Aug. 29 (Bloomberg) -- German Chancellor Angela Merkel's coalition, reacting to pressure from some of Germany's biggest companies, may tighten rules on acquisitions after Schaeffler Group's takeover bid for Continental AG.
The regulations will be scrutinized after Schaeffler's move to secure a dominant stake in Continental through swaps, Finance Ministry spokesman Stefan Olbermann said today, following a letter from the chief financial officers of nine DAX-listed companies, including Daimler AG, SAP AG and Siemens AG.
``The transparency rules may turn out to be adequate -- we will weigh the pros and cons carefully,'' Olbermann said in an interview. ``Market innovation is always a step ahead of the rules, but that doesn't mean it needs throttling.''
Companies including E.ON AG and Daimler urged Finance Minister Peer Steinbrueck to close gaps in transparency rules after closely held Schaeffler used swaps to help secure control of a company three times its size. Germany should adopt rules in force in the U.S. and the U.K. requiring investors to report swap purchases, according to the letter.
Signatories of the Aug. 27 letter, obtained by Bloomberg, include Muenchener Rueckversicherungs AG, Infineon Technologies AG, Deutsche Telekom AG, RWE AG and Bayer AG, in addition to SAP, Siemens, E.ON and Daimler.
The companies said they are open to all German and foreign investors yet seek more transparency. ``However it's done, building up significant positions in a company'' should be ``laid open,'' according to the letter.
Schaeffler, the world's second-largest ball-bearing maker, secured control of 28 percent of Continental through the help of swaps transactions arranged through Merrill Lynch. Schaeffler terminated the swaps on Aug. 21, requiring Merrill Lynch to close out its position.
Dirk Notheis, co-head of investment banking at Morgan Stanley Bank AG in Frankfurt, said he shares the industry's complaint. ``Reporting rules must be applied to swaps and options,'' he said in an interview on Aug. 25. ``It's time to act -- it's important for the credibility of the German market.''
Germany closed perceived loopholes in reporting share purchases last month by requiring investors who buy at least 10 percent of a stock company to report their aims. The Social Democrat-led Finance Ministry has for a decade sought to push Germany as a financial center by licensing financial investments from hedge-fund products to real-estate investment trusts.
Companies selling shares can also in the future demand that investors say for whom they hold the stock.
Yet successive legal amendments have left gaps in reporting swaps, said Christine Scheel, a lawmaker from the opposition Green Party, who wants current rules applied to the instruments.
In an Aug. 22 reply to questions posed by Scheel, the government said so-called cash-settled-equity-swaps fall outside current reporting rules on shareholdings as investors in the instruments don't legally own shares but ``simply have a claim on cash'' equivalents.
Germany's BaFin financial-market regulator uncovered 622 infringements of reporting restrictions since January 2007, the government told Scheel. Just 32 cases led to fines, which averaged 4,700 euros ($6,920), it added.