The European Regime on Takeovers

On the eve of 20th May 2006, the deadline of the transposition by Member States of the Directive n° 2004/25 of 21st April 2004 on Takeovers Bids, the question is: what will be the impact of this Directive? Is it a useful text or is it merely a mirage?Those questions were unanswered even when the Danone affair came to light in France late last July. Some of the media said that the American group PepsiCo was thinking of launching a takeover bid for the French group Danone. French Prime Minister Dominique de Villepin reacted immediately, saying that ‘economic patriotism’ is necessary. The French Prime Minister promised that the European Directive on Takeover Bids would enter into force in France at the beginning of autumn – and that this transposition would apply the reciprocity rule. For the above reason, it was interesting to observe that, although the bidder was not a European company, one of the issues was the transposition of the Takeover Directive. A few days after that, Belgian Electrabel became embroiled in a takeover affair with Suez Bank.It is obvious therefore that the 13th European Directive is the cornerstone of the European financial market. And it is similarly clear that Member States' rules on takeovers require harmonisation or at least must move toward greater convergence. So, it is still necessary to achieve the objective of the European Directive “to create rules for takeover bids on listed companies, offering a mechanism for consolidating and integrating Europe's industry in order for European business to make optimal use of the EU's single market”.Regarding the Directive itself, after more than a decade of tough negotiations and the rejection by the European Parliament of a proposal in 2001 through a blocking vote (273 votes against 273 votes), we know that a compromise was achieved in December 2003 with the help of the work of the High Level Group of Experts – and thanks to the idea of optional rules. In this way, the EU succeeded in making the Directive acceptable to all Member States. As wrote J. Winter, ‘The outcome is a takeover regime where the two key provisions that can ensure that takeover bids can be made successfully (i.e. the neutrality rules of the management and the breakthrough rule) are only optional’.One of the members of the High Level Group (J. Simon) even asked why such an optional Directive is of interest, especially when Member States – and also companies – can choose the most convenient solution for them. According to Mrs. Simon, a Directive without Articles 9 and 11 would have probably been simpler and clearer and therefore better. The point of such a Directive (without Articles 9 and 11) would have been to give a common background to the 25 Member States as regards the rules for mandatory bids, squeeze out and sell out proceedings, information obligations toward minority shareholders and transparency of control.However, despite the optional character of the key provisions of the Directive, we believe that the Directive is still useful and will be able to achieve its objective. As Mrs. Simon observed it in her critical Article on the Directive, the text provides mandatory rules on transparency and in favour of minority shareholders (see I.) and this point is very important in an enlarged Europe. Moreover, the Directive gives some rules which should establish the level playing field required by the EU Market (see II.).Of course, the drawback is that the key provisions of the Directive are only optional. However, as J. Winter wrote, “the opt-out/opt-in system is combined with a reciprocity rule that ensures that even companies that have voluntarily chosen to be subject to rules that allow a successful takeover bid can put up defences against a bidder that is not itself subject to these rules. As a consequence, national regime could continue as they are”. However, we will see that the rule of reciprocity may contribute to indirect harmonisation – there exists a great incentive for Member States and companies to integrate according to the Directive's guiding principles (see III.).