Digging the moat

23 February 2006

All over Europe, informal takeover defences have been shown to have no clothes. Italy is the latest country to consider using poison pills. It isn t clear how effective this might be. France s attempt looks like a paper tiger. But for Italy to plan a deterrent would be silly.

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Giulio Tremonti, Italy's finance minister, said that the Italian law on takeover bids is among the most open and was written before the European [takeover] directive, which was then changed in a more restrictive sense as is happening in France.

France is considering allowing companies under or expecting a hostile bid to issue warrants convertible into shares at discounted prices to existing shareholders. This would have to be approved by shareholders, and would only be available for use against bidders who had the same protection in their home country.

Meanwhile, Luxembourg has adopted the European takeover directive minus a clause which would have prevented companies from taking any frustrating action in particular share issues without the approval of shareholders.

Charlie McCreevy, the EU's internal market commissioner, has criticised the moves by France and Luxembourg. He said While these measures may be in line with the EU takeover directive, I believe they are contrary to the spirit of the movement of capital.

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