Brussels, 10/01/2002 (Agence Europe) - European Commissioner Frits Bolkestein announced that the Commission will be presenting a new proposal of Directive in April on public takeover bids, based on the results of a report on public offerings by a group of experts in company law, and published on Thursday.
The group had been called together at the request of the Commission after the European Parliament had rejected the takeover bid directive last July (see EUROPE of 5 July, p.7), in order to examine three questions raised by MEPs. These questions concern: fair treatment of all shareholders, a fair price for minority shareholdings and compulsory conditions for the purchase of minority shares by the majority shareholder.
Along the same lines as the Commission on its main point of divergence with Parliament, the experts consider that the final decision to accept a takeover bid is up to shareholders and not up to the administrative board. "In the event of a takeover bid, the ultimate decisions must be with the shareholders. They must be able to decide whether to tender their shares to a bidder and for what price. It is not for the board of a company to decide whether a takeover bid for the shares in the company should be successful or not", said the chairman of the expert group, Jaap Winter, Professor of Erasmus University in Rotterdam and legal adviser for Unilever.
In parallel, experts recommend limiting "specific shares", the so-called "golden shares" which allow States to keep a special right of control within privatised companies. They consider that, in so far as it is allowed by Community law, the Member States that hope to keep control over a company must organise this control through legislative means conform to the principles of public law. Without committing himself on behalf of the Commission on the group's proposals, Commissioner Bolkestein recalled that, before giving a stance, it will be necessary to wait for the conclusions of the Court of Justice regarding the three cases concerning Golden Shares in several companies in Portugal, France (Elf Aquitaine) and Belgium (Société nationale de transport par canalisations). We recall that the conclusions of the Advocate General at the Court were more in favour of Golden Shares on condition that they do not create discrimination between Member State nationals (see EUROPE of 4 July, p.11).
The group suggests that a bidder acquiring 75% of the risk capital of the target company must be able to thwart defensive mechanisms set up by the target company, arguing that Member States must not set a lower threshold for this than 75% of the risk company of the company targeted. According to Jaap Winter, this threshold allows common standard rules to be set while leaving Member States enough flexibility to apply majority rules differently, by accepting blocks of shares, for example. The threshold would also apply to golden shares. The group of experts recommends setting the upper threshold at 75%, but Member States are free to choose to set the threshold for controlling a company at 20%, explained Commissioner Bolkestein.
The experts also call for the Commission to study the feasibility of introducing general legislation covering pyramid and cross shareholdings (that can block bidders wanting to thwart defence mechanisms) and what measures of protection should be enforced in all Member States.
In order to define the equitable price to be offered in a mandatory bid, the experts propose the price be the highest price paid by the bidder prior to acquiring the controlling holding.
The group recommends that the threshold for squeeze-out at 90-95% of the capital (ie the threshold at which the squeeze-out right is triggered) with the presumption of bid price as the fair price when bid is accepted by 90%. Minority shareholders should have the right to sell out to a bidder at this price.
Commissioner Bolkestein says the group's proposals make is possible to set an even playing field across the EU for all shareholders (this was the European Parliament's main concern). Mr Bolkestein hoped that the proposal to be presented by the European Commission in April would be adopted in a single reading by the EP but said it was not his place to make that request.
The expert group is expected to publish new recommendations by July 2002 on updating company law, borderless governance and company mobility, added the Commissioner.
Klaus-Heiner Lehne MEP welcomes experts' recommendations
The European Parliament's rapporteur on takeovers, Klaus-Heiner Lehne (German Social Democrat) welcomed the experts' recommendations. In a press release published after his meeting in Brussels on Thursday morning with the leader of the expert group, Jaap Winter, he said the experts had "recognised the absence of a "level playing field" and therefore followed the position of those Members of the European Parliament who - for this reason - had voted against the old directive proposal in July 2001. The proposal of the expert group to suspend special rights as golden shares or the limitation of voting rights during takeover periods would be appropriate to establish equal competition conditions between European companies. Nevertheless, the linkage to a control threshold of 75% should be examined in detail. This threshold should be reconsidered", said Mr Lehne. He underlined that the European Parliament would be "cooperative" during the negotiations with the Commission and would "try to reach an agreement with the Council during the first reading". "Then, it would be possible to put into force this new legislative proposal even earlier than the directive, that failed in July 2001, which had foreseen a 5 year period before entering into force. In this case, German legislation recently adopted would become unnecessary". (Germany adopted legislation immediately after the EP vote in July that guaranteed the powers of the executive board of companies targeted by a hostile takeover bid, Ed). Sources close to Klaus-Heiner Lehne said that since the directive ensures every share is accompanied by voting rights, there is no reason to not give shareholders voting rights.
The Commission explained that the group's report will be available online at: http://www.europa.eu.int/comm/internal_market/en/company/compagny/official/index.htm.