The UK's M&A regulator, The Takeover Panel has concluded that the regime for hostile bids needs revision. Calls for a radical overhaul of the British approach to takeovers were made following the heated Kraft/Cadbury deal earlier this year.

The Panel has rejected some of the more far reaching proposals mooted at the time but has conceded that target companies need to be able to defend themselves from protracted "virtual bids".

One of the most ambitious requests for change was the suggestion that the threshold for a successful bid should have been moved above the current 50% plus one of the target firm's shareholders. The other was the removal of  voting rights of  shares in the target firm bought following the start of the bidding process. According to the Panel the proposals were unanimously rejected during the consultation as they were impractical under UK company law.

The changes which have met with agreement  include:

• More protection against "virtual bids" by forcing bidders to clarify their offer in a short period of time;
• Stricter disclosures re the identity of bidders;
• Disclosure of bid-related fees; and
• Better disclosure about the impact of the bid on the target company and its employees, including making it easier for employees to raise their concerns

Lindsay Tomlinson, chair of the Takeover Panel's code committee, said in a statement on Thursday: "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. We will propose proportionate measures to do this, which do not require changes to law or compromise shareholders' rights."

Further Reading

Takeover Panel Statement (PDF) >>