More hot air from Mandelson on UK takeover rules?

Lord Mandelson has been banging the drum about possible changes to the Takeover Code...

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Last Updated: 31 Aug 2010

Lord Mandelson called last night for a major overhaul of the takeover rules. Well, sort of. The Business Secretary used a speech at Mansion House last night to argue that the system should protect the long-term interests of a target’s workforce, as opposed to short-term financial speculators. It’s a voter-friendly argument in the aftermath of Kraft’s Cadbury takeover. But it doesn’t change the fact that the Government was powerless to intervene in that case – and would still be powerless even if all Mandy’s suggestions ended up on the statute book...

It’s remarkable Lord M found the time to think about the Takeover Code yesterday, given how busy he was putting the boot into the Tories over Lord Ashcroft’s tax status (because he’s big on unelected peers having undue influence on UK public life, you see). But the ever-diligent Labour bigwig used his speech last night to call for a ‘fresh look’ at the M&A rules, arguing that there is a ‘strong case for throwing some extra grit in the system... We need directors equipped to be stewards rather than just auctioneers,’ he said.

So was there anything concrete in his speech? Well, he did have some specific suggestions (most of which were in line with those of ex-Cadbury chairman Roger Carr): raising the required voting threshold to two-thirds; lowering the disclosure threshold from 1% to 0.5% (to smoke out influential shareholders); reducing the ‘put up or shut up’ period; and requiring greater transparency about advisory fees, financing arrangements and future plans. This would allow both sides ‘more actively to scrutinize the transaction, and better weigh the long term prospects for the merged company,’ he said.

All well and good. But what would this actually mean in practice? ‘If this requires re-stating the 2006 Companies Act, then I am willing to do that,’ he said – although he’s not really a fan of a public interest test (as they have in France, for example), because it runs the risk of protectionism. This does rather beg the question of what these changes would achieve, since it still wouldn’t allow the Government to block a future Cadbury (‘Meaningless hints’, was his oppo Ken Clarke’s withering verdict).

Changing the Takeover Code to try and safeguard a company’s long-term interests (as far as possible) is an admirable aim. But otherwise, the Government’s influence in takeover battles is – and should be – limited. So it’s a bit tiresome when ministers try to pretend otherwise.


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