REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Application of Directive 2004/25/EC on takeover bids
Date: 2012-06-28
Institutions: European Commission
Subjects: derogation from EU law, established right, labour law, official market, securities, shareholder, stock-exchange listing, takeover bid

EUROPEAN COMMISSION 

Brussels, 28.6.2012  
COM(2012) 347 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE 
COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE 
COMMITTEE OF THE REGIONS 

Application of Directive 2004/25/EC on takeover bids 

(Text with EEA relevance) 

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REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE 
COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE 
COMMITTEE OF THE REGIONS 

Application of Directive 2004/25/EC on takeover bids 

(Text with EEA relevance) 

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INTRODUCTION 

This  report  reviews  the  application  of  Directive  2004/25/EC1  on  takeover  bids 
(hereinafter:  "the  Takeover  Bids  Directive"  or  "the  Directive"),  in  accordance  with 
Article 20 of the Directive. 

The  Takeover  Bids  Directive  contains  minimum  guidelines  for  the  conduct  of 
takeover  bids,  including  disclosure,  involving  securities  with  voting  rights  of 
companies governed by the laws of Member States, where all or some of these shares 
are admitted to trading on a regulated market.  

The  objectives  pursued  by  the  Takeover  Bids  Directive  are  important  to  financial 
markets and stakeholders of listed companies. More specifically, the objectives of the 
Directive are:  

• 

• 

• 

• 

Legal  certainty  on  the  conduct  of  takeover  bids  and  community-wide  clarity 
and transparency in respect of takeover bids; 

Protection of the interests of shareholders, in particular minority shareholders, 
and of employees and other stakeholders through transparency and information 
rights, when a company is subject to a takeover bid or change of control; 

Facilitation of takeover bids, through reinforcement of the freedom to deal in 
and vote on securities of companies and prevention of operations which could 
frustrate a bid; 

Reinforcing  the  single  market,  by  enabling  free  movement  of  capital 
throughout the EU. 

The  Takeover  Bids  Directive  is  based  on  general  principles2,  which  should  be 
complied  with  by  Member  States  for  the  purpose  of  transposing  the  Directive.  The 
principles include: 

• 

Equal treatment of shareholders; 

Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids, 
OJ L 142/12 of 30.03.2004, p.38. Available at: 
htp://ec.europa.eu/internal_market/company/official/index_en.htm 
See Article 3 of the Directive. 

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• 

• 

• 

Protection of minority shareholders in case of change of control; 

Prohibition of market manipulation or abuse; and 

Shareholders  must  have  sufficient  time  and  information  to  make  a  properly 
informed decision on the bid. 

Any  exemptions  made  by  Member  States  to  the  rules  of  the  Directive  must  still 
comply with these principles, as well as the other principles listed therein. 

This report describes the impact of the Takeover Bids Directive and how it has been 
complied with (section 2); identifies the main issues emerging from the application 
of the Directive (section 3) and draws a number of conclusions (section 4).  

IMPACT OF AND COMPLIANCE WITH THE TAKEOVER BIDS DIRECTIVE  

The External Study on the application of the Takeover Bids Directive conducted on 
behalf  of  the  Commission  (hereinafter  "the  External  Study")3  considers  that  the 
Takeover Bids Directive has not led to major changes in the legal framework of the 
Member States included in the study4, because similar rules already existed or were 
in the making at national level prior to the adoption of the Directive. 

With  regard  to  the  transposition  of  the  optional  provisions  of  the  Takeover  Bids 
Directive,  the  External  Study,  the  2007  Commission  Staff  Report  on  the 
implementation of the Directive5 and further research conducted by the Commission 
show that 196 Member States have transposed the board neutrality rule7, while only 
three  Member  States8  have  transposed  the  breakthrough  rule9.  In  accordance  with 
article  12  (3)  of  the  Directive,  about  half  of  the  Member  States10  allow  companies 
who  are  subject  to  the  board  neutrality  rule  and/or  breakthrough  rule  (by  law  or 
based on the articles of association of the company) not to apply the rule when they 
are confronted with a takeover bid by an offeror who is not subject to the same rule 
(reciprocity).  

of 

on 

bids. 

