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The Future of Corporate Takeovers in Europe

The Future of Corporate Takeovers in Europe. ECGI Session at the Federation of European Securities Exchanges' 6th European Financial Markets Convention Brussels, 31 May 2002. Corporate Takeover Defences in Europe. Marco Becht Université Libre d e Bruxelles & ECGI.

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The Future of Corporate Takeovers in Europe

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  1. The Future of Corporate Takeovers in Europe ECGI Session at the Federation of European Securities Exchanges' 6th European Financial Markets Convention Brussels, 31 May 2002

  2. Corporate Takeover Defences in Europe Marco Becht Université Libre de Bruxelles & ECGI

  3. The U.K. Takeover Panel says : “Though Shalt not have Post-Bid Defenses”

  4. No “Level Playing Field” with the US

  5. Texaco Inc. (Global FT500 #162) • no 5%+ block holder • blank check preferred stock • poison pill shareholder rights plan • pill approved by shareholders • vote (1998) : 65.1% for, 34.1% against • 1/3 staggered board with 3 year terms • 11/12 directors independent Texaco Inc. Source : Proxy Statement for meeting April 26, 2000; IRRC 2000

  6. How typical is Texaco? • Poison Pill is always available • Staggered Boards • 58% in IRRC sample (S&P 1500 + 1000) • 70% of IPO firms in 2001 • Only 92 hostile bids 1996-2000 • 32 failed (34.8%) • 23 acquired by bidder (25%)

  7. No “Level Playing Field” within Europe

  8. Main Pre-Bid Defences in Europe • Majority voting blocks • with proportional amounts of capital • with disproportional amounts of capital (shares with no vote, multiple votes, pyramids) • Voting right ceilings • Shares with special rights

  9. How will the “breakthrough rule” affect these pre-bid defenses?

  10. Blocks

  11. Percentage of listed companies under majority control Source : country chapters in “The Control of Corporate Europe”

  12. at times with less capital often with much less capital Percentage of listed companies with a blocking minority of at least 25% Source : country chapters in Barca and Becht (2001)

  13. Companies not affected by the “Breakthrough Rule”

  14. Almanij 67.9% capital 67.9% votes KBC Bank and Insurance Holding Co (Euronext 100 company) KBC Bank and Insurance Holding Co Source : www.kbc.com (consulted 24 May 2002)

  15. Porsche AG Porsche/Piech Family Voting Pool 100% 10%* Porsche AG Voting Stock Porsche AG Non-Voting 50:50 capital Source : Hoppenstedt Guide 1999; * estimate

  16. Allianz AG and Munich Re AG Share transfer restrictions locked in by cross-holding 24.9% Allianz Munich Re 20% 13.7% (V 14.04) 5.05% (V 5.18) 6.8% 6.8% Bay. Hypo-Vereinsbank AG

  17. Companies under blockholder control potentially affected by the “Breakthrough Rule”

  18. Investor AB Wallenberg Foundations 21% capital 44% votes Investor AB Class A 1 vote 40.6% capital 87.2% votes Investor AB Class B 1/10 vote 59.4% capital 12.7% votes Source : www.investorab.com (situation as of 12/31 2000)

  19. Volkswagen AG Land Niedersachsen votes 18.8% 14% of total capital VW AG Voting Stock VW AG Non-Voting 75:25 capital 13.05% 100% Voting right ceiling of 20% No “blank” proxy voting Major decisions require 80% supermajority Volkswagen Beteiligungs- Gesellschaft mbH Source : Volkswagen Law, Company Statutes, BaWe, Hoppenstedt 2002

  20. Certificate Holders 6.25% Aegon nv 100% capital 0% votes 6.15% Fortis nv ING Administratie Kantoor ABN Amro Holding nv 5.12% 100% capital 100% votes ING Groep N.V. ING Source : Form 20-F, Handboek Nederlandse Beursfonden 2000

  21. Companies under Minority Control potentially affected by the “Breakthrough Rule”

  22. Chair, Vice-chair Standing Committee Board potential raider Banco Santander Central Hispano S.A. • 70% supermajority to : • change 10% voting limit • change supermajority amendment 3 year waiting period 2 year waiting period BBVA S.A. 10% voting right ceiling Source : Company Statutes

  23. Priority Share Foundation Ten Royal Dutch Board Members 10 x 6 shares and votes 1440 shares with 6 votes dispersed holdings (one equal 3.2%) compliance with Combined Code meeting of priority shareholders binding nomination; assigns priority shares; block change general meeting dispersed holdings 0.05% of issued capital Royal Dutch Petroleum Company NV 60:40 Royal Dutch/Shell (Global 500 #10) The “Shell” Transport and Trading Company p.l.c. Source : Form 20-F 2000

  24. Radical Italians Voting right restrictions are null and void in a full bid for a privatised company

  25. Telecom Italia 51.8% 25.2% Pirelli & C. A.p.a. GPi Camfin Spa 60.6% 100% 100% (?) Agreement (8 Partners) Pirelli & C. Lux. S.A. Marco Tronchetti Provera 27.5% 10.9% 6% 8.5% Pirelli Spa 60% 20% Benetton Family Olimpia 26.96% Olivetti Spa BCI Spa 10% 54.2% UCI Spa 10% Telecom Italia Spa 51.8% 56.1% Seat Spa TIM Spa not listed listed Source : Consob filings

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