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International Finance. Professor Diamond Week 5 - Class 2 Securities Regulation. International Finance. Today: EU securities regulation (cont.) EU M&A market Vodafone/Mannesmann merger case study. International Finance. EU Securities Regulation Against this backdrop, key developments:

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International finance

International Finance

Professor Diamond

Week 5 - Class 2

Securities Regulation

International finance1

International Finance

  • Today:

  • EU securities regulation (cont.)

  • EU M&A market

  • Vodafone/Mannesmann merger case study

International finance2

International Finance

  • EU Securities Regulation

    • Against this backdrop, key developments:

    • Acceptance of mutual recognition over harmonization (a partial defeat for EU project)

    • Directives

      • Listing Particulars Directive (1980)

      • Public Offer Prospectus Directive (1989)

International finance3

International Finance

  • EU Securities Regulation

  • The Listing Particulars Directive

    • 1980, amended in 1987 to allow mutual recognition, amended in 1990 to allow POP to satisfy requirement

    • Basic disclosure package when listing on an organized exchange

    • Sets minimum standards - as long as home country meets or exceeds, host country should allow listing on their exchange

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International Finance

  • EU Securities Regulation

  • The Public Offering Prospectus (POP)

    • Meant to be an EU passport for securities

    • Must enable investor:

      • to “make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the issuer and of the rights attaching to the transferable securities”

    • Problems:

      • Downward harmonization

      • Allows host country control

      • Turkey v. London

      • Host country language required

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International Finance

  • Market forces can help with race to bottom:

    • A Danish issuer making an offer in UK to investors there may comply with those standards to meet demand

    • Forum shopping limited by requirement (generally) to follow rules of HQ country

    • Non-EU issuers can choose home Member State (complicated rules)

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International Finance

  • How is the system working?

    • Only one pan-EU offering so far!

    • 1999 Deutsche Telekom

  • Is it a demand problem?

    • Investors go to the exchanges instead of other way around

    • Could use U.S. “E.T.” system to protect

      • “E.T., phone home” :))

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International Finance

  • Reform effort underway

  • Wise Men led by Baron Lamafalussy led to far reaching proposed changes

  • New regulatory framework

    • A committee of EU regulators (CESR)

    • and ESC to have EU wide SEC style powers\

      • but much weaker

    • still evolving - concern for “democratic safeguards”

  • New prospectus directive with clearer rules and wider applicability

  • EP and market resistance to more rules

International finance

Measuring EU Integration: Market

Return dispersion

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International Finance

  • Mergers and Acquisitions

    • Public companies have a currency to engage in acquisitions

    • Thus, a market for corporate control emerges

    • Disciplinary effect on current managers

    • Helps police agency costs

    • Controversial

      • Private equity role

      • Restructuring leads to job loss

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International Finance

  • In EU, adoption of euro as currency should have sparked M& wave

    • single pricing possible

    • but financial markets still separate

    • political issues

  • Majority of deals done in single country

  • Concentrated in markets with most active stock markets (UK dominates with 1/3 of deals)

  • Any surprise that it was Vodafone?

  • Case study

Vodafone offer

Vodafone Offer

This document should be read in conjunction with the Listing Particulars dated 20 December 1999 relating to the New Vodafone AirTouch Shares. The Listing Particulars have been approved by the London Stock Exchange, have been filed with the Federal Supervisory Authority for Securities Trading (Bundesaufsichtsamt fur den Wertpapierhandel) in Frankfurt am Main together with a certificate evidencing their approval by the London Stock Exchange, and, thereafter, have been published in Germany as a Sales Prospectus (Verkaufsprospekt) in accordance with the German Sales Prospectus Act (Wertpapier-Verkaufsprospektgesetz). In connection therewith, the Federal Supervisory Authority for Securities Trading has dispensed with the requirement that the Listing Particulars be translated into German.

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