UK takeover rules: quaking in their boots
Reforms reflect a continuing backlash triggered by Kraft’s crimes against nostalgia
Kraft of the US acquired two businesses when it purchased Cadbury for £11.5bn in 2010. The first was a humdrum UK-listed confectionery group led by an American who didn’t like chocolate. The second, by then existing only in the popular imagination, was a company run by kindly British Quakers who cared for workers from cradle to grave.
UK takeover regulators this week proposed further tightening a regime introduced in the wake of the transaction. This reflects a continuing backlash triggered by Kraft’s crimes against nostalgia in acquiring the second business along with the first. Resentment back then was deepened by the failure of the processed cheese titan to keep open a Bristol factory as promised.
If the new rules are implemented, fewer bids would be made and fewer would succeed. Incumbent bosses would rest a little easier. Investors would be marginally worse off.
Previous reforms made sense. The UK deal timetable was shortened and disclosure improved to discourage sieges. Acquirers were required to stick to any binding commitments on jobs, or face legal consequences.
The changes mooted by the Takeover Panel, which polices UK mergers and acquisitions, look more nakedly protectionist. It comes as no surprise to find they were suggested by a UK government eager for populist approval.
Bidders would have to publish plans for the location of corporate headquarters, workforce composition and for research and development. They would make these new pledges, along with promises already required by the rules, earlier during a bid.
An acquirer would still choose whether commitments were binding or not. But politicians and unions would have longer to demand more onerous concessions, and across a wider range of corporate activity. Most deals would be unaffected. They are too small or involve businesses the public has not heard of. A few big ones would be in trouble, particularly if consumer brands were involved.
Bankers with good political connections would be in hotter demand. That does not bode well for the openness of UK markets.