Bag Wars and Bank Wars, the Gucci and Banque National De Paris Hostile Bids: European Corporate Culture Responds to Active Shareholders

Abstract

This essay examines trends in European corporate governance, which shape the context wherein hostile takeovers attempts have occurred. It examines shareholder activism, corporate structure in Europe, and the European Union's (EU) attempts to regulate takeovers. This essay analyzes the takeover experiences involving: 1) Louis Vuitton Moet Hennessey's (LVMH) 1999-2001 bid for Gucci, with Pinault-Printemps-Redoute (PPR) serving as Gucci's white knight, and 2) Banque National de Paris' (BNP) 1999 dual-bid for Paribas and Societe General (SG). The essay asks two central questions: 1) why were the European hostile takeovers so prolonged and antagonistic?; and 2) what has been the EU and government responses to these takeovers attempts?

This essay makes three contentions about the nature of hostile bids. These European hostile takeovers have been prolonged and antagonistic because: 1) corporate boards have little experience with hostile bidders, 2) traditional corporate culture's method of resolving disputes through conciliation fails with hostile bids, and 3) EU attempts to regulate takeovers may, for the foreseeable, fail to be implemented because of political concerns. With concentrated share ownership and exclusive ranks of executives, traditional European corporate culture resolves its disputes with conciliation. Examples include interlocking boards, meetings, and cross-shareholding arrangements. This method of resolution is unable to resolve shareholder-board disputes, when there is an unsolicited bid for a corporation.

Keywords: european corporate governance, hostile takeovers, European Union, EU thirteenth directive, corporate law, shareholder rights