Directive 

Available 

2004/25/EC 

Marccus Partners, in cooperation with the Centre for European Policy Studies (June 2012), Study on the 
application 
at: 
takeover 
http://ec.europa.eu/internal_market/company/takeoverbids/index_en.htm 
Austria, Belgium, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, 
Hungary,  Ireland,  Italy,  Luxembourg,  the  Netherlands,  Poland,  Portugal,  Romania,  the  Slovak 
Republic, Spain, Sweden and the United Kingdom 
Commission  Staff  Working  Document.  Report  on  the  Implementation  of  the  Directive  on  Takeover 
Bids, 21 February 2007, SEC(2007) 268.  
Austria, Bulgaria, Cyprus, the Czech Republic, Estonia, Finland, France, Greece, Ireland, Italy, Latvia, 
Lithuania, Malta, Portugal, Romania, Slovenia, the Slovak Republic, Spain and the United Kingdom  
The board neutrality rule (Article 9 of the Directive) provides that during the bid period the board of the 
offeree company must obtain prior authorisation from the general meeting of shareholder before taking 
any action which might result in the frustration of the bid. 
Estonia, Latvia and Lithuania 
The breakthrough rule (Article  11 of  the Directive)  neutralises  pre-bid  defences during  a  takeover by 
making  certain  restrictions  (e.g.  share  transfer  or  voting  restrictions)  inoperable  during  the  takeover 
period  and  allows  a  successful  offeror  to  remove  the  incumbent  board  of  the  offeree  company  and 
modify its articles of association.  
Belgium, Denmark, France, Germany, Greece, Hungary, Italy, Luxembourg, the Netherlands, Poland, 
Portugal, Slovenia and Spain 

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8. 

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With  regard  to  the  application  of  the  legal  framework  in  the  Member  States,  no 
structural compliance issue has emerged.  

The  External  Study  considers  that  the  Takeover  Bids  Directive  has  contributed  to 
improvements  in  relation  to  its  objectives,  for  instance  through  the  introduction  of 
coordination  rules  for  supervisors  with  regard  to  cross  border  offers,  general 
principles of the directive, disclosure rules, the mandatory bid rule and squeeze-out 
and sell-out rights.  

Stakeholders  who  participated  in  the  perception  survey,  conducted  for  the 
preparation of the External Study, consider the Takeover Bids Directive to be useful 
for  the  proper  and  efficient  functioning  of  the  market.  Stakeholders  are  generally 
satisfied  with  the  clarity  of  the  rules  included  in  the  Directive  and  the  adequacy  of 
their enforcement. Stakeholders generally believe that the Directive has strengthened 
the  position  of  minority  shareholders  and  are  positive  about  the  disclosure  regime, 
the  mandatory  bid  rule  and  the  squeeze-out  and  sell-out  rights  included  in  the 
Directive.  Representatives  of  employees,  consulted  through  the  perception  survey, 
are however less satisfied with the Directive. In particular, they expressed the view 
that the Directive does not sufficiently protect employees against the risk of change 
in working conditions or redundancies after the takeover.  

With  regard  to  the  optional  provisions  of  the  Takeover  Bids  Directive,  which 
regulate the use of defensive measures, stakeholders appear to believe that they had 
little  effect.  For  instance,  the  External  Study  shows  that  stakeholders  perceive  that 
the  Directive  did  not  have  a  significant  effect  on  the  number  of  bids  and  that, 
notwithstanding  the  existence  of  the  Directive,  a  high  number  of  mostly  pre-bid 
defences  is  used  in  Europe.  However,  they  also  expressed  the  view  that  there  are 
sufficient  possibilities  to  break  through  defences  even  though  most  Member  States 
have not transposed the breakthrough rule.  

