Mandelson launches radical rethink of takeovers
In a speech on Monday night, Peter Mandelson proposed a radical overhaul of the rules surrounding corporate acquisitions in the UK. The speech was very precise on the proposals being considered:
- raising the voting threshold for securing a change of ownership to two thirds;
- lowering the requirement for disclosure of share ownership during a bid from 1% to 0.5% so companies can see who is building up stakes on their register;
- giving bidders less time to “put up or shut up” so that the phoney takeover war ends more quickly and properly evidenced bids must be tabled;
- requiring bidders to set out publicly how they intend to finance their bids not just on day one, but over the long term, and their plans for the acquired company, including details of how they intend to make cost savings;
- requiring greater transparency on advisors’ fees and incentives;
- all companies making significant bids in this country to put their plans to their own shareholders for scrutiny.
Mandelson also called for a debate about the TUC’s proposal for the application of a “public interest test” to any takeover (we are actually calling for a test to ensure that a takeover is in the “long-term interest” of a company). However, he urged caution on this for fear of encouraging protectionism. I think that’s a red herring. I can’t really see how a properly constituted and independent commission which would judge a proposed takeover against strict criteria would fall prey to protectionist sentiment.
I don’t think the speech seriously addressed the concern that however much one revises the rules governing shareholder voting or urges greater investor engagement, most fund managers and investors will in the end vote through a takeover if the bid price is high enough no matter what the long term effects on the acquired company might be.
Having said that, however, the first and last points in his list would genuinely create a much more rigorous environment for a company seeking to buy a UK corporation. As such, Mandelson has now opened a new front in the election campaign. The Cadbury takeover was a clear sign that the City can still operate in no-one’s interest but its own; it was very unpopular across the UK and particularly in Birmingham (a not insignificant electoral battleground).
The trick now is to get Mandelson and Labour’s manifesto writers to think seriously about a wider test and to force the other parties to play catch-up in order to create a consensus on this issue much as there is now about the need for tougher regulation of the banks.