Kraft's swoop on Cadbury prompts plan to change takeover rules

MAJOR changes to UK takeover rules were proposed yesterday in the wake of the controversial acquisition of chocolate maker Cadbury.

The Takeover Panel outlined proposals to make hostile takeovers more difficult although it rejected some of the more radical calls for overhaul including removing voting powers from investors such as hedge funds who acquire stakes during a bid battle.

Key recommendations include ensuring companies take into account the impact of a takeover on employees and giving them greater opportunity to make their views known.

The panel also plans to restructure its so-called "put up or shut up" regime to force companies to make a formal bid or walk away, while also introducing rules that will see all fees involved disclosed.

Lindsay Tomlinson, chairman of the Takeover Code Committee, said: "It is clear that some rebalancing of the rules is needed to check the evolution of market practice which has run in favour of the offeror."

Kraft's 11.6 billion takeover of Cadbury prompted the review. The US food giant has been heavily criticised over the treatment of Cadbury employees and its decision to shut the firm's Somerdale factory having initially suggested it would be retained.

The proposals will require firms to stick by statements made on employees and locations for at least a year - a proposal that could have changed the way Kraft communicated its intentions on the Somerdale site.

Firms should also be publicly named when an approach is revealed and will then automatically have four weeks to announce their intention to make an offer.

This would help reduce the time under which a hostile takeover target feels "under siege", according to the panel's recommendation.

A number of key figures - including business secretary Vince Cable - have made the case for stricter rules.

The panel rejected the more extreme measures put forward by many, such as raising the threshold for acceptance of hostile bids from the current 50 per cent plus one vote.

Cable welcomed the proposals, but also pledged to continue a separate review of the "wider questions around corporate governance and short-termism".

He said: "It has become too easy for bidders to make hostile offers and to succeed even though there are questionable benefits.

"It is pleasing that the panel has decided to take concrete steps to address this central concern."

The CBI said the changes would reduce periods of uncertainty for companies that are takeover targets.

"However, there remains a need for a full debate about the role of short-term investors in determining the outcomes of takeover battles," said Matthew Fell, CBI director for competitive markets.