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Government pushing new anti-takeover rules, aligning to other countries

by Carmine Fotina

Italy’s competition law could be resurrected in a surprise move: a “defensive” measure against hostile takeovers. The government intends to approve the piece of legislation to ensure total transparency in investment strategies in Italian companies, aligning the country’s regulation with stricter systems adopted by other large economies.

Stock market regulator Consob would have more powers, while some technical issues would be addressed in a separate measure.

The government is ironing out the details. One option is to present an amendment to the troubled competition bill which, after a parliamentary odyssey of 20 months, will return to the Senate after February 21.

If the process takes longer, alternative solutions could be considered to accelerate approval.
The proposal, which was prepared by Economic Development Minister Carlo Calenda, was refined by government experts and shared by Consob.

Under the proposal, an additional mandatory disclosure would be required from shareholders reaching certain ownership thresholds – 5%, 10%, 15%, 20% and probably 25%. Investors would have to inform Consob about their goals over a specific period of time (6 to 12 months), declare how they intend to fund the transaction, whether they are acting in partnership with other investors, aim to take control of the company, and intend to appoint one or more board members. They would also need to update the information if the strategy changes in the short term.

France’s regulation, preferred to the American system, requires the same level of disclosure but includes the mandatory communication of any agreements regarding the temporary sale of shares or voting rights. The government is looking to France, calling for full reciprocity.

“No more cases like Vivendi,” government officials say, referring to the French media group’s stake-building in Italian broadcaster Mediaset. The government has criticized Vivendi’s move as “opaque,” with scarce or no information on the effective reasons behind the investment.

Had this happened in France, investors would have faced stricter transparency requirements.

“We cannot afford in the future to see foreign financial investments aimed to block the governance of a strategic company,” officials say.

Prime Minister Paolo Gentiloni calls these transactions “incursions,” Minister Calenda calls them “raids,” but the meaning is the same.

The amendment would give more powers to Consob (it’s still unclear whether it could issue sanctions) but not have a retroactive effect on Vivendi’s case.

But, while important financial moves are made when the government is seen as weaker, the measure would affect the future of other important systemic companies like insurer Generali and telecoms group Telecom Italia, often seen as a possible takeover target of French groups such as Axa and Orange.

The new regulation would not pose vetoes, let alone selective choices, but would force all players to lay their cards on the table. The government hopes to have the bill approved by the lower house by March.


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