Takeover Panel Proposed Tighter Takeover Rules

Bidders of stock market listed UK companies will be required to compose more detailed plans for their target. The information should include location of its headquarters and research and development investment, under a proposed overhaul of takeover rules unveiled on Tuesday.

A plan to address concerns was proposed, where buyers are required to report back a year after completing their acquisitions on whether they have fulfilled their plans and kept their promises for the target group. Such proposals would cover matters such as strategic direction and fixed asset.

The Takeover Panel, the independent custodian of the UK’s rules on mergers and acquisitions activity, tightened the Takeover Code as it was designed to set higher standards for foreign bidders to protect British companies from asset strippers. The new rules published in a consultation document on Tuesday acquires more time for companies, unions, and other employee representatives to respond to bids in changes.

Potential protests that the extra hurdles could deter investments or cause bidders unfair costs were dismissed as the Takeover Panel stated that “any additional burden on the offer or as a result of having to state its intentions at the time of the firm offer announcement would be outweighed by the benefit to employee representatives, pension scheme trustees and market participants generally.”

UK officials had pressed for the proposal which follows a period of heightened sensitivity over foreign takeovers in the country wherein it has been traditionally one of the most accessible markets to overseas investments.

The New Code

The new proposes implies the increased level of disclosure required where targets are also set to gain sight of their buyer’s plans earlier in the takeover process for more response time.

Under the current regime, bidders are not required to disclose their offer, but the revised proposal will entail them to state their intentions the same time as they confirm their officer.

In an attempt to give an allotted time of 28 days for targets to make a defense case for shareholders, the Takeover Panel also plans to introduce a 14- day minimum delay between the announcement of an intention to make an offer and the firm offer itself.

Takeover Provoked Fear

Kraft Foods secured an outcry in 2010, following its hostile of the takeover of Cadbury, closing its factories after promising to keep it open where it led to hundreds of laid-off workers. Kraft secured £11.9bn and eventually moved the British chocolate maker’s headquarters to Switzerland for tax purposes.

It follows the company’s aborted acquisition for Unilever, prompting fear from the officials of a repeat of its Cadbury takeover.