The Takeover Panel today published a consultation document on new rules, which it said were prompted by Pfizer Inc. (PFE)’s attempted takeover of British drugmaker AstraZeneca Plc (AZN), which was rejected earlier this year. If adopted, the rules would allow the Panel to seek a court order if it believes there’s a risk a buyer won’t stick to its promises, and to closely monitor their implementation.
British politicians including Business Secretary Vince Cable have lamented the absence of a mechanism that would force companies to follow through on
pledges to keep jobs and operations after a deal. Those concerns featured heavily in Parliamentary hearings on the proposed Pfizer deal, in which the American company said it would retain research-and-development activity in the U.K., with the caveat that it could “adjust these obligations” if circumstances changed.
The Panel has suggested establishing two mechanisms for commitments by bidders: “statements of intention” and more iron-clad “undertakings.” Reneging on the former would require consultations with the London-based regulator, while the latter could be enforced by the courts.
U.K. politicians have also cited the 2010 acquisition of chocolate producer Cadbury Ltd. by the company now known as Mondelez International Inc. (MDLZ) as proof of the need for stricter rules. After the deal, the U.S. firm went back on a pledge to keep open a factory in south-west England with about 400 employees.
The Takeover Panel, a non-governmental body staffed largely by lawyers and bankers on temporary secondments, already administers a set of regulations on deals much stricter than those in the U.S. They’ve occasionally caused befuddlement among overseas investors who aren’t familiar with the British system, which imposes tight restrictions on the timing of bids and on what constitutes a “final” offer, among other subjects.
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