It is difficult to calculate the impact of the Takeover Bids Directive on the economy, 
mainly because there have been few takeover bids in the EU since the transposition 
of  the  Directive11,  due  to  the  economic  situation  in  the  EU  following  the  financial 
crisis12.  Moreover,  the  minimum  harmonisation  character  of  the  Directive,  together 
with the optional character of the articles with regard to defensive measures and the 
possibility in article 4 (5) of the Directive, for Member States to derogate from the 
rules  of  the  Directive  has  led  to  a  wide  variety  of  national  rules  in  the  field  of 
takeover bids.  

More  generally,  economic  analysis13  shows  that  although  takeover  bids  promote 
economic  efficiency  in  theory,  this  is  not  always  the  case  in  practice  because  the 
conditions of  rational behaviour,  fully  informed  market  participants  and  absence  of 
transaction  costs  are  not  always  met  (e.g.  takeover  bids  might  be  made  for  empire 
building  purposes  and  shareholders  might  face  incomplete  information,  high 
transaction  costs  and  pressure  to  tender).  Moreover,  some  provisions  of  the 
Directive,  e.g.  the  board  neutrality  rule,  the  breakthrough  rule  and  the  squeeze-out 

11 
12 
13 

Except a 'peak' in takeovers in 2007, see figure 2 in the Annex. 
See Figures 1 and 2 in the Annex to this Report.  
See Chapter 4 of the External Study. 

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right, facilitate takeover bids, while others, e.g. the mandatory bid rule, may serve as 
a deterrent to takeover bids14.  

A  comparison  with  third  countries15  shows  that  takeover  bid  legislation  in  those 
countries is based on similar principles to those in the Takeover Bids Directive. An 
exception  is  the  principle  of  protection  of  employees  through  information  rights, 
which is in general not present in the third countries investigated. The duration of a 
takeover bid and the information that needs to be provided is also similar in the EU 
and  in  third  countries.  Most  investigated  third  countries,  except  the  United  States, 
have  a  mandatory  bid  rule  or  a  similar  rule  in  their  legislation,  under  which  the 
control threshold is usually around 30% or one third, which is also similar to the EU 
(the  Takeover  Bids  Directive  leaves  it  to  Member  States  to  define  the  control 
threshold,  but  most  Member  States  have  chosen  30%  or  one  third).  With  regard  to 
defensive measures, the comparison shows that they are used in all investigated third 
countries,  and  that  most  of  these  countries  (except  the  United  States)  have  an 
equivalent  to  the  board  neutrality  rule.  However,  there  is  no  equivalent  to  the 
breakthrough rule included in the legislation of any investigated third country. With 
regard  to  squeeze-out  and  sell-out  rights,  a  limited  number  of  investigated  third 
countries do not have such rules. However, there are other mechanisms present that 
have  similar  effects  (e.g.  callable  shares  in  Japan  and  compulsory  acquisitions  in 
Australia  and  cash  mergers  in  Switzerland).  Some  third  countries  also  offer  the 
possibility  to  obtain  full  ownership  of  a  company  through  the  use  of  schemes  of 
arrangement. 

Article 20 of the Takeover Bids Directive instructs the Commission to include in its 
examination of the Directive a survey of control structures and barriers to takeover 
bids that are not covered by the Directive. The External Study investigated pyramid 
structures16  and  cross-shareholdings,  which  are  not  covered  by  the  Takeover  Bids 
Directive. It finds that 18,1% of listed companies in the Member States included in 
the  study  have  pyramid  structures,  while  3,5%  have  cross-shareholdings17.  This  is 
consistent  with  the  fact  that  EU  continental  shareholding  structures  are  to  a  large 
extent based on block holding. It concludes that, although pyramid structures remain 
a  popular  mechanism  to  retain  control  of  a  company  with  less  capital,  both 
mechanisms  are  considered  weak  defences  against  takeovers.  The  External  Study 
also  considers  that  other  possible  barriers  to  takeovers,  such  as  sector-specific 
regulations,  public  funds,  co-determination  procedures  and  employee  share 
ownership do not create strong or unjustified obstacles18.  

