some observers wonder whether recent events (such as the Montedison-EDF case cited above) will not lead to other Member States changing their position over the takeover Directive. According to largely agreeing information, the German government is preparing a draft law against hostile takeovers, which would allow company managers to call on the shareholders assembly for a general authorisation, valid for five years, to take defensive measures in case of an attack, without it being necessary to improvise a defence in extremis at the time of the hostile takeover. At the same time, in the very last days of its life, the Italian government established an emergency decree-law allowing to tackle hostile escalations without takeovers in the energy sector (answer to the initiative of EDF; see yesterday's EUROPE, p.9). This decree, on which French circles have already expressed "strong perplexities", is being examined by the Commission services from the point of view of the free movement of capital and the right to establishment. Observers noted the great similarity between the Italian measure and that adopted previously by Spain to oppose the takeover of the electricity company Hidrocantabrico by the German company EnBW (in which EDF is holds 25%), also being examined in Brussels. Furthermore, the Commission services are examining the legality of the "preferential" share that the Land of Lower-Saxony holds in the capital of Volkswagen, as well as the ban on any person holding more than 20% of the VW shares, which lead to worrisome statements from the company president (Ferdinand Piech recalled that the VW group, as important as it is, financially only represents a quarter of Daimler-Chrysler and that due to its great profitability, it is very tempting, and he added that the European Commission cannot want for all the large European automobile firms to become the property of American manufacturers).
Difficult to conjure away. We can see it, three Member States, and not lesser ones, consider it practical that certain rules of the large market without borders must be applied with care, if the conditions for the opening of the markets and the status of companies are not uniform. All this is part of a highly sensitive context due to its economic, financial and social significance, and thus political, the problematic of the information/consulation of workers is linked to it, as well as, from another point of view, the famous phrase from the Stockholm Summit "conclusions" that invite the Commission to 'ensure that companies which retain a monopoly position in their national market do not unduly benefit from this situation".
Politically clear phrase, but legally difficult to translate into concrete initiatives as the Commissioner for Competition, Mario Monti, explained it. At the same time, the Vice-President of the Commission, Mrs de Palacio, insisted on having a debate in Commission over the anomaly linked to privatisation: if a government decides to privatise certain sectors of its economy, it is certainly not to see them fall into the hands of another government. Though, nothing in the present rules ban a State company from taking over a company that another State has privatised. Though a government that privatises does so in the name of free market and free competition, in order to reduce the State control over the economy of its country, and certainly not to transfer this company to another Member State. This aspect is part of the same global debate, and it is difficult to conjure away, whatever some Commissioners may think.
Hardly a convincing argument. The Commission position in the face of various aspects of this immense problematic are based, it is normal, on the rules of the large market. Faced with the Montedison-EDF case, Mario Monti has always referred to the texts in place. EDF must notify its acquisition of a stake in Montedison, under the "mergers" regulation, if its control develops, and launch a takeover if its stake exceeds 30% of the capital; for the time being it stopped at 20%, but EDF could form alliances with other stakeholders. Thus the situation could also be assessed from the Brussels point of view of an agreement or a possible abuse of dominant position. The spokesperson for Commissioner Monti also noted that the reciprocity between France and other countries would be ensured if the Council adopted the accelerated timetable for the liberalisation of the electricity market by 2005, put forward by the Commission. The Directive on this issue may be approved through majority. The governments concerned only have to apply the Treaty instead of complaining over the monopoly position of EDF. This argument leaves me perplexed, as it mixes two different aspects: the opening of the market and the ownership of the production and distribution companies. Whatever the percentage of market opening, it does not eliminate the distinctive feature of a company that may gain control of producers in other Member States without possible reciprocity. If France increased to 40 or 50% or even more, its degree of market opening, the disparity between a company, which can cream off the companies of others while being "immune" against takeovers or escalations by others (there are no EDF shares on the stock market) would nevertheless remain. EDF denies any desire to control Montedison (electricity producer, via its subsidiary Edison and Sondel) and asserts that its investment is exclusively financial: invest capital. While respecting the European Directives concerning both the opening of national markets as well as the free movement of capital. The Italian industrial circles challenge this appeasing interpretation which, according to one commentator, can only "convince idiots".
6 June, its tomorrow. The word is to the government and European institutions. In terms of timetable, the case of the takeover Directive is a priority, as 6 June, is tomorrow. The clarification of the stakes and the links between this Directive and the whole problematic that surrounds it indicates that the Parliament will not modify its position. In the interview cited, the rapporteur Mr Lehne reaffirmed that a system facilitating takeovers is only acceptable if possible escalations are similar everywhere. Though if it is possible, in certain Member States, to oppose hostile escalations through mechanisms of the "golden share" type or limitation to voting rights, then the possibilities for defence must be widened for all, as attackers and defenders must be on an equal footing and the shareholders form both sides must have the same rights. Once more he cites the case of the London Stock Exchange (which may takeover other stock exchanges, but cannot be attacked) and of Alcatel (which may escalate Siemens without possible reciprocity).
Point of balance. We have understood this after all that is said above: I have difficulty taking a position. A unified European market implies the ending of all barriers, in order to create the conditions for a national market. If this is the aim, why the national measures to defend and to protect? Moreover, the Lisbon aim (to make the EU, by 2010, the most competitive region in the world), implies that restructuring is encouraged. Though, at the same time, European integration presupposes the safeguard of national identities, and the concept of a "European model company" implies rules and the protection of everyone's interests especially those of the weakest. Where lies the balance? What does UNICE think, when noting that the positions of national European employers diverge? And the European Trade Union Confederation? A political debate is needed, beyond the legal considerations. Moreover it has begun. Chancellor Schröder has made a personal undertaking through the modification of the German position on takeovers. The Spanish and Italian governments have acted in a clear direction. In his Monday speech, Lionel Jospin took a position against "tax dumping", in favour of "strong and efficient public services" and for a "true European social law". Though this debate consists especially, for the time being, of improvised answers to unforeseen situations. It is necessary to define the principals and stick to them. (F.R.)