TAKEOVER REGULATION AS A WOLF IN SHEEP’S CLOTHING: TAKING U.K. RULES TO CONTINENTAL EUROPE

Aesop was an optimist. In his cautionary fable that inspired the famous admonition about wolves in sheep's clothing, the predator intentionally dons a sheep's fleece in order to sneak up on a lamb. His disguise, it turns out, is so effective that he ends up being mistaken for the real thing and killed by another wolf. According to Aesop, even the most effective fraud can turn against its perpetrator, and justice be done. The results are not always so salutary with other clandestine predators, including legal rules that appear aimed at protecting vulnerable groups, but instead provide valuable tools to be exploited by other, and more powerful, lobbies. The thesis of this Article is that some of the takeover regulations that have proven so successful at protecting minority shareholders in the U.K., and have been incorporated into European takeover regulation, may operate in Continental systems as a deceptive guise that instead ensures protection for entrenched controlling shareholders. The Article proceeds as follows. First, it offers a brief outlook on the ownership structures prevailing in continental Europe and, more precisely, in some countries used as benchmarks for the discussion, pointing out the different effects that a similar takeover regulation might have vis-a-vis more or less concentrated ownership structures. Paragraph 3 will provide some evidence concerning the adoption of mandatory bids, board neutrality and breakthrough rule in Europe, also before the Thirteenth directive, and its effect on takeover dynamics. In paragraph 4, we will take a closer look at the way in which the directive has been implemented in some countries. The thesis here is that the directive represented an occasion to tune even more the U.K. approach to the defensive needs of entrenched controlling shareholders. Paragraph 5 will discuss a case-study: the adoption of the Thirteenth directive in Italy. Italy represents an excellent test for the thesis advanced in this work, because, especially if compared with the U.K., its listed corporations have a very concentrated ownership structure and institutional investors are relatively weak and strongly related to banking institutions which might be less concerned with investors’ protection, but it complied with the British approach well before the enactment of the Thirteenth directive. Paragraph 6 will consider, with some empirical evidence, the effects on the Italian market for corporate control of the adoption of these rules. ∗ Bocconi University Law Department and Paolo Baffi Center on Central Banking and Financial Regulation, Milan, Italy. This Article has been presented at Oxford University, Oxford Law and Finance Seminar, on February 4, 2008, and at Tilburg University, Anton Philips Fund for Company Law Seminar, on November 5, 2007. The Author is grateful to seminar participants and other colleagues for comments and observations and, in particular, to John Armour, David Kershaw, Joseph McCahery, Chiara Mosca, Wolf-Georg Ringe, Mark Roe, David Skeel, Miguel Trias Sagnier and, in very special even if different ways, to Piergaetano Marchetti and Catherine Rogers.