THE REVIEW OF THE OPERATION OF THE DIRECTIVE: EMERGING ISSUES 

A  number  of  issues  emerge  from  the  review  of  the  operation  of  the  Takeover  Bids 
Directive. 

See Figure 3 in the Annex to this Report. 
The External Study includes the following third countries: Australia, Canada, China, Hong Kong, India, 
Japan, Russia, Switzerland and the United States. 
Pyramid structures are structures where an entity holds a controlling stake in a company, which holds a 
controlling stake in another company, which holds a controlling stake in another company, and so on. 
See Figure 4 in the Annex to this Report. 
See page 48 and 267 of the External Study. 

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16. 

Firstly,  there  is  some  concern  about  the  legal  certainty  of  the  concept  of  "acting  in 
concert" and its application by national regulators. The concept of "acting in concert" 
is  relevant  for  calculating  whether  the  control  threshold  has  been  crossed  and, 
consequently, whether an obligation to launch a mandatory bid has arisen. Article 2 
(1) (d) of the Takeover Bids Directive defines "acting in concert" as:  

"natural or legal persons who cooperate with the offeror or the offeree company on 
the basis of an agreement, either express or tacit, either oral or written, aimed either 
at acquiring control of the offeree company or at frustrating the successful outcome 
of a bid".  

Member States have transposed the definition in different ways. For instance, some 
Member  States19  stay  close  to  the  definition  given  in  the  Takeover  Bids  Directive, 
while others20 have included elements of the definition of "acting in concert" given in 
the  Transparency  Directive21.  Moreover,  the  concept  of  "acting  in  concert"  is  also 
included in the Acquisitions Directive22. The broad definition of the term, included in 
the Acquisitions Directive's level 3 guidance,23 is however not used by regulators in 
connection with takeover bids. To mitigate uncertainty around the application of the 
concept  of  "acting  in  concert"  some  national  regulators24  have  issued  interpretative 
guidelines or presumptions. However, the content of these guidelines is not the same. 
The existence of different definitions and interpretations on national level is a source 
of uncertainty for international investors who wish to cooperate with each other and 
might  have  a  limiting  effect  on  their  willingness  to  engage  actively  with  investee 
companies. This is confirmed by respondents to the Commission Green Paper on the 
EU  Corporate  Framework25  who  expressed  the  view  that  there  is  a  need  to  clarify 
existing provisions on "acting in concert"26. 

17. 

Secondly, the wide range of national derogations to the mandatory bid rule raises the 
question  as  to  whether  the  mandatory  bid  rule  adequately  protects  minority 
shareholders  in  situations  of  change  of  control.  Article  4  (5)  of  the  Takeover  Bids 
Directive allows Member States to make derogations from the rules of the Directive 
by providing that: 

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24 
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E.g.  Austria,  Cyprus,  Denmark,  Italy,  Hungary,  Ireland,  Luxembourg,  the  Netherlands,  the  Slovak 
Republic and the United Kingdom  
E.g. Belgium, Finland, France, Germany, Poland, Portugal, Romania, Spain and Sweden 
Directive  2004/109/EC  of  the  European  Parliament  and  the  Council  on  the  harmonisation  of 
transparency  requirements  with  regard  to  information  about  issuers  whose  securities  are  admitted  to 
trading  on  a  regulated  market.  Article  10  (a)  of  the  Directive  defines  "acting  in  concert"  as:  "a  third 
party  with  whom  that  person  or  entity  has  concluded  an  agreement,  which  obliges  them  to  adopt,  by 
concerted exercise of the voting rights they hold, lasting common policy towards the management of the 
issuer in question". 
Directive  2007/44/EC  of  the  European  Parliament  and  the  Council  as  regards  procedural  rules  and 
evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial 
sector 
Level  3  guidance  to  the  Acquisitions  Directive  considers  persons  "acting  in  concert"  when:  "each  of 
them decides to exercise his rights linked to the shares he acquires in accordance with an explicit or 
implicit agreement made between them".  
E.g. Italy and the United Kingdom 
Green  Paper  on  the  EU  Corporate  Governance  Framework,  4  April  2011,  COM  (2011)  164  final. 
Available at: http://ec.europa.eu/internal_market/company/docs/modern/com2011-164_en.pdf#page=2  
See: Feedback Statement, Summary of Responses to the Green Paper on the EU Corporate Governance 
Framework.  Available 
http://ec.europa.eu/internal_market/company/docs/modern/20111115-
feedback-statement_en.pdf 

