Lord Mandelson says directors should consider more than price
Business Secretary Lord Mandelson has called for tougher rules on takeovers to protect the long-term interests of employees and shareholders.
He said that too often mergers failed to create value for people other than advisers and short-term investors.
He said measures should be put in place so that all shareholders could scrutinise any takeover more closely.
Lord Mandelson criticised the role of speculators in the takeover of Cadbury by US food giant Kraft last month.
"It is hard to ignore the fact that the fate of the company with a long history and many tens of thousands of employees was decided by people who had not owned the company a few weeks earlier, and probably had no intention of owning it a few weeks later," he said.
He said company directors often accepted a takeover bid if it exceeded their own valuation of the company they ran.
But they should, under current rules, "consider the best outcome for a company in the long term, considering interests of all the stakeholders - employees, suppliers, and its brands and capabilities".
"Getting a higher price in a takeover may not be the best proxy for that," he said.
He added that "we need directors equipped to be stewards, rather than just auctioneers".
The business secretary outlined a number of ways to tighten up rules on takeovers:
- Raising the voting threshold needed to secure new ownership to two-thirds
- Lowering the requirement to disclose share ownership during a takeover bid from 1% to 0.5%
- Giving the bidding company less time to tie up a deal
- Forcing bidders to reveal how they intend to finance a takeover
- Requiring greater transparency on advisers' fees and incentives.
He also suggested that shareholders in the acquiring company should be able to scrutinise any takeover bid.
Lord Mandelson was speaking at the annual Trade and Industry Dinner hosted by the Lord Mayor of the City of London.
Kraft Foods sealed its takeover of Cadbury after shareholders in the UK chocolate maker voted in favour of the £11.5bn ($18.9bn at the time) deal at the beginning of February.
Unions have expressed fears that Kraft will cut jobs to recoup some of the cost of the deal, while some people have bemoaned the sale of one of the UK's best-known companies to a foreign buyer.