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Europe's takeover boom gathers pace

It's a simple idea. You own most of a company so you control its fate. But this notion of shareholder value has been slow to reach continental Europe where governments often allow small groups of long-term shareholders to control public companies. Things are starting to change. Cross-border mergers - even hostile foreign bids - are becoming more common, debt-financed deals are supplanting stock swaps and companies are making big acquisitions using hybrid tradable loans. Michelle Celarier reports on the Americanization of European M&A.

After a year trying to entice the owners of French retailer Casino into a friendly merger, rival French supermarket chain Promodès took a bolder approach. Advised by Morgan Stanley Dean Witter, the number-one ranked M&A dealmaker in Europe this year, in August Promodès launched what has become France's most contentious hostile takeover bid. Its Ffr28 billion ($4.7 billion) all-cash bid was swiftly rejected by the family that controls Casino, as well as by majority shareholder Rallye, which then made its own offer.

Months later, the Promodès-Casino-Rallye battle has resulted in four alternative offers, two of which are difficult to value. But in the end it may matter little whether the Promodès cash offer (now raised to Ffr30 billion, Ffr375 a share) is worth more than Rallye's bid, a combination of stock and bond paper with a valuation hingeing on the price of Casino's shares. Through a quirk of French law, Rallye's principal shareholder, Jean-Charles Naouri, may have enough power to vote down Promodès's offer, no matter how good it is.

In January the courts are to decide whether Naouri can exercise Casino warrants he owns. If so, he will have 33% of Casino's shares but more than 50% voting control.

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