Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Tuesday, March 07, 2006

EU Acquisitions: France Steps on Some Toes

There have been several high-profile mergers or merger attempts in the past few weeks in the EU. Despite the desire for a common market, protectionism by some countries has thwarted recent attempted mergers.

Italy's largest utility, Enel, attempted to take over Suez, a French utility company, as part of an agreement with another French company, Veolia. Under the agreement, Enel would have taken over the energy assets of Suez, while Veolia would have taken over environmental services outside of France.

Rather than allow the merger to proceed, the French government encouraged another French company, Gaz de France, to take over Suez instead. The EU has given the French government two weeks to explain what happened. Britain and Germany have expressed their disappointment with France's actions.

France is already subject to EU scrutiny when it comes to mergers and acquisitions because it has identified a large number of industries as "strategic" sectors that are exempt from foreign takeovers.

If the EU is truly to develop into a single market, then the kind of protectionism that France has engaged in needs to stop. There are some real synergies to be gained through cross-border European mergers, but this cannot happen unless all of the EU countries play by the same rules.

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