Hostile Takeovers 'European Merger Control & Hostile Acquisitions'
Brussels, Belgium
21 April 2005
Hosted By: Le Centre
Dr. Mark Williams, Director of European Competition Policy at NERA, spoke at the conference organized by the Brussels-based think-tank Le Centre on the interaction between Hostile Takeovers and Merger Control.
Dr. Williams began his remarks by noting that hostility could arise in various forms in transactions. Bids can be described as hostile when a raider launches an "unsolicited" bid for the target, meaning that the merger was not "agreed" with target management. Hostility can also occur when there are competitive rival bidders for the target, one of which will often be recommended, while the other is hostile. A third dimension to hostility arises when there are complainants, not necessarily from competitors or corporate customers, but from parties who are "stakeholders" in the business. Dr. Williams noted that though hostile bids traditionally been viewed as an Anglo-Saxon phenomenon, signs of hostility are increasingly emerging in Continental European matters.
Dr. Williams then discussed three aspects of hostility:
First, merger control can be used as a strategic instrument of bid defense. This has occurred in a number of UK mergers including in 1985, when Plessey successfully resisted GEC's hostile bid, which was blocked by the UK Monopolies and Mergers Commission -- though the joint bid for Plessey by GEC and Siemens was cleared by the same regulator in 1989. An antitrust defense was notably employed by Abbey National against Lloyds TSB, whose hostile bid lapsed after the UK Competition Commission found that the merger was against the public interest on competition grounds.
Second, hostility has implications for bid timetables. Whereas in an agreed merger, both merging parties will typically seek to expedite the process, in a hostile situation, one party may "play for time," in the hope that a White Knight will emerge. In competitive hostile situations, such as the Cruise mergers, the fact that bids were being scrutinized in three different jurisdictions contributed to the bid timetable being prolonged.
Third, hostility might be expected to have an impact upon the set of information and arguments that are submitted to regulators. For example, in a hostile or competitive situation, at least one affected party typically has an incentive to put into play economic and competition policy arguments that challenge the merger, and to support and document these theories with market information.
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