To the Said Business School, Oxford, to hear departing Cadbury chairman Roger Carr talk about hostile takeover bids – a timely address, given the Kraft deal…
Carr, we can report, had clearly topped up on the theobromine ahead of his speech. Treating his audience to an insider’s view of a genuine transatlantic takeover battle, which he “won” by virtue of extracting 850p a share, Carr proceeded to recommend a range of rule changes to The Code, the City’s cherished but non-statutory takeover rulebook. To wit:
- Tighten the rules around bear hugs, which unfairly extend the real bid period;
- Cut the Rule 8 disclosure threshold for shareholding movements from 1 per cent to 0.5 per cent; and, most radically,
- “…consider the possibility of disenfranchising shares that are acquired during a bid period to ensure short term money does not determine long term futures.”
Yes, you read that correctly: Roger Carr, the man who built and broke up Williams Holdings, and who ranks as one of Britain’s most experienced boardroom operators, thinks it might be a good idea to outlaw the bid arbitrage business.
The removal of voting rights in the bid period is clearly contentious and needs much more careful thought. Long funds would certainly find profitable top slicing more challenging by dulling market appetite in the hedge fund community.
Whilst not eliminating the chance of profit by risk takers, it would undoubtedly reduce the risk of self fulfilling prophecies.
The balance of power would move from those making speculative short term purchases in times of war to the judgement of those who had made their investment decision in peacetime.
For some, I am sure, a bridge too far – but for those really seeking to limit the influence of short money in bid situations – a real antidote.
Note here that Carr was talking on the back of his experience at Cadbury. Not at Mitchells & Butler, the pub company which he also chaired until early 2008 and which has also had its far share of share-register shenanigans. In fact Mitchells didn’t get a mention in the Said School address
Moving swiftly on, Carr also took a good swipe at Lord Mandelson, noting that for companies in the middle of a takeover battle, “it is important that political rhetoric is not viewed as a substitute for political action.”
In fact, Carr seems to want some sort of ‘strategically important company’ register for the British government to focus upon. And while he accepts that foreign ownership is a two-way street, he’s happy to engage in a bit of bacon counter nostalgia:
However the list of companies that are now controlled by foreign enterprises with all that that implies is long: – the leading UK based glass manufacturer Pilkington, our leading airports operator BAA, our leading ports operator P & O, our leading steel company, Corus and our leading chemicals company ICI, and now our leading confectionery company Cadbury to name but a few are all subsidiaries of overseas companies.
Does foreign ownership really matter – that is undoubtedly for Governments to debate and decide – to determine industrial policy – to find the balance between interventionism and protectionism – to conclude what really is in the national interest in a global economy.
Full speech available on the Hedgies’ table in the Long Room.