Takeover rules set for shake-up

THE Takeover Panel is preparing what could be the most dramatic shake-up of its rules for 20 years in the wake of Kraft’s £12bn takeover of Cadbury.

Following a passionate speech by outgoing Cadbury chairman Roger Carr in Oxford a fortnight ago, the mergers watchdog has launched a white paper-style consultation on rules governing hostile bids.

The move reflects growing concern from trade unions and politicians, including business secretary Lord Mandelson, that British companies are falling victim to foreign predators too cheaply.

High on the agenda will be the controversial role played by short-term investors such as hedge funds in the success of hostile bids. The panel’s code committee will look at whether shares bought during a bid period should be “disenfranchised” after 26 per cent of Cadbury’s stock was bought up by speculators, effectively forcing Carr to hand over the company to Kraft boss Irene Rosenfeld.

It may also increase the threshold of shareholder approval needed to vote through a hostile merger from 50 per cent, and could cut down the level at which investors’ positions have to be disclosed.

A key part of the consultation will look at so-called “put up or shut up” orders, which set a deadline for a potential bidder to table a formal offer or walk away. In a move that will be watched closely by services firm VT Group, currently the target of shipbuilder Babcock, the code committee may shorten the timetable for bids.

Referring to the near-six month battle endured by Cadbury, a source said: “There has been lots of debate about virtual bids and relieving target companies from excessive siege.”

It is understood the white paper could lead to the most radical reshaping of the panel’s rules since Lord Rockley led a consultation in 1988 following Nestlé’s buyout of Rowntree, the British chocolatier.

Carr, who has been vociferous in his calls for an overhaul of the guidelines, will contribute to the process, as will Lord Mandelson. The committee also expects to speak to a wide range of market participants, including fund managers, investment bankers and company bosses.

A spokesperson said: “The code committee welcomes suggestions on how the code could be amended to take account of changing market practices.”

Lord Mandelson said he welcomed the panel’s review, which he described as “important”.