at: 

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"Provided that the general principles laid down in Article 3(1) are respected, Member 
States may provide in the rules that they make or introduce pursuant to this Directive 
for derogations from those rules: 

i.  by  including  such  derogations  in  their  national  rules,  in  order  to  take  account  of 
circumstances determined at national level and/or 

ii.  by  granting  their  supervisory  authorities,  where  they  are  competent,  powers  to 
waive such national rules, to take account of the circumstances referred to in (i) or in 
other specific circumstances, in which case a reasoned decision must be required. 

All  Member  States  included  in  the  External  Study  have  made  derogations  to  the 
mandatory bid rule. Derogations can be divided into a number of categories27: 

• 

Discretionary  power  of  the  national  supervisory  authority  to  grant  an 
exemption. Only a few Member States28 have used this possibility;  

•  Whitewash procedures where shareholders may decide to waive the obligation 

to launch a mandatory bid; 

• 

• 

• 

• 

• 

Technical  derogations,  such  as  a  derogation  for  open-ended  collective 
investment  schemes  (which  are  outside the  scope  of  the  Directive),  which  do 
not limit the scope of application of the mandatory bid rule as foreseen by the 
Directive;  

Situations  where  there  is  no  real  change  of  control,  for  instance  when  the 
change  of  control  is  temporary  or  the  acquisition  has  taken  place  within  the 
same  company  group  or  "acting  in  concert"  group.  These  derogations  do  not 
affect  the  objective  of  the  directive  to  protect  minority  shareholders  in 
situations of change of control;  

To  protect  the  interests  of  the  offeror  or  the  controlling  shareholder,  for 
instance  when  the  change  of  control  was  not  caused  by  a  voluntary  act,  the 
acquisition was indirect, or followed a personal event, such as inheritance;  

To  protect  the  interests  of  a  creditor,  for  instance  in  situations  where  the 
acquisition is the consequence of an exercise of financial security by a creditor; 

To protect the interests of other stakeholders, for instance when an investor is 
in  financial  distress,  when  control  is  acquired  through  a  specific  type  of 
corporate  transaction,  such  as  a  merger  or  scheme  of  arrangement,  or  when 
control is acquired following a sale of securities by the state. 

Within the range of different national derogations to the mandatory bid rule, it is not 
always clear how the protection of minority shareholders is ensured. As follows from 

27 

28 

For  a  table  of  different  derogations  to  the  mandatory  bid  rule  and  in  which  Member  States  they  are 
available, see p. 152 of the External Study. This report summarises the most common derogations and 
arranges them in categories. 
Finland,  Ireland  and  the  United  Kingdom.  In  Germany,  Bafin  has  a  limited  discretionary  power  to 
waive a mandatory bid, while in France the Court of Appeal upheld a decision from the AMF to grant 
an exemption.  

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18. 

19. 

Article 4 (5) of the Directive Member States who provide for derogations from the 
rules of the Directive, must respect the general principles of the Directive. One of the 
general principles is that, if a person acquires control of a company, the other holders 
of securities must be protected (Article 3 (a) of the Directive). The Directive does not 
regulate  how  Member  States  should  ensure  that  the  general  principles  of  the 
Directive are respected.  

