Tougher rules will favour target firms

THE Takeover Panel has adopted tougher merger rules, tipping the balance of power back towards acquisition targets.

It published its final rules yesterday after a year-long consultation prompted by the outcry over Kraft's purchase of Cadbury. That deal sparked anger after US-based Kraft reversed a promise to keep a plant open.

Business leaders and politicians questioned whether the UK's traditional openness to takeovers was hurting national interests. The new rules will take effect on 19 September and closely match proposals outlined last October.

Hostile bids will become more difficult and target companies will not have to endure months under "siege" from unsolicited suitors. Break fees, which penalise any party that walks away from a deal, will be banned.

Nick Rumsby, a member of the Takeover Panel and a partner at City law firm Linklaters, said: "Private equity houses, although probably resigned to the position, will continue to be disappointed."

Private equity firms have lobbied against the plans, hoping to temper a four-week deadline to "put up or shut up" once a bid emerges and the need to disclose financing arrangements.

Standard Life Investments, a major shareholder in UK firms, said it supported the changes overall, but argued that a decision to publicly identify a bidder should rest with the target company's board, not the Panel.