EU directive could cause takeover chaos

The European Union's botched attempt to smooth out the rules on cross-border mergers is threatening to plunge future takeovers into chaos.

Legal experts have warned that bids for companies with split jurisdictions face lengthy delays, millions of additional pounds in advisers' fees and months of uncertainty on the back of the new EU takeover directive, which came into force last week.

The new rules were intended to create a level playing field for companies seeking to acquire European rivals by, for example, making it harder for groups under siege to use "poison pill" tactics as a defence from an unwelcome predator.

But strong opposition from member states such as Germany and Sweden meant the directive has had the opposite effect and is instead helping to fan the flames of protectionism burning across Europe in the wake of several contentious energy deals.

There is particular confusion over which country's takeover rules will apply in bids involving companies with split jurisdictions - where one group is incorporated in one EU country but trades its shares on the bourse of another.

"The rules on which regulator has jurisdiction over various aspects of a bid in split jurisdiction cases are far from clear, so there could be real confusion," Selina Sagayam, corporate partner at Simmons & Simmons, a London law firm, said yesterday. Bids for companies operating in politically sensitive sectors from energy to defence will be most at risk, she warned.

With no firm guidelines, national regulators will have to vie with each other on a bid-by-bid basis to decide who gets to be the ultimate arbiter. Takeover rules in each member state vary wildly, which will make it very difficult to establish a precedent.

Current deals at risk include Deutsche Börse's battle with the New York Stock Exchange for control of Euronext, which may be a Paris institution but is incorporated in the Netherlands. Arcelor, which is Luxembourg-based but listed in France among other countries, is also caught up in the confusion.

The directive covers the EU's 25 members plus Norway, Iceland, Liechtenstein and Switzerland.

Ms Sagayam said: "It will be quite challenging for companies to make preparations in advance [to launch bids]."

Brussels watered down the new takeover rules to allow countries to opt out of certain clauses. Crucially, the law left member states free to ignore the core clauses on "poison pills". Some countries have moved to make it easier for companies to fend off unwelcome suitors.

In the wake of Mittal Steel's hostile bid for Arcelor, France drew up fresh legislation allowing companies facing a hostile bid to make themselves more expensive to acquire by giving them the right to issue warrants convertible to shares at a discounted price to existing shareholders.

To further complicate matters, just five of the 29 countries affected met the 20 May deadline to implement the directive.

There has been a rash of deals between companies in different EU member states so far this year.

Start your day with The Independent, sign up for daily news emails
News
i100
News
Bobbi Kristina Brown, daughter of the late singer Whitney Houston, poses at the premiere of
people
News
people
News
The frequency with which we lie and our ability to get away with it both increase to young adulthood then decline with age, possibly because of changes that occur in the brain
scienceRoger Dobson knows the true story, from Pinocchio to Pollard
Voices
The male menopause: those affected can suffer hot flushes, night sweats, joint pain, low libido, depression and an increase in body fat, among other symptoms
voicesSo the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Life and Style
health
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: DBA Developer - SQL Server

£30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Customer Service Administrator

£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...

Recruitment Genius: Dialler Administrator

£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...

Ashdown Group: Contracts Manager - City of London

£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...

Day In a Page

Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

US betrayal of old ally brings limited reward

Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
VIPs gather for opening of second Suez Canal - but doubts linger over security

'A gift from Egypt to the rest of the world'

VIPs gather for opening of second Suez Canal - but is it really needed?
Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
The male menopause and intimations of mortality

Aches, pains and an inkling of mortality

So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

'How can I possibly be on the list with these writers I have idolised?'

Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

Bettany Hughes interview

The historian on how Socrates would have solved Greece's problems
Art of the state: Pyongyang propaganda posters to be exhibited in China

Art of the state

Pyongyang propaganda posters to be exhibited in China
The haunting of Shirley Jackson: Was the gothic author's life really as bleak as her fiction?

The haunting of Shirley Jackson

Was the gothic author's life really as bleak as her fiction?
Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

Bill Granger's seaside-inspired recipes

These dishes are so easy to make, our chef is almost embarrassed to call them recipes
Ashes 2015: Tourists are limp, leaderless and distinctly UnAustralian

Tourists are limp, leaderless and distinctly UnAustralian

A woefully out-of-form Michael Clarke embodies his team's fragile Ashes campaign, says Michael Calvin
Blairites be warned, this could be the moment Labour turns into Syriza

Andrew Grice: Inside Westminster

Blairites be warned, this could be the moment Labour turns into Syriza
HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

The mystery of Britain's worst naval disaster is finally solved - 271 years later

Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

'I saw people so injured you couldn't tell if they were dead or alive'

Nagasaki survivors on why Japan must not abandon its post-war pacifism
Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

The voter Obama tried hardest to keep onside

Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen
RuPaul interview: The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head

RuPaul interview

The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head