Right idea, wrong remedy

2 March 2010 By Neil Collins

Britain’s business minister is rightly concerned that UK takeover rules seem to favour hostile bidders. But Mandelson’s vague proposals are mostly either unworkable or irrelevant. One idea he should consider instead is giving more power to loyal shareholders.

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Peter Mandelson, the UK Business Secretary, has called for a radical tightening of the UK takeover rules, including demands that bidders set out how they intend to fund their purchase, and that they put the plans in front of their own shareholders.

The Takeover Panel is currently reviewing its rules in the light of the experience of Kraft Foods' takeover of Cadbury.

"Directors should expect to run the gauntlet of public and shareholder criticism if they have done their homework poorly, plan to load companies with heavy debt, are motivated chiefly by the desire to strip assets or simply want to make a quick profit off the share price with little respect for the workforce or local interests," Mandelson said. "Companies making acquisitions should set out an objective analysis of the potential gains and be entirely open about their intentions for the workforce, while shareholders on both sides have to be genuinely critical."

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The Takeover Panel is currently reviewing its rules in the light of the experience of Kraft Foods' takeover of Cadbury.

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