Legislation was recently approved by the Cabinet of German Chancellor Angela Merkel, making stealth takeovers more difficult to pull off. One of the recent takeovers that this law would have been able to prevent was Porsche SE’s 2008 acquisition of shares in Volkswagen AG.
This law, which took two years to be approved, seeks to plug gaps in disclosure rules for stock options including swaps held by investors to build a position in companies. This provision helped Porsche’s bid to build a majority stake in Volkswagen as well as an attempt by Schaeffler Group to control tiremaker Continental AG.
These two bids later failed. German finance-industry groups, including the BVAI Alternative Investment Federation, said that this government measure won’t necessarily obstruct takeovers but it will increase transparency and aid investment strategies.
A copy of the draft bill shows that presently, disclosure applies only to common shares. In an interview, Frank Dornseifer, Bonn-based BVAI’s managing director, said, “It’s hard to argue against the basic logic of the legislation.”
He said that with rules widening, the insight for all market players are “amplifie[d]” and it doesn’t only involve executives at companies whose shares are “being bought invisibly.”
Since March 2008, Herzogenaurach-based Schaeffler has been gathering a position in Continental through equity swaps. When the stock plunged close to a three-year low in July of 2008, Schaeffler made a bid that Europe’s second-largest carparts maker was unable to ward off.
Then the financial crisis happened, burying Schaeffler in debt as it was stuck with more shares than it meant to purchase. [via Bloomberg]