Panel looks at 'creeping acquisitions'

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The Independent Online
THE TAKEOVER Panel is looking at ways to stop 'creeping acquisitions', whereby acquirors take control of companies by buying an extra 2 per cent of their shares each year.

The Panel is inviting a wide range of City bodies to comment on its proposals. Normally it restricts consultation to a select group.

Worries that companies can take control of targets other than through a full bid came to the fore two years ago when Leucadia National Corporation of the US, an investment company, topped up the 45.5 per cent holding in Molins it had acquired in a bid.

This alerted Molins, the cigarette machinery maker, to the risk that Leucadia could take control in less than three years without making a further bid. Molins defeated Leucadia's attempts to secure board room representation.

Leucadia had acquired an extra 2.9 per cent of Molins by the time it sold its shareholding in November last year.

Under the code, companies cannot launch a bid within 12 months of the previous attempt. They are allowed to buy an extra 2 per cent a year without bidding.

One suggestion is that any bidder left with between 30 and 50 per cent of a target after a bid should be required to bid again every time it increases its stake.

This would be opposed by holders of large minority stakes who argue that their shareholdings can change as a result of rights and other share issues. Hard- pressed merchant bankers may, however, argue in favour of the extra work that would result.

This is one of a number of rule changes under consideration by the Panel. Most of the others codify and clarify rather than change the substance of the rulebook.