Thirdly, Article 5 (2) of the Takeover Bids Directive regulates that where control has 
been  acquired  following  a  voluntary  bid  to  all  the  holders  of  securities  for  all  their 
holdings, the obligation to launch a mandatory bid no longer applies. It has come to 
the attention of the Commission that this exemption can be used by offerors to avoid 
having  to  launch  a  mandatory  bid  for  an  equitable  price.  The  advantage  for  the 
offeror  is  that  the  Directive  does  not  regulate  the  price  of  a  voluntary  bid.  The 
exemption for situations where control has been acquired following a voluntary bid 
assumes  that  the  offer  price  was  high  enough  to  persuade  a  significant  part  of  the 
shareholders  to  accept  the  offer,  otherwise  the  offeror  would  not  have  acquired 
control through the bid. However, if the offeror already holds an interest very close 
to  the  control  threshold,  only  a  few  shareholders  need  to  offer  their  shares  for  the 
offeror to cross the control threshold. Therefore, even if the offeror offers a very low 
price,  he  is  likely  to  acquire  control  through  the  voluntary  bid  and  thus  is  able  to 
make  use  of  the  exemption  to  the  mandatory  bid  rule.  In  this  case,  minority 
shareholders  are  unable  to  share  in  the  control  premium.  However,  in  a  number  of 
Member States this route is unavailable because national law provides that the offer 
must be subject to the condition that the offeror acquires a minimum percentage of 
the shares29 or subsequent acquisitions of shares will trigger a mandatory bid30.  

It has also been argued that offerors can acquire a controlling stake without having to 
launch  a  mandatory  bid  by  keeping  their  participation  just  below  the  control 
threshold,  while  de  facto  they  are  able  to  control  the  company,  or  by  acquiring  a 
derivative position31.  

Fourthly, with regard to the optional articles of the Takeover Bids Directive, it could 
be  concluded  that,  although  the  board  neutrality  rule  is  a  relative  success32,  the 
breakthrough rule was not so successful, given that only three Member States have 
transposed  it.  At  the  moment  of  adoption  of  the  Directive,  the  idea  was  that 
shareholders  might  push  for  the  optional  provisions  to  be  applied  voluntarily  by 
companies,  where  Member  States  chose  not  to  transpose  them.  However,  this 
appears not to have been the case. It could therefore be considered that the Directive 
is not very effective in regulating the use of defensive measures. This is confirmed 
by  stakeholders.  However,  they  have  also  indicated  that  there  are,  notwithstanding 
the  lack  of  transposition  of  the  breakthrough  rule,  sufficient  possibilities  to  break 
through takeover defences (see paragraph 11 of this report).  

29 

30 

31 

32 

For instance in the United Kingdom, the offer must be subject to the condition that the offeror acquires 
at least 50% of the shares. 
For an overview of national provisions defining when subsequent acquisitions trigger a mandatory bid 
obligation, see p. 130 of the External Study. 
The proposal for modification of the Transparency Directive already includes mandatory disclosure of 
derivative  positions.  See:  http://ec.europa.eu/internal_market/securities/docs/transparency/modifying-
proposal/20111025-provisional-proposal_en.pdf  
See paragraph 7 of this Report. 

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20. 

4. 

21. 

22. 

23. 

Fifthly, the Takeover Bids Directive requires that representatives of employees of the 
offeree company and the offeror must be informed in detail in the event of a takeover 
bid33.  The  information  provided  to  employee  representatives  should  include  a 
statement  of  the  offeror's  intentions  as  regards  the  future  business  of  the  offeree 
company  and  the  offeror  with  a  view  to  repercussions  on  employment  and 
employment  conditions34  and  a  statement  of  the  view  of  the  board  of  the  offeree 
company  on  the  offer  and  its  likely  repercussions  on  employment35.  The  External 
study  shows  that  representatives  of  employees  are  not  satisfied  with  how  the 
Directive  safeguards  the  interests  of  employees.  They  mention  that  the  required 
information  is  not  always  given  in  time,  or  is  inadequate,  and  that  takeover  offers 
have a significant  impact on working conditions and redundancies. Moreover, after 
the  bid,  they  claim  that  there  is  no  control  over  whether  the  offeror  will  do  as  he 
stated  in  the  information  disclosed  in  the  offer  procedure.  This  is  however  not 
regulated by the Directive.  

