May under pressure to tighten rules
• UK politicians urge May to help protect vulnerable companies after Kraft Heinz’s failed bid for Unilever
UK Prime Minister Theresa May came under pressure to tighten takeover rules and to do so quickly after the failed Kraft Heinz bid for Unilever. Politicians say more British firms may become vulnerable, exposed to a weakened pound that makes them cheaper to foreign investors.
UK Prime Minister Theresa May came under pressure to tighten takeover rules and to do so quickly, in the wake of the failed Kraft Heinz bid for Unilever.
“I use the expression sitting ducks and I’d worry about who’s next,” former business secretary Vince Cable said in an interview. He added: “We have a very weak takeover code in the UK. The public interest tests are too narrow.”
Politicians of all stripes say more British firms may be vulnerable, exposed to a weakened pound that makes them cheaper to foreign investors. May’s government is eager to show the UK is open for business, even as it prepares to redraw its relationship with its closest trading partners in the EU.
The $143bn offer, announced on Friday, was then abandoned on Sunday. Even if May had wanted to act against the Unilever approach, her powers are limited.
Britain’s takeover code allows interventions only if competition, media plurality, national security or financial stability might be at risk. The code should be extended beyond that, said Chuka Umunna, an opposition Labour legislator and the party’s former business spokesman.
‘MATERIAL IMPACT’
“There is an argument for expanding that to cover transactions which will have a material impact on the economy and affect our research and development and innovation base, which is, after all, how we’re
going to compete in the future,” Umunna told a panel discussion organised by the policy analyst ResPublica on Tuesday.
Company directors should be “empowered to take a longterm view” so they “don’t feel that they must recommend to
shareholders that they accept a takeover bid simply because in the short term they have been offered a high price”, he said.
It’s a point of view May might agree with. Last year, in one of only two speeches in her brief campaign to become prime
minister, she identified Kraft’s 2010 takeover of Cadbury as an example of the kind of deal that hurts staff in a target company and should have been blocked.
Alison McGovern, a Labour lawmaker whose district includes a Unilever plant, spent
the weekend thinking about ways to fight the Kraft approach. While she was relieved the danger had passed, she wants a plan in place for the next time a foreign bidder comes calling.
“I would have liked to see us negotiate stronger powers to intervene on social grounds in any case, but given the Brexit vote, now would seem like a good time to work out a policy and a plan to do so,” she said.
January was a missed opportunity when Business Secretary Greg Clark published an industrial strategy that was silent on foreign takeovers, according to Callum McCaig, business spokesman for the Scottish National Party.
‘DEFENDING SECTORS’
“I was surprised there was nothing on foreign takeovers in the industrial strategy, given what Theresa May had said about protecting UK industry in large-scale mergers,” he said in an interview.
Alongside Kraft-Cadbury, May’s speech last July identified US pharmaceutical company Pfizer’s 2014 attempt to buy London-based AstraZeneca as an example of a bad bid.
“A proper industrial strategy wouldn’t automatically stop the sale of British firms to foreign ones, but it should be capable of stepping in to defend a sector that is as important as pharmaceuticals is to Britain,” she said.
Not everyone is keen on altering the rules.
Richard Fuller, a legislator with May’s ruling Conservatives and a member of Parliament’s Business, Energy and Industrial Strategy Committee, said the government “has the powers that it needs”.
“If we rush to legislation about public interest tests, then our perspective will be governed very much by the needs of the time,” he said. “And the needs of the time are more acute than would normally be required.”