Vince Cable plans to toughen up takeover rules
Vince Cable plans to strengthen Britain’s takeover rules to make it harder for international bidders to renege on promises made during a deal. The business secretary concluded that the existing rules were inadequate after Pfizer’s £69.4bn approach for AstraZeneca. Mr Cable said on Sunday he was going to bring in new rules to ensure that companies honoured commitments made during the takeover process, or face “tough” financial penalties. The government has been considering how to tighten the rules since April, when Pfizer made its approach to the UK drug company. Pfizer made a five-year commitment to retain research and development investment in the UK. But it also said this could alter if circumstances changed “significantly”, raising fears that the takeover would lead to cuts in UK science jobs and research.
“What the government did then was to engage in negotiations to seek assurances,” Mr Cable said. “Where we now have to strengthen that is to make sure that where commitments are made, there is no wiggle room.” The business secretary also said he wanted to introduce “tough financial penalties” for companies that renege on promises and is prepared to introduce legislation to enforce this if necessary. The government will consult on the changes, with new laws set to be introduced before the general election in 2015. Mr Cable said the government was discussing options with the Takeover Panel, which oversees mergers and acquisitions. The minister wanted the panel to drop the “material change of conditions” get-out clause for binding commitments in the takeover code. Companies have reneged on promises. Kraft, the US food group, was criticised by the panel for breaking a promise, made during its five-month battle to buy Cadbury, to keep the UK chocolate maker’s Somerdale factory open. The business secretary also said he believed that the government should have more powers to intervene if a company refuses to give assurances about British jobs and investment in strategic sectors. Mr Cable said he believed a narrow “last resort” power should be put into law to enable ministers to intervene in a takeover that is “very clearly against the national interest”. This “narrow, specific intervention” would be a sensible compromise between introducing a wider public interest test and a “laisser-faire” approach, he said. Under EU public interest test rules, the government can only intervene in a takeover if national security, economic stability or media plurality are threatened. However, the Labour party wants to strengthen government powers to intervene in deals affecting the science industry – although this would need approval from Brussels. Chuka Umunna, the shadow business secretary, said on Sunday he supported Mr Cable’s attempts to make sure commitments “have more teeth” and was happy to work on a cross party basis to pass new laws. Pfizer walked away from AstraZeneca in May after its advances were rebuffed. But it is thought likely to return with a fresh offer after a six-month “no-approach” period ends in November.