Takeovers Regulation in Italy:
Empirical Analysis and Recent Developments
Marco Ventoruzzo
Bocconi 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
Cost of the Mandatory Tender Offer:
Number of Shares
30%
full voting shares
limited voting shares
30%
full voting shares
(shares voting on a/r of directors)
limited voting shares
Minimum Price of the Mandatory Tender Offer:
e.g., Takeover of Edison by EDF (October 2005)
P
P(hp)
2.18
P(mm)
1.86
P(to)
P(ma)
1.53
outstanding
full-voting shares
(1.303.010.879)
Q
Average Market Price and Maximum Price Paid
31%
69%
P(hp) > P(ma)
P(hp) < P(ma)
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)
Board Neutrality and Breakthrough Rules
2007 TUF
(implementation of
XIII directive)
2008 TUF
(anti-crisis decree)
Mandatory
Mandatory, subject
to reciprocity
Optional, subject to
reciprocity
Only for some
shareholders’
agreements (art.
123 TUF)
Mandatory, subject
to reciprocity
(except some
shareholders’
agreements)
Optional, subject to
reciprocity (except
some shareholders’
agreements)
1998 TUF
Board neutrality
Breakthrough
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
Number of Tender Offers on Shares In Italy
(1998-2008)
120
100
97
77
80
60
40
20
0
voluntary
mandatory (106 §§ 1, 3)
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008) & Malberti (2008)
Number of Tender Offers on Shares in Italy
(1998-2008)
120
100
80
60
40
20
0
voluntary
mandatory (106 §§ 1, 3)
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008) & Malberti (2008)
Mandatory Tender Offers in Italy and M&As in Europe
70000
50
45
60000
40
50000
35
30
40000
25
30000
20
15
20000
10
10000
5
0
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
EU (left scale)
Italy (right scale)
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)
Target per Industry
35%
37%
28%
financial
manufacturing
services
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)
Bidder per Industry
21%
52%
17%
10%
financial
manufacturing
services
newco
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)
Industry of Bidder versus Industry of Target
44%
56%
same industry
different industry
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)
Target’s Ownership Structure Before Triggering Event
45
41
40
35
30
25
21
20
15
15
10
8
6
5
1
0
CS < 30%
30% ≤ CS < 50%
all cases
CS ≥ 50%
shareholders' agreement
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)
Target’s Ownership Structure Before Mandatory Offer
(and after triggering event)
24.67%
75.33%
30% < CS-bidder < 50%
CS-bidder ≥ 50%
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)
Revised Offer at Higher Price
3; 4%
+ 9%
75; 96%
+ 0.085%
+ 1.45%
no better offer
better offer
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)
Bidder’s nationality
4%
3%
3%
3%
Bidder listed corporation
87%
Italy
Luxemburg
Netherlands
France
Germany
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)
Price of the Tender Offer
P
P(hp)
P(to)
P(mm)
P(ma)
t
Price of the Mandatory Tender Offer
60%
53%
50%
44%
40%
30%
20%
10%
3%
0%
P(to) < P(mm)
P(to) = P(mm)
P(to) > P(mm)
Source: Galliani, Ghezzi, Mosca, Ventoruzzo (2008)
Average Controlling Shareholder (%)
18.26
37.91
48.14
46.13
51.98
0
10
20
U.K.
30
Spain
Italy
40
Germany
50
60
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
Evolution of Ownership Structure of Italian Listed
Corporations (1990 – 2005)
60%
55%
47%
50%
45%
45%
40%
28%
30%
20%
17%
39%
14%
38%
17%
38%
18%
10%
0%
1990
Largest shareholder
1998
2003
Other relevant shareholders
2005
Dispersed ownership
Source: Bianchi, Bianco (2006)