French legal reforms set to hit global M&A deals
Legal Week reports
March 08, 2006 at 07:03 PM
2 minute read
Paris corporate lawyers are scrutinising the French Government's controversial plans to introduce a wave of new M&A defence measures, as France once again finds itself accused of protectionism.
The Government is currently reviewing reforms that would allow French companies to utilise new tactics to derail hostile bids, including a version of the 'poison pill' defence, which involves companies restructuring specifically to frustrate unsolicited bids.
Under the plans, companies would be able to issue warrants that could be converted into shares at a diluted price, making it more expensive to acquire a majority shareholding.
In addition, there are moves to create so-called 'reciprocal' defences, meaning that if a bid comes from a jurisdiction that allows certain 'uncompetitive' defensive measures, then the same approach should be allowed for French firms, effectively blocking the deal.
It is believed the French market regulator – AMF – would have the final decision on whether the 'reciprocal' rules are applicable to various bids.
Lovells M&A partner Gilles de Poix told Legal Week: "There are still discussions underway and the new laws still have to go to the [French legislature]. In principle though, it could make things quite complicated for lawyers."
The proposed reforms would have a significant impact on deals such as the €18.2bn (£12.5bn) bid from India's Mittal Steel for Luxembourg-based steel giant Arcelor, which has a large French shareholding.
France has faced further criticism for protectionism in the light of the £49bn Gaz de France/Suez merger, which is regarded as an attempt to head off a foreign takeover of Suez.
Herbert Smith Paris corporate partner Jacques Buhart commented: "These sort of reforms may agitate people, but in reality, hostile bids are rather rare in France. The debate [about poison pills and reciprocal defences] is fascinating academically, but it will have less of an impact on a practical level."
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