Protection Structures
Pfäffikon SZ, Switzerland – The last few weeks, protective structure were more in the spotlight than usual. For example, Boskalis discontinued the acquisition of Fugro. The dredgers from Sliedrecht seem to have choked on the protection structure of the engineers from Leidschendam. But also the Belgian Bpost is frustrated by the notoriously obstructive PostNL, making that even the Dutch Minister Kamp of Economic Affairs is stirred.
Dutch Discount
For decades long, Dutch companies already spend much attention to possible hostile takeovers. In the 90s of the last century, it was customary for a self-respecting listed firm to rig a proper protection structure. The relatively low valuation of Dutch listed companies was often attributed to these types of structures, also known as ‘the Dutch discount.’ Evidence has however never been found. Other reasons, such as international indexing also encouraged a lower valuation.
Nevertheless, several protective structures disappeared silently through shareholder activism and encroaching globalization. It is striking that the Dutch Entrepreneurs Chamber increasingly takes sides with the hunting, activistic party and thus erodes the Dutch Ltd. All the more remarkable is that the Supreme Court blow the whistle to the Dutch Entrepreneurs Chamber several times. Obviously, this state of affairs is food for legal connoisseurs.
Greed
In any event; Since 2007, the Dutch state has emerged as an activistic player in the financial arena. Shareholders are more in a bad light because greed too often ended in tears for many involved. The result is that the trend of rigging protective structures seems to have turned again. According to many, the sale of the Dutch businesses should be brought to a halt. The soap opera surrounding the acquisition of ABN Amro is still fresh in the memory of the Dutch taxpayer.
Anti-takeover protection structures heave as it seems along with the spirit of political and financial powers. Now populism is continue gaining ground and globalization is in a more negative light, it is clear that protective structures will gain back popularity. Probably in his innocence, precisely the Dutch Minister Kamp confirms this trend. In this context, it is even more interesting how the Dutch court ––fueled by new insights–– looks at protective structures; Not to mention the activistic shareholder.
It remains for me to wish you a good weekend.
Jan Dwarshuis is CIO at Thirteen Asset Management AG. Dwarshuis writes his columns in a personal capacity. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in above mentioned shares and has no intention of doing so in the next 72 hours.
