Takeover Panel nears tougher M&A rules

LONDON Mon Mar 21, 2011 6:55pm GMT

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LONDON (Reuters) - The Takeover Panel moved closer to adopting tougher merger rules, despite opposition from private equity firms and others who argue the watchdog's new regime throws up too many obstacles to takeovers.

The panel's proposals, first outlined in October, are meant to give hostile bidders less sway and to allow boards to give more weight to the views of employees and other stakeholders.

Private equity firms wanted the panel to water down key measures such as a near-banning of "break fees," a four-week deadline to "put up or shut up" once a bid approach emerges, and the need to reveal how a bid is financed.

The 28-day deadline is supposed to stop target companies enduring months "under siege" from a would-be bidder, but represents a tough timetable for buyout firms dependent on complex financing packages.

On Monday the panel published a 172-page consultation paper outlining detailed changes to the Takeover Code and set a May 27 deadline for responses. Lawyers said, however, little had changed since its earlier proposals, and it looked likely that most of the rules would be adopted.

"It doesn't look like much has changed, despite three months of intense lobbying by private equity and others," said Jonny Myers, a lawyer at Clifford Chance.

"For our corporate clients it's excellent if they are targets -- it strengthens their position immensely -- but I think it's bad news for private equity, and bad news for long-term shareholders too if this deters bidders."

The panel devised the changes after Kraft Foods Inc's KFT.N takeover of Cadbury Plc sparked political and public outcry, although it rejected the most radical proposals put forward by former Cadbury Chairman Roger Carr and others.

Other changes will include publishing fees paid to lawyers, bankers and public relations officials.

Herbert Smith, another law firm, said while Monday's document included tweaks such as allowing a "white knight" counterbidder to remain secret or to negotiate a break fee, in general the panel had "held firm with the key principles set out in its response paper ... despite the lobbying efforts of the private equity industry and others since then."

"A few new carve-outs have been introduced but in other areas there is a toughening up of the stance," Herbert Smith added in an email.

The full consultation paper is available on the panel's website: here

(Reporting by Quentin Webb; editing by David Cowell)

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