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Controversial shake-up proposed for British takeover rules

Overseas corporate investors could face significant complications under controversial new proposals to shake-up the UK’s Takeover Code, which could have a serious knock-on effect for cross border mergers and acquisitions.

According to a report in The Guardian, a new consultation document has been unveiled proposing “higher standards” for foreign bidders amid concerns that British companies are “more vulnerable to asset strippers” than rival firms in Europe and the US.

The document, which has been published by regulatory body The Takeover Panel in recent days, proposes that any intended buyers of British companies should have to reveal whether or not they would move British headquarters overseas following a deal, or whether they would shut down any research labs, factories or other UK premises.

The news also follows US manufacturer Kraft’s recently aborted bid for Dutch-headquartered Unilver, which sparked controversy that the American consumer goods giant could ‘repeat’ its “volatile” takeover of Cadbury seen in recent years.

Kraft’s £11.9 billion takeover of Birmingham-based Cadbury in 2010 – which The Guardian describes as “hostile” – subsequently saw British factories closed and hundreds of UK workers lose their jobs.

Later, Cadbury’s headquarters was moved from Birmingham to Switzerland.

Under new plans put forward by The Takeover Panel, foreign bidders for UK companies would need to clearly state their intentions prior to undertaking similar deals.

Bidders would be expected to release details in relation to:

  • The location of target company headquarters.
  • The skills and functions of British workers after the merger.
  • Research and development.

Companies would be expected to initially state their intentions at the same point as making a takeover offer.

Any successful acquisitions would also need to be followed by a corporate report to be issued to the Takeover Panel, outlining how the larger company has stuck to their pre-deal promises.

In a recent statement, Business Secretary Greg Clark welcomed the proposals, which he described as containing “valuable changes.”

In addition, the Takeover Panel has said: “Any additional burden on the offeror as a result of having to state its intentions at the time of the firm offer announcement would be outweighed by the benefit to employee representatives, pension scheme trustees and market participants generally.”

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ELS Legal is an international law firm based in London with more than 50 partner offices across the world. As part of the Cathay Associates global legal network, we are the first choice law firm for a number of British businesses and overseas clients.

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