Margareta Pagano: From Cadbury to Cablegate, and beyond ...
Takeover fever marked 2010, but moves are afoot that could make it tougher for such bids to succeed
Sunday 26 December 2010
What delightful symmetry that the year should close just as it opened – with takeover fever. While the two bids in question couldn't be more different they are certainly equal in controversy.
The first frenzy was prompted by the rapacious US sliced-cheesemaker, Kraft, gobbling up one of Britain's most loved chocolate makers, Cadbury, while the second is the bid by media magnate Rupert Murdoch for the rest of BSkyB, which has been thrown open to the wolves after Vince Cable, the Business Secretary, got caught in a journalists' sting after sensationally admitting he had "declared war" on Murdoch.
The irony of the situation is almost too much to bear. The Murdoch-phobic Cable has been stripped of the power to decide on whether or not News Corporation gets the go-ahead; this now lies with the more Murdoch-friendly Culture Secretary, Jeremy Hunt. He will be receiving the Ofcom report on the bid's impact on "media plurality" by the end of this week and will then decide whether to refer it to the Competition Commission – or not.
Whatever Hunt does now, he will find himself between a rock and a hard place. If he does allow News Corp to own all of BSkyB, he will be accused of currying favour, of returning thanks for its support of the Tories in May's election. And if he does refer, he may be accused of over-reacting and open the Government up to legal challenge.
Both Cadbury and Cablegate demonstrate the difficulties and weaknesses in the UK takeover rules. Ironically (again) it was Cable who, after the Cadbury debacle, launched the inquiry into Corporate Britain which is due to report early next year. The review covers a range of corporate governance issues, including how we could improve the rules to make it more difficult for UK firms to be taken over – and not just by foreigners. It also looks at whether there are other factors which should be taken into account, such as the long-term effects of a takeover on local employment, community and tax even – moving Cadbury to the Alps deprives the UK of around £200m in tax each year. At the moment, it's just about investors turning a quick buck. Cable's review – still taking evidence – will look closely at stopping investors from having a vote unless they hold the shares for at least six months. Such measures would certainly make it much tougher for bids such as Kraft's for Cadbury to succeed.
But there is another, more important, issue to be addressed that goes to the heart of the political difficulties and challenges surrounding bids such as Murdoch's £8bn one for the rest of BSkyB. There are three grounds on which ministers can stop a bid on public interest grounds – national security, whether it destabilises the banking system, or if it impacts on "media plurality"; a loosely defined concept by which they would have to be convinced that rival newspapers and broadcasters were at risk of closure or cuts that would damage democratic debate.
And it is this latter that has got Cable, and now Hunt, on the hop. In a world where television and the internet are more or less the same outlet, where blogging, tweeting and newspapers are now so interconnected – and cross-subsidised, it's very difficult to see how to judge what "plurality" means, and even more difficult to assess the competition which thrives without country borders. You could argue that WikiLeaks, Google and Facebook are competitors to BSkyB, as well as other more traditional media owners. That's the pertinent debate that needs to be had if the Government is to justify whichever way it decides on the BSkyB bid. Whatever you think of Murdoch's influence, this debate is bigger than he is, and needs more definition.
The question to ask is why the Telegraph didn't publish the juiciest "declaring war" bit of Cable's outburst, when, until now, like all the other media proprietors, it's been against Murdoch's bid. What do they know that we don't? We'll find out next year.
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