Dutch corporate takeover defences tough to breach

Corporate takeovers can be tricky in the Netherlands, as US food giant Kraft Heinz found out before performing a sudden U-turn in its surprise move on Unilever, experts say.

But even unwanted attention from a potential predator can be useful, if it serves as a wake-up call for companies needing to shape up to avoid becoming a target again, they say.

Kraft Heinz on Sunday announced it was dropping its $143 billion (135 billion euro) offer to buy the Anglo-Dutch Unilever -- barely two days after vowing to press ahead with the bid that would have created the world's second-largest food giant behind Nestle.

Rotterdam-based Unilever had on Friday snubbed the offer, saying it "fundamentally undervalues" the company that has brands like Marmite, Magnum ice cream, Lipton tea and Knorr soups in its portfolio.

"We don't really know what happened behind the scenes" between Friday and Sunday, said Peter Roosenboom, professor in corporate finance at Rotterdam's Erasmus University.

"I think they (Kraft Heinz) thought they could do a friendly deal... but they made a mistake. Historically Dutch companies make use of many takeover defences," he told AFP.

Although many Dutch protective measures have been dismantled over the past 10 to 15 years "it still remains very difficult to acquire Dutch-listed companies in a hostile way", Roosenboom said.

Kraft Heinz may have decided to drop the bid once it saw things sliding towards a hostile takeover and realised "it was going to be an uphill battle to get the deal done", he said.

- Unique protection -

Analysts say Dutch corporations are protected by a unique set of laws and anti-takeover measures that makes it very difficult, but not impossible, for outside companies to conclude hostile takeovers.

Dutch companies by law must themselves consider whether the deal is in the interest of all stakeholders including management and employees, customers, creditors, suppliers and the environment.

This model differs from that used in the United States or Britain "where a board only has a responsibility towards its shareholders", said Martijn Kesler, a corporate lawyer for AMS Advocates in Amsterdam.

Unilever's corporate culture -- which focuses more on corporate responsibility and sustainability than short-term profits -- also differs vastly from that of Kraft Heinz and its owners 3G Capital, the analysts said.

The Brazilian group is well known for its brutal approach when it comes to cost and job cuts and zero budgeting principles, analysts said.

"The bottom line is the most important aspect for the owners of Kraft Heinz," said Joost van Beek of Theodoor Gilissen private bank in Amsterdam.

"Had this deal gone through, I believe thousands of Dutch jobs may have been lost," at Unilever, he said.

- Dutch 'poison pill' -

Home-grown anti-takeover measures include the so-called "Dutch poison pill" which during a takeover transfers control of the company from public stockholders to a controlled foundation.

For instance, a targeted company can issue share certificates that means a large portion, or even a majority, of the vote in a takeover bid is shifted to a so-called trust office foundation.

"This is a very powerful position because basically the administrators of the trust office are on friendly terms with the target company's management... effectively making it very difficult to launch a hostile takeover."

"The anti-takeover schemes in The Netherlands, especially the one using the trust office foundation are quite unique," added Kesler.

"I would not be surprised if Unilever had (similar) measures in place to protect them from the attempt," he told AFP.

The attempted takeover however showed that even large companies such as Unilever, which posted a 52.7 billion-euro turnover last year can be vulnerable to attack, analysts said.

"It might force Unilever to shape up, become more efficient and keep them on their toes," said Erasmus University's Roosenboom.

"That's probably the best way to keep your shareholders happy and make sure you don't get this unwanted takeover attention," he said.