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VW takeover now possible

2007-10-23 10:41
Luxembourg - The European Court of Justice on Tuesday overturned a decades-old law which protects Europe's biggest carmaker Volkswagen from hostile takeovers.

The landmark decision will open the company to a likely takeover by rival German carmaker Porsche, which holds a 31% stake in the company, and could have repercussions for many of Europe's other government-protected corporate giants.

The EU's executive, the European Commission, took Germany to Europe's top court for refusing to dismantle the country's "VW law", which was set up after the company was privatised in 1960 to deter potential foreign takeovers.

The law prevents any shareholder from having more than 20% of the voting rights in the company, regardless of the size of the stake owned.

It also gives Volkswagen's home state of Lower Saxony a controlling minority stake in the car maker and both regional and national governments guaranteed seats on the company's board.

The German government said the law is designed to protect jobs. The commission said the law is bad for business and sets up a barrier to free cross-border investment within the European Union's 27 member countries.

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