Hostile Takeovers Are Spreading in Europe as End of Trade Barriers Looms in 1992

AMSTERDAM — Continental Europe is waking up to the realization that it is going to have to live with the hostile takeover bid, just like the United States and Britain.

Some of Europe’s oldest and most respected firms suddenly appear vulnerable, analysts say. Their stock is cheap since the 1987 crash, and their appeal has been boosted by prospects of the single, pan-European market that the European Community intends to create by 1992.

A highly publicized battle between Italian tycoon Carlo De Benedetti and Franco-Belgian rivals for Belgium’s biggest company, Societe Generale de Belgique, is in its seventh week and has caused a stir throughout corporate Europe.

It and other recent takeovers and mergers have made board room leaders realize that a cozy world of deals between friends and unchallenged independence is about to vanish.

Some Big Differences

“This takeover boom is like a bombshell that has sent everybody fanning out in all directions, running for shelter,” said a brokerage analyst in the Netherlands.

Analysts say Continental Europe is unlikely to breed the equivalent of U.S. corporate raiders such as Carl C. Icahn and T. Boone Pickens Jr. And prospects for a U.S. style “junk bond” market to fund hostile takeovers look equally remote.

But the case of Generale and other takeovers have highlighted two important developments.

First, businesses are digging deep into their pockets to prepare for what had long seemed a politician’s daydream--1992, when trade barriers between EC states are to be removed to create what will be the world’s largest market.

Inadequate Defenses

One example was last month’s agreement between Belgium’s premier bank Generale de Banque and AMRO Bank, the Netherlands’ No. 3, to link in an integrated banking group.

It is seen as heralding a rash of concentrations in European banking, and in chemicals, pharmaceuticals and consumer goods, where even the largest players in many EC states would be too small to take on competitors from outside after 1992.

The second fact evidenced by the battle for Generale and other recent takeover bids is how diverse takeover and merger rules are in EC countries, and how ill-equipped some are to cope with the likely battles ahead.

Belgian Finance Minister Mark Eyskens said recently that a raid like the one on Generale was only possible in an open and liberal country such as Belgium. Most other EC countries had techniques to discourage unwanted takeovers.

He listed “the often discouraging procedures” of West Germany’s competition authorities, a sophisticated system of non-voting share certificates widely used in the Netherlands, methods still used by the Bank of England and recent tactics in France to delay a newspaper takeover.

European attitudes range from very liberal to outright protectionist.

“European countries are all doing their own things, some liberal, some protectionist, and in the middle you have that poor European Commission trying to hold everything together with proposals to get EC countries to sing in tune by 1992,” said one analyst.

Calls for Protection

Spurred by recent takeover activity, most European stock market regulators now seem determined to introduce British-style rules to make investors declare large stakes and give companies and shareholders early warning of a possible bid.

In France, where several prestige names such as cognac maker Martell et Cie and chocolate manufacturer Poulain have been snapped up by foreigners, there have been calls for protection by other companies and a strike against takeovers.

Economics and finance minister Edouard Balladur is considering giving firms more freedom to issue new shares as a “poison pill” protection against unwanted takeovers, a move supported by France’s securities regulatory commission, COB.

Spain’s parliament is debating a bill that would force foreign bidders to seek central bank approval if they want to build up a stake larger than 10% in a Spanish bank.

At the other end of the scale, the Amsterdam Bourse on Friday announced reforms to abolish some of the sophisticated schemes that Dutch firms use to fend off unwanted takeovers.

Seen as Excessive

“The accumulation of protective schemes has gone too far,” said exchange Chairman Boudewijn van Ittersum, adding that it should be left to shareholders, not management, to decide whether they wanted to transfer control of a company.

The European Commission, meanwhile, has introduced proposals to give it powers to oversee large acquisitions and mergers in the Community and is preparing guidelines to protect firms and shareholders.

At present, approval or refusal of merger or takeover plans is the responsibility of national authorities. The European Commission can only intervene if, after the merger or takeover is complete, it considers the new company is dominating a market.