The institute of Directors (IoD) have warned the Government not to block foreign takeovers in the wake of Kraft Foods' controversial takeover of Cadbury, but believes the Takeover Code should be beefed up.
The business lobby group warned against government proposals to extend the public interest test to apply to utility and infrastructure companies. Miles Templeman, Director-General of the Institute of Directors, said: "We would be very concerned if the Government had powers to block or approve takeovers except in exceptional cases of national security, or where there are implications for the competitiveness of markets."
He continued: "If those powers were acquired and then misused, the UK's status as a leading destination for foreign investment and location for corporate headquarters and operations would be at risk."
The IoD released a statement yesterday in response to the £11.5bn Cadbury takeover as well as the publication of the election manifestos from the main political parties.
"We do believe there is a case for reforming certain aspects of the existing rules," the group said. It backed the Government's proposal for shareholder approval for a hostile takeover to be raised to two-thirds.
Yet, it said the Takeover Code should go further, and added that the buyer's shareholders should also have to approve the deal by two-thirds. "We think it should be a requirement in the Code," the group said. The UK's takeover rules must continue to sustain the UK as a leading destination for foreign investment, the body said, and not be amended "in a way that would discriminate against foreign buyers".
The IoD wants shareholders to take a more active interest in takeovers because they are "very fiddly things, which are often unsuccessful," according to its head of corporate governance Roger Barker.
"Hostile takeovers do have a place, but all parties should have their eyes open," he said, adding that such deals should be a last resort.