The UK’s merger and competition watchdog, the Takeover Panel, has proposed changes to takeover rules ensuring that companies stand by their takeover promises.
Current rules require a bidding company to include a statement in the offer document outlining its intentions with regards to the future business and employees of the target, as well as the bidder’s strategic plans for the target and their likely repercussions on employment and the locations of the target’s places of business.
But, the Takeover Panel came under political pressure to address whether or not these statements are binding after Pfizer’s £70 billion ($119 billion; €88 billion) bid for UK drug company AstraZeneca. Critics of the Pfizer bid said the company’s assurances during the acquisition process were vague and raised concerns of UK job cuts and a drop in medical research.
At the time the government’s top business policymaker, Vince Cable, told the BBC there must be “no wiggle room” for firms to walk away from promises made during an acquisition or face “tough” fines.
Under the proposed rules the Takeover Panel would require a bidding company to consult the Panel before making a statement and require that the terms of any statement be specific, precise and capable of objective assessment and not dependent on subjective judgements, according to a client alert from Debevoise & Plimpton.
The Takeover Panel has asked for comments on the proposed changes to be provided by no later than October 24, 2014.