M&A rules set for largest overhaul 'in 20 years'

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The Independent Online

The Takeover Panel will today impose the biggest shake-up of UK merger and acquisition rules for a generation in the wake of Kraft's controversial acquisition of Cadbury.

The rule changes are designed to strengthen UK target companies against opportunistic and unwelcome predators. Concerns about foreign companies preying on British businesses were heightened by Kraft's aggressive bid for Cadbury in late 2009 and the US company reneging on a pledge not to close a factory.

Measures in the revamped Takeover Code include requiring potential bidders to announce a firm intention to bid or withdraw within 28 days of being identified; target companies must announce all bidders when the offer period launches, and break fees will be outlawed. Greater disclosure will also be required on advisers' fees, bidders' financing and bidders' plans for the target company.

Nick Rumsby, a partner at the law firm Linklaters, said: "There has been a major review of the rules. The last time this happened was after Nestle's takeover of Rowntree so it's the biggest change for 20 years."

In 1988, Nestle won a bitterly fought battle to buy Rowntree Mackintosh, like Cadbury a chocolate company with a history of philanthropy and benevolence.

The deal also sparked uproar over potential cuts to investment and jobs and triggered tightening of the merger code because Swiss rules made Nestle bid-proof.

Mr Rumsby said: "The real impact will be in hostile and competitive or potentially competitive situations. Bidders may have done more due diligence from afar and gone further on their financing lines before they approach a target so that if there is a leak resulting in a four-week deadline they will be able to move quickly."

The Takeover Panel has already acted according to its new rules by ordering the billionaire Joe Lewis to make a firm offer within 28 days for Mitchells & Butlers after his initial approach was rejected by the company.