CONCLUSIONS 

This  review  of  the  operation  of  the  Takeover  Bids  Directive  shows  that,  generally, 
the regime created by the Directive is working satisfactory. No structural compliance 
issues  have  emerged  in  relation  to  the  application  of  the  legal  framework  in  the 
Member  States.  Stakeholders  are  generally  satisfied  with  the  clarity  of  the  rules 
included  in  the  Directive  and  the  adequacy  of  their  enforcement  and  consider  the 
Directive  be  useful  for  the  proper  and  efficient  functioning  of  the  market.  The 
External  Study  considers  that  the  Takeover  Bids  Directive  has  contributed  to 
improvements in relation to its objectives.  

Nevertheless,  there  are  areas  where  the  rules  of  the  Takeover  Bids  Directive  could 
merit some clarification in order to improve legal certainty for the parties concerned 
and the effective exercise of (minority) shareholder rights.  

Firstly, the concept of "acting in concert" could be clarified on EU level, in order 
to  provide  more  legal  certainty  to  international  investors  as  to  the  extent  to  which 
they can cooperate with each other without being regarded as "acting in concert" and 
running  the  risk  of  having  to  launch  a  mandatory  bid.  Clarification  could,  for 
instance, be provided through the development of guidelines, from the Commission 
and/or  ESMA.  Such  clarification  would  give  greater  opportunity  to  shareholders  to 
hold  boards  accountable  for  their  actions  and  promote  good  corporate  governance 
standards  in  listed  companies  in  the  EU.  However  it  should  not  limit  the  ability  of 
competent  authorities  to  oblige  control  seeking  concert  parties  to  accept  the  legal 
consequences of their concerted action. Possible initiatives in this area would be in 
line  with  the  goals  of  the  Commission's  Green  Paper  on  the  EU  Corporate 
Governance Framework and its Communication "Towards a Single Market Act"36 to 
promote  longer  term,  sustainable  ownership  to  the  benefit  of  sustainable  growth  of 

33 
34 
35 
36 

See Articles 6 (1), 6 (2) and 8 (2) of the Directive.  
See Article 6 (3) (i) of the Directive. 
See Article 9 (5) of the Directive. 
Communication  "Towards  a  Single  Market  Act",  April  2011,  COM(2011)  206  final.  Available  at: 
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0206:FIN:EN:PDF  

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24. 

25. 

26. 

the European market. The Commission intends to announce what measures it intends 
to take in this area in October 2012.  

Secondly, the review shows that there is a wide variety of national derogations to 
the mandatory bid rule and that it is not always clear how the general principle of 
the directive, which requires the protection of minority shareholders in situations of 
change of control, is respected when a national derogation applies. As a possible way 
forward, the Commission intends to carry out further investigation on how minority 
shareholders  are  protected  when  a  national  derogation  to  the  mandatory  bid  rule 
applies.  More  information  is  indeed  needed  on  the  scope  of  application  of  national 
derogations  to  the  mandatory  bid  rule,  on  the  extent  to  which  national  derogations 
limit the protection of minority shareholders in situations of change of control and, 
when relevant, what alternative mechanisms exist in national law to protect minority 
shareholders  in  situations  of  change  of  control.  If,  following  the  investigation,  the 
protection  of  minority  shareholders  proves  to  be  inadequate,  the  Commission  will 
take  the  necessary  steps  (e.g  through  infringement  procedures)  to  restore  the 
effective application of this general principle of the Directive. 

