The European Union may consider expanding options available tocompanies to block hostile takeovers as part of a review oflegislation on corporate acquisitions.

The European Commission in Brussels is examining whether firmshave too little power to use defensive measures such asshare-transfer restrictions or multiple voting rights to prevent ahostile takeover, according to a letter from the regulator obtainedby Bloomberg News.

EU regulators have struggled to clarify how far companies can gounder existing law to protect themselves against unwantedtakeovers. Hermes International SCA, the maker of Birkin bags, wona waiver of French market rules to shield itself against a possiblebid from LVMH Moet Hennessy Louis Vuitton SA earlier this year.

The commission will examine “control structures and barriers totakeovers,” according to the letter, sent to law firms and tradeassociations earlier this month. It will also examine how EU ruleson issues such as treatment of minority shareholders during anacquisition compare with those in other regions.

The review is being carried out to satisfy a requirement that itassess how well a 2004 law on takeover bids is working. Under thelegislation, the commission has until this year to assess the rulesand propose revisions, “if necessary,” the letter says.

Capital Markets
The commission's review willdetermine how existing EU law has achieved its aims of promoting“the integration of European capital markets,” the commission said.This should be achieved through “efficient takeover mechanisms andstrong rights for shareholders,” it said.

The study is part of an early fact-finding process, OlivierBailly, a spokesman for the European Commission, said in an e-mail.The results will be available by the end of this year, he said.

The commission will examine its options during 2012 on “whatneeds to be done, if anything at all,” Bailly said.

“The most sensitive issue is obviously to what extent listedcompanies should be able to defend themselves against takeovers,”Jaap Winter, a partner at law firm De Brauw Blackstone Westbroek,said in a telephone interview.

Cross-Border Takeovers
EU nations “weren'twilling to facilitate cross-border takeovers in 2004, I don't seeany indication they've become more willing to do so,” said Winter,who was formerly chairman of a group of company law experts set upby the commission. “The current populist sentiments about theEuropean Union make it unlikely that at this stage governmentswould opt to weaken takeover defenses.”

The U.K. Takeover Panel earlier this year proposed changes toits merger rules including a 28-day window for potential buyers to“put up or shut up” by giving their firm intention to bid.

Last year's takeover of Cadbury Plc by Kraft Foods Inc. has beencriticized by Vince Cable, the U.K.'s business secretary, who saidin June that there were “too many company takeovers which reduce ordestroy value and are driven by the fat fees earned by the lawyersand banks who facilitate them.” Kraft was also criticized by U.K.authorities for misstating plans to keep a plant open as part ofits acquisition of Cadbury.

The commission should examine how widely voluntary ruleslimiting defenses in the current legislation have been applied,Winter said.

The measures include allowing a buyer who has accumulated 75percent of a firm's share capital to break through takeoverdefenses and a requirement for a target company's board to beneutral in the face of a takeover bid unless it has been authorizedto block it by shareholders.

Bloomberg News