Large investors attack Dutch plans to curtail foreign takeovers

Ten of the world’s largest asset managers have decried new rules put forward by the Dutch government that would hinder takeover bids by foreign companies over fears that the proposals are “unduly harsh” and damaging to shareholder interests.

The investors, which include Fidelity International, Old Mutual Global Investors and Allianz Global Investors, have written to the Dutch minister of economic affairs urging him to abandon the “extreme” proposals that would put “the Dutch market in an unfavourable light”.

The proposals would force foreign companies to take a one-year “time out” period after submitting a hostile takeover bid in the Netherlands. During this period shareholders could be blocked from calling extraordinary general meetings to discuss sacking board members or executives.

“We believe the negative consequences would impact the efficiency of the financial markets, entrench ineffective company managers and disenfranchise institutional investors,” the asset managers said in the letter to Henk Kamp, who has been Dutch economics affairs minister since 2012.

“It is our view that this is an unduly harsh provision that damages shareholder protections to the detriment of good corporate governance, efficient markets and sustainable value creation,” the letter said.

“We further believe that this would carry economic disadvantages and put Dutch companies and the Dutch market in an unfavourable light from the perspective of the global institutional investment community.”

Foreign takeovers of Dutch companies have become a heated political issue after Dutch paintmaker Akzo Nobel successfully resisted a three-month hostile takeover attempt by US rival PPG earlier this year. Anglo-Dutch consumer goods giant Unilever also fended off a takeover bid from US conglomerate Kraft Heinz in February amid fears that the deal would lead to ruthless job cuts.

The takeover attempts prompted Dutch finance minister Jeroen Dijsselbloem to call for the government to have greater power to block foreign takeovers of domestic companies when they are considered against the national interest.

Mr Dijsselbloem said in March that a takeover of Akzo Nobel was not in Dutch interest. “This hostile takeover would lead to a split, sale and disappearance of knowledge and research in our country . . . and would be harmful to the long-term economic strength of the Netherlands,” he said at the time.

Mr Kamp added in a letter to parliament, which will discuss the anti-takeover provisions before the end of the month: “The Netherlands has an open economy and an attractive business climate. The Netherlands is the most competitive economy in the EU and the fourth most competitive in the world. Foreign acquisitions play a role. They contribute to the competitiveness of companies. But at the same time, our open attitude does not mean we should be naive.”

However, investors remain concerned that any attempt to block foreign takeovers would undermine the relationship between Dutch companies and their shareholders, deter foreign investment in the country and make it harder to oust underperforming executives.

The investors, which also include Standard Life, Columbia Threadneedle and Hermes, said in their letter: “We are sympathetic to your fundamental concerns about the potentially negative impact of hostile takeovers, particularly in cases when a hostile bidder might introduce short-term changes that do not support a company’s potential for long-term value creation.

“At the same time it is important to note that takeovers, including hostile takeovers, are neither intrinsically good nor bad. Done properly, takeovers can have a positive disciplining effect on companies and financial markets.”