State ups interest in UK takeovers

Dec 11, 2012
<p>But legal 'test' for overseas acquisitions ruled out</p>

You know economic nationalism is on the rise when even the UK is growing comfortable with it. The British government has said it will take a ‘greater interest’ in foreign takeovers in its response to a recent study.

The government has ruled out the introduction of a foreign takeover ‘test’, however, suggesting the UK will remain largely open for business when it comes to overseas acquirers.

UK politicians, it seems, have come round to the idea that shareholders can’t always be trusted with the big decisions. The main evidence for this was the sale of popular British confectioner Cadbury to US food group Kraft, a move back by investors but widely unpopular with MPs, the media and the public.

After the sale was made, Cadbury’s ex-chairman blamed short-term traders for taking over the stock and making a sale inevitable.

That brought about changes to the UK’s Takeover Code – making it harder for corporate predators to draw out their bids – but now the government is outlining how politicians might directly shape the outcome of M&A.

Its comments on foreign takeovers came in response to the Kay Review, set up to tackle short-termism in financial markets. In a letter, business secretary Vince Cable offers general support to Kay’s recommendations while expanding on his own thinking.

The government ‘will engage with companies and their investors… to promote investment that benefits the UK economy,’ he writes.

Yet quite how far the government plans to go remains unclear. The Kay report suggests politicians discourage takeovers that pose a significant threat to a firm’s UK operations. While the government does not directly back this proposal in its response, it makes clear it wants to be more involved.

One move that can be ruled out is the introduction of new rules to ‘test’ takeovers, like the kind found in Australia or Canada. A recent study in the UK called for a similar measure to be brought in for UK companies, but Cable dismissed it immediately. We’re ‘not going down that road,’ he stated.

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