Europe's Thirteenth Directive and U.S. Takeover Regulation: Regulatory Means and Political Economic Ends

ABSTRACT Cross-border acquisitions, especially through hostile takeovers, represent one of the most dramatic consequences of growing economic integration in Europe and the United States. Professor Ventoruzzo's article focuses on the Thirteenth Directive of the European Union on Takeover Regulation-European legislation approved in 2004 and scheduled for implementation by Member States by the end of 2006. Earlier versions of the Directive were embroiled in political controversies that generated Member State antipathy toward harmonization of European takeover law. The final version represents a significant compromise and is striking for the flexibility it grants to Member States adopting its provisions. The European regulation imposes significant restrictions on the corporate raider and the target corporation. Under the Directive, raiders may generally acquire control only through a public offer on all outstanding shares at a fixed minimum price. Directors and controlling shareholders of target companies are restricted in the defensive measures they may employ to repel a hostile bid. The Directive grants individual states significant freedom in adopting and implementing the European rules and, in this respect, the Directive will greatly affect regulatory competition in Europe. Taking as its starting point U.S. rules and assumptions regarding takeovers, the article identifies and analyzes the fundamental features of the European approach to takeovers in a comparative and critical perspective, examining the causes and possible consequences of the discrepancies between the two systems. I. INTRODUCTION Building a European Union is among the most ambitious attempts at international and transnational governance. 1 Some optimistic projections foresee a more integrated European Union as challenging U.S. dominance of the world economy and even its political hegemony in world politics. As brazen as these predictions seem-especially after apparent setbacks in the attempted passage of a European constitution2-there are signs that this prognosis may not be so far off, particularly in economic contexts. According to some indicators, the EU economy has surpassed the United States.3 Meanwhile, the size and health of the European market portends potentially greater gains for the future in relation to an over-indebted United States.4 In something of a surprise twist for many observers of corporate affairs, European multinationals dominate American corporations in numerous strategic industries,5 and European corporations are taking over American corporations at a higher rate than American corporations are reciprocating.6 Cross-border acquisitions, especially through hostile takeovers, represent one of the most dramatic consequences of the growing integration, both within Europe and when considering the economic balance of power between the U.S. and the European industries.7 Given the importance of these developments, they should have induced intense focus on the regulatory differences between U.S. and European takeover regimes.8 Today, however, the single most important piece of legislation on European takeover law has received only scant comment in American legal scholarship.9 Passage of the Thirteenth Directive of the European Union on Takeover Regulation, which was approved on April 21, 2004,10 and must be implemented by Member States before the end of 2006, is no minor event. Earlier versions were embroiled in arresting political controversies that generated significant Member State antipathy toward European regulation of the area.11 As a result, several earlier versions were rejected, causing many experts and observers to question whether any takeover directive would ever be adopted at the EU level.12 Also as a result of the political controversies, the final version of the Directive represents a significant compromise, most strikingly for the flexibility it affords Member States in adopting its various provisions. …