Germany to curb hostile takeovers

Vodafone's Mannesmann takeover would have been harder

The German cabinet is to approve a new draft law aimed at making hostile corporate takeovers more difficult.

The new law, which has been under discussion since March, allows company management more freedom in implementing defensive measures against a takeover, even if no bid has emerged.

These defensive measures include so-called "poison pills", complex legal clauses which aim to make a company far less palatable to a hostile bidder.

Schroeder: Swayed by union pressure

The German law comes only a week after the European Parliament threw out an EU-wide Takeover Directive, which would have unified takeover rules and made corporate acquisitions easier.

German opposition to the directive was the main factor behind the parliamentary vote.

Many in Germany are wary of hostile bids - a feeling heightened since Vodafone's successful takeover of German mobile firm Mannesmann last year.

Happy at home

The new law, which could take effect by the beginning of next year, should be popular in Germany.

It has been strongly supported by trade unions.

Unions enjoy considerable rights in Germany, including representation on corporate boards, and they fear that foreign acquirers may dilute those privileges.

Bolkestein: Unhappy with Germany

The German government argues that the law only bring Germany into line with other EU states, where firms are generally entitled to use a wide range of defensive measures.

But its decision to introduce a takeover law of its own, only days after helping to reject the proposal to harmonise EU legislation, will not please Brussels.

Frits Bolkestein, the European commissioner responsible for the internal market, described last week's vote as "tragic".

"Twelve years of work have been wasted," he said.