Thirdly, the review shows that the exemption to the mandatory bid rule included in 
the  Takeover  Bids  Directive,  for  situations  where  control  has  been  acquired 
following a voluntary bid for all shares of the company, has created a possibility 
for  offerors  to  get  round  the  mandatory  bid  rule  by  acquiring  a  stake  close  to  the 
mandatory  bid  threshold  and  then  launching  a  voluntary  bid  for  a  low  price.  As  a 
consequence,  the  offeror  would  cross  the  mandatory  bid  threshold  without  giving 
minority  shareholders  a  fair  chance  to  exit  the  company  and  share  in  the  control 
premium. This technique is clearly not in line with the objective of the Directive to 
protect minority shareholders in situations of change of control, although it does not 
appear to breach the letter of the Directive37. Examples in national legislation, such 
as  additional  mandatory  bid  thresholds38  or  minimum  acceptance  conditions  to 
takeover  offers39,  show  that  there  are  possibilities  to  prevent  the  use  of  this 
technique. The Commission will take the appropriate steps to discourage the use of 
this  technique  across  the  EU,  such  as  through  bilateral  discussions  with  the 
concerned Member States or Commission Recommendations. 

Fourthly,  with  regard  to  the  optional  Articles  9  and  11  of  the  Takeover  Bids 
Directive  the  review  shows  that  although  the  board  neutrality  rule  (Article  9)  is 
transposed by a relatively large number of the Member States, this is not the case for 
the breakthrough rule (Article 11)40. However, the lack of application of the optional 
rules does not seem to have been a major obstacle to takeover bids in the EU, given 
that stakeholders have indicated that there are sufficient possibilities to break through 
takeover  defences.  In  light  of  this  and  considering  also  the  lack  of  economic 
evidence  available  to  justify  changing  the  situation,  it  does  not,  therefore,  seem 
appropriate  at  this  stage  to  propose  to  make  the  optional  articles  of  the  Directive 
mandatory.  

37 

38 
39 
40 

See article 5, paragraph 2, of the Directive, which explicitly exempts acquisitions following a voluntary 
bid for all shares of the company from the mandatory bid rule.  
See p. 130 of the External Study for an overview of additional thresholds. 
See p. 146 of the External study. 
See paragraph 7 of this Report. 

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27. 

Finally, employee representatives have indicated that they are not satisfied with how 
the Takeover Bids Directive protects the rights of employees in a takeover situation, 
in  particular  with  respect  to  the  risk  of  changes  in  work  conditions  and  job 
availability. The Commission will pursue its dialogue with employee representatives 
with a view to exploring possible future improvements. It will also investigate further 
the experience gained in practice with the provisions of the Directive which require 
disclosure  of  the  offeror's  intentions  as  regards  the  future  business  of  the  company 
and its employment conditions and the view of the offeree company's board on this, 
as  well  as  disclosure  of  information  concerning  the  financing  of  the  bid  and  the 
identity of the offeror41.  

28. 

Member  States,  the  European  Parliament,  the  European  Economic  and  Social 
Committee  and  other  interested  parties  are  invited  to  submit  their  views  on  the 
review described in this Report.  

41 

See  article  3  paragraph  1  (b),  article  6,  paragraph  3  (i),  (l)  and  (m)  and  article  9  paragraph  5  of  the 
Directive.  

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ANNEX TO THE REPORT FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Application of Directive 2004/25/EC on takeover bids 

Figure 1: Evolution of takeovers in Europe 

Source: External Study, p. 284 

Figure 2: Number of Intra-EU Takeover Deals 2003-2010 

Source: External Study, p. 285 

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Figure 3: Impact of takeover regulation (+ relationship and intensity) 

Source: External Study, p.29 

Figure  4:  Barriers  to  takeovers  not  covered  by  the  Takeover  Bids  Directive.  Percentage  of 
companies that have pyramid structures or cross-shareholdings.  

Source: External Study, p. 48 

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