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ICAS warns against over-regulating takeover market

27 Jul 10

Desire to learn lessons from Cadbury takeover could lead to knee-jerk suppression of the free market, says institute

Any reforms which could be viewed as protectionist risk damaging the UK’s position as a world-leading capital market, ICAS has warned in its response to the Takeover Panel’s consultation on the regulation of takeover bids.

Andrew Dougal, convener of the ICAS Business Policy Committee said: “While these are difficult and challenging economic times and the loss of ownership of UK companies to overseas investors and companies can often be disappointing, there is an open and free market within the UK. We would not be comfortable with the Takeover Panel affecting this by making changes to the current voting requirements in a takeover situation.

“Every party in a takeover situation has their own view of the merits or otherwise of any bid. They then make their decision accordingly. This is a right that should be afforded to all shareholders, irrespective of the length of ownership of shares. The recent situation with Cadbury and the actions of short-term investors is not, in our opinion, a sufficient reason to fundamentally change the Takeover Code.”

However, ICAS does believe that the panel should increase its scrutiny of ‘virtual bids’, in which a party can test the water by announcing a possible offer, but with no obligation to then make a formal offer.

Dougal advised: “The uncertainty caused by the ever-increasing practice of ‘virtual bids’ can be disruptive and confusing to shareholders and boards of the target companies. We believe this is an area which requires greater scrutiny, achieved through increased co-operation between the Panel and the Financial Services Authority.”

Consultation on the review of certain aspects of the regulation of takeover bids ends on 27 July.

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