Changes to Takeover Panel rules are set to make hostile bids more difficult in the wake of Kraft's controversial £11.6bn buyout of Cadbury. The panel's updated code aims to redress imbalances giving hostile bidders a "tactical advantage" and making it too easy for hostile bids to succeed, the City regulator said yesterday.
Alongside changes to the "put up or shut up" system, the new rules also require companies to take into account the impact of a change of ownership on staff. Businesses will also have to disclose all advisory fees, to address concerns that high fees were tempting banks to act in their own interests rather than in those of shareholders.
The Takeover Panel review was triggered by the furore following Kraft's decision to shut down the Cadbury's Somerdale factory in Keynsham, near Bristol, when the US food giant had said during the acquisition process it would remain in operation. The review generated an "unprecedented number of responses" and "a great deal of discussion" among both market participants and other interested parties, the panel said.
Under the new rules, a potential buyer will have just four weeks after its name becomes public in which to formally declare its intentions, unless the timetable is extended by agreement with the company it is approaching. The new measure aims to stop bidders destabilising businesses by approaching them without laying down any firm offer. The target company will now be able to publish the name of its stalker and thus start the four-week countdown.
Business groups broadly applauded the updated regime yesterday. "The panel makes some welcome changes that will reduce periods of uncertainty for companies that are takeover targets, and which give greater clarity about the bidder's plans for the business, including the impact on employees," said Matthew Fell, director for competitive markets at the Confederation of British Industry.
"Greater transparency is also welcome to help ensure that the prospect of fees on completion of a deal does not bias the likelihood of it happening."
But the panel rejected some of the more radical suggestions from the review process. It will not be increasing the amount of shares a bidder needs for a hostile approach to be accepted, despite the anger voiced by, among others, the Business Secretary, Vince Cable, about takeover bids swung by short-term hedge-fund investors. Increasing the minimum acceptance share would be "impractical without associated changes in company law", the panel said.
Despite the panel's conclusions, Mr Fell said the matter was not over and "there remains a need for a full debate about the role of short-term investors in determining the outcomes of takeover battles".