Prime Minister Theresa May has talked tough on foreign takeovers and raised the prospect of a beefed-up national interest policy as fears rise about opportunistic takeovers on the back of the weaker pound.
However, it is unclear how far the government would actually intervene in corporate dealmaking when it comes to the crunch.
Ministers were nearly tested by Kraft’s audacious bid for Unilever last month but ended up having a lucky escape when the deal collapsed. Had it gone ahead, the mooted merger would have brought scrutiny to bear on the large gap between May’s rhetoric any any proposed new policy.
Yesterday, Unilever turned up the heat on the issue again, urging the UK government to take steps to safeguard national corporate champions. It questioned the strength of the country’s takeover code given Kraft has less than half of Unilever’s annual sales.
At present, the 2002 Enterprise Act only allows ministers to prevent mergers on the basis of three issues: financial stability, media plurality and national security. Ministers are drawing up proposals for a new framework which could add a fourth criteria, “critical national infrastructure”.
But for all May’s talk about national interest provisions, the plan so far lacks teeth. Bids like Kraft’s face strong bluster from Downing Street rather than a robust system to test them.
May faces a tricky balancing act. Setting out the new proposals would lend some much-needed clarity and certainty to takeover policy. Codification would also allow takeovers to be judged on merit rather than on political caprice, amply demonstrated during the Westminster debate on Sky’s planned takeover by Rupert Murdoch’s Fox.
But too much political interference beyond the current national interest tests would smack of protectionism. That would look bad for a government trying to persuade the rest of the world that the UK is open for business post-Brexit.
There are only so many bullets May can dodge on overseas takeovers. It’s time for her to show her cards, before another foreign opportunist sweeps in.
The alternative is simply to let Downing Street blow off some heat whenever a deal is proposed, while lacking the legislative clout to actually do anything about it. In such conditions, no-one is a winner.