Takeovers Regulation in Italy: Empirical Analysis and Recent Developments

Takeovers Regulation in Italy: Empirical Analysis and Recent Developments

Marco VentoruzzoBocconi University

Takeovers Regulation in Italy: Empirical Analysis and Recent Developments

• Overview of Recent Developments– Mandatory Bids (Art. 106 TUF)– Board Neutrality (Art. 104 TUF)– Breakthrough Rule (Art. 104-bis TUF)

• Empirical Analysis (1998-2008)

• Assessment of the New Regulatory Framework

1998 T.U.F. 2007 XIII directive

full voting shares

limited voting shares

30%

full voting shares

limited voting shares

30%

(shares voting on a/r of directors)

Cost of the Mandatory Tender Offer: Number of Shares

Minimum Price of the Mandatory Tender Offer: e.g., Takeover of Edison by EDF (October 2005)

P(hp)2.18

P(mm)1.86

P(ma)1.53

P

outstanding full-voting shares(1.303.010.879)

~ 417 mil. euroP(to)

Q

69%

31%

Average Market Price and Maximum Price Paid

P(hp) > P(ma) P(hp) < P(ma)Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)

Board Neutrality and Breakthrough Rules

1998 TUF2007 TUF

(implementation of XIII directive)

2008 TUF (anti-crisis decree)

Board neutrality Mandatory Mandatory, subject to reciprocity

Optional, subject to reciprocity

BreakthroughOnly for some shareholders’ agreements (art. 123 TUF)

Mandatory, subject to reciprocity (except some shareholders’ agreements)

Optional, subject to reciprocity (except some shareholders’ agreements)

Mandatory board neutrality

Mandatory breakthrough Reciprocity

Austria yes no no

Belgium yes no yes

Czech Republic yes no yes

Denmark no no yes

Finland no no no

France yes mixed yes

Germany no no yes

Grece yes no yes

Italy no no (yes 123 TUF) yes

Netherlands no no yes

Poland no no no

Portugal yes no yes

Spain yes no yes

Sweeden yes no no

United Kingdom yes no no

Source: Maul, Muffat-Jeandet, Simon (2008), Italy updated

Takeovers Regulation in Italy: Empirical Analysis and Recent Developments

• Overview of Recent Developments– Mandatory Bids (Art. 106 TUF)– Board Neutrality (Art. 104 TUF)– Breakthrough Rule (Art. 104-bis TUF)

• Empirical Analysis (1998-2008)

• Assessment of the New Regulatory Framework

voluntary mandatory (106 §§ 1, 3)0

20

40

60

80

100

120

97

77

Number of Tender Offers on Shares In Italy (1998-2008)

Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008) & Malberti (2008)

voluntary mandatory (106 §§ 1, 3)0

20

40

60

80

100

120

Number of Tender Offers on Shares in Italy(1998-2008)

hostile (5)

Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008) & Malberti (2008)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080

10000

20000

30000

40000

50000

60000

70000

0

5

10

15

20

25

30

35

40

45

50

Mandatory Tender Offers in Italy and M&As in Europe

EU (left scale) Italy (right scale)Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)

35%

28%

37%

Target per Industry

financial manufacturing servicesSource: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)

52%

10%

17%

21%

Bidder per Industry

financial manufacturing services newcoSource: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)

56%

44%

Industry of Bidder versus Industry of Target

same industry different industrySource: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)

CS < 30% 30% ≤ CS < 50% CS ≥ 50%0

5

10

15

20

25

30

35

40

45

15

21

41

1

68

Target’s Ownership Structure Before Triggering Event

all cases shareholders' agreementSource: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)

24.67%

75.33%

Target’s Ownership Structure Before Mandatory Offer (and after triggering event)

30% < CS-bidder < 50% CS-bidder ≥ 50%Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)

75; 96%

3; 4%

Revised Offer at Higher Price

no better offer better offer

+ 9%

+ 0.085%

+ 1.45%

Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)

87%

4%3% 3% 3%

Bidder’s nationality

Italy Luxemburg Netherlands France Germany

Bidder listed corporation

Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)

P(hp)

P(mm)

P(ma)

P

P(to)

t

Price of the Tender Offer

P(to) < P(mm) P(to) = P(mm) P(to) > P(mm)0%

10%

20%

30%

40%

50%

60%

3%

44%

53%

Price of the Mandatory Tender Offer

Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)

0 10 20 30 40 50 60

51.98

46.13

48.14

37.91

18.26

Average Controlling Shareholder (%)

U.K. Spain Italy Germany France

Source: Van der Elst (2004)

Takeovers Regulation in Italy: Empirical Analysis and Recent Developments

• Overview of Recent Developments– Mandatory Bids (Art. 106 TUF)– Board Neutrality (Art. 104 TUF)– Breakthrough Rule (Art. 104-bis TUF)

• Empirical Analysis (1998-2008)

• Assessment of the New Regulatory Framework

• 1998 TUF– Protecting Minorities in Friendly Takeovers, Compromise

with Excessive Cost of Takeover;– Acknowledging and Addressing Conflict of Interests in the

Adoption of Defensive Measures;– Harmonizing Regulatory Framework

• 2008 TUF– Takeovers Potentially More Expensive for Bidders;– Abolition of Mandatory Board Neutrality and Breakthrough

1990 1998 2003 20050%

10%

20%

30%

40%

50%

60%55%

47%45% 45%

17%14%

17% 18%

28%39% 38% 38%

Evolution of Ownership Structure of Italian Listed Corporations (1990 – 2005)

Largest shareholder Other relevant shareholders Dispersed ownership

Source: Bianchi, Bianco (2006)