Ask most City folk for their views on regulators and you'll most likely find yourself on the end of a raft of expletives and invective. But one regulatory body has proved the exception to the rule. The Takeover Panel enjoys an enviable reputation in the Square Mile and beyond.
In just a few weeks, Robert Hingley, the director-general of the panel, hands over the baton of leadership after two years at the helm, readying himself for a return to his employer, Lexicon, the boutique investment house. Leadership of the panel is restricted to two years' secondment – a measure intended to ensure that the boss of the organisation remains in touch with the market.
"I'd certainly recommend the job to my friends," says Hingley, who joined the panel in the altogether more prosperous markets of 2007. "At the time, we had deals like BHP Billiton and Rio Tinto, and Scottish and Newcastle being bought by Heineken, and it was really pretty active until the summer of 2008. And then, of course, we had the world ending with the banking crunch."
While ceding that the panel was "some distance from the centre of the crisis", Hingley and his colleagues were called upon to take some quick decisions, waving through Lloyds' hurried purchase of HBOS in 2008.
"The good thing about the panel is that it remains nimble," says Hingley. "We have the ability to get round a table within 20 minutes and come to a view quickly if we need to. It's important that we keep this."
With a total staff of just 45 – a large proportion of whom are seconded to the panel – the regulator is small.
While the takeover market has remained largely quiet lately – just a handful of FTSE250 firms are currently under offer, including VT Group – the role of the panel was recently thrown into the spotlight with Kraft's purchase of Cadbury and the boardroom tussle at brewer Mitchells & Butlers, where chairman Simon Laffin was ousted.
In the wake of Kraft's successful bid for Cadbury, the Bournville chocolate-maker's chairman, Roger Carr, has launched a broadside against some of the panel's rules, calling for changes to the Takeover Code. This is the same Roger Carr who chaired Centrica in its hostile takeover of rival Venture last year under the same rules.
"We are interested in his views," says Hingley. "We will think about them. But some of them – such as changing the principle of one share, one vote – I have questions and reservations about."
Carr has called for an increase to the minimum acceptance threshold in hostile bids to 60 per cent – from the current 50 per cent – and suggested that shares bought in an offer period should come without voting rights.
The latter point is aimed at hedge funds which typically buy companies under offer and sell, or short, the acquiring company in a tactic known as pairs trading. It's a strategy that has scooped billions for some hedge-fund managers.
"For many people, it's 'the panel regulates takeovers so, QED, it should do something', but that's not how we work," says Hingley, who likens the role of the panel to a boxing referee. "We are there to make sure there isn't any gouging or biting, but the wider issue of whether boxing, or takeovers, is good or bad is not just for us. There would have to be a much wider debate. Look, whether it is right for a major company to be taken over is a matter for government and not us."
Although a root-and-branch review of the takeover rules is unlikely, in April the panel ushers in a new rule that will, perhaps, placate some people who have argued the need for greater transparency during takeovers.
Under current rules, those who have built up a holding in a stock, whether it be physical or through a derivative contract, before a takeover offer, are under no obligation to disclose their position. Under the new rules, holders will be obliged to reveal what they are holding.
"It's absolutely fair enough that the spotlight shines on shareholders a bit more during a takeover, and certainly the market should get a more complete view because of the rule change," says Hingley. "One of the things Carr has suggested is that this rule should be applied at the half of 1 per cent level. But when we were putting together this latest set of rules, the comment we received at the time was that 1 per cent was perhaps too low, and the burden of disclosure on the market too great. You cannot please everyone."
Although, in most part, the typical regulator – quietly spoken, in a grey suit and glasses – Hingley is in combative form, no doubt emboldened by his looming exit.
Although he declines to comment on the specifics of the Mitchells & Butlers saga, it's clear that comments from the brewer's former chairman, ousted after a tussle with shareholders including the billionaire Joe Lewis, irked Hingley. In an article penned by Laffin, the former M&B chief accused the panel of being out of touch with the reality of the markets: "These regulators have forgotten that there are shareholders out there who may not play by gentleman's rules."
Says Hingley: "People are wrong when they claim that we have changed the rules to make it more difficult to prove a concert party [ie that shareholders are working together]. The rules being used now are completely unchanged. We did review them last year in the context of the Walker Review, but nothing has altered. We put out a practice statement reiterating that the code is not about stopping shareholder activism, that's all."
Aside from batting away Cadbury and M&B, Hingley is also keen to raise concerns over the panel's future, in particular addressing plans from the Tories and the EU that would see it radically reshaped. The shadow Chancellor, George Osborne, put forward tentative plans last year that could see the panel merged with the markets division of the Financial Services Authority and/or the Financial Reporting Council.
"We have absolutely had discussions with the Conservatives and we have made the case for continued independence," says Hingley. "They have listened but I don't think they plan to make any conclusions before the election." He adds: "If we were to merge with FSA, for example, we do not have the power to fine or impose criminal sanctions or anything like that. It would be very odd at the end of it with one part imposing fines and one not. It would change the culture and the way we operate. I hope the Tories agree with that."
Hingley also comes out fighting against plans from the EU to wrest the governance of takeovers away from the UK. Plans are currently being drawn up to create the European Securities and Markets Authority (ESMA), which will act as the Continent's financial watchdog.
"There is a political impetus for harmonisation across the market, and perhaps [a consensus] that the Brits screwed up during the crisis and should pay the price," says Hingley. "ESMA would be allowed to make rules binding on the takeover code so they could alter our code and they would also have the right to interfere in specific transactions and that, we think, would be wrong. If [the panel] is included in ESMA, it wouldn't bring the world as we know it to a catastrophic close, but it would mean there is the right at the EU level to alter the way takeovers are conducted in the UK fundamentally."
Dealing with the problem of the EU will now fall to Hingley's successor, Peter Kiernan, a managing director at Lazard, the investment bank. Hingley returns to take up a position with Lexicon, although details are yet to be finalised. "I've thoroughly enjoyed my time with the panel and I've garnered great oversight into the way lots of different banks operate," he says. "Certainly there is value to this when you return to the poacher side of the equation."
Perhaps the face of the Takeover Panel isn't as gentlemanly as Laffin would have us believe.Reuse content