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Italy: Measure to Counter Foreign Takeovers

(May 10, 2011) On March 31, 2011, Italy issued a decree that established a national fund to acquire equity in companies in key industries if those companies are threatened with takeovers by foreign businesses. The measure was advocated by Finance Minister Giulio Tremonti following the acquisition in March 2011 of a 29% interest in the Italian dairy company Parmalat by a French company, Lactalis. That move made Lactalis the largest shareholder in the Italian firm. After the decree was issued, Parmalat put off until late June the April shareholders' meeting at which a new board of directors was to be selected. This delay gives time for the Italian government and banks to either work out a compromise with Lactalis or make their own bid for control of Parmalat. (Italian Govt Approves Anti-Takeover Measures, REUTERS (Mar. 31, 2011); Finance Minister Defends Anti-Takeover Measure, ANSA.IT (Apr. 21, 2011), World News Connection online subscription database, Doc. No. 201104211477.1_83d8u005c47634a22.)

Tremonti defended the new measures in a meeting with the Finance Committee of the Italian House of Deputies on April 20. Arguing that the move was needed to protect businesses in strategic sectors of the economy from foreign control, he said, “I believe the best defense is attack.” (ANSA, supra.) He went on to describe the policy changes he felt are needed to protect and develop the Italian economy, including reducing the number of tax audits for entrepreneurs, making it generally easier for small companies to grow, and reforming “public infrastructure, residential construction, tourism and scientific research.” (Id.)

In addition to the food industry, it was reported before the adoption of the new measure that the defense, energy, and telecom industries could also be protected from foreign takeovers by the fund. The Italian decree is seen as following the precedent set by a 2005 measure in France. Professor Scott Moeller of the Cass Business School in London placed the Italian decree in the context of growing “economic patriotism” in Europe, stating:

This move continues a recent trend in Europe to provide greater protections for target companies. We saw a similar consternation in the U.K. in the wake of Kraft's takeover of Cadbury. … It is unfortunate that the Italians are following the French rather than the French [and the Italians] providing greater openness. Some of the sectors identified as 'strategic' are anything but that in today's linked economies of continental Europe. (Giuseppe Fonte & Antonella Ciancio, Italy to Erect Barriers Against Foreign Takeovers, THE GLOBE AND MAIL (Mar. 29, 2011).)