Voting rights in UK companies under the spotlight

Apr 01, 2010
<p>Monthly M&amp;A roundup looks at the ramifications of Cadbury sale</p>

Roger Carr, Cadbury’s outgoing chairman, has rekindled the debate over voting rights in UK companies following the sale of his business to Kraft. In a speech to the Saïd Business School (part of Oxford University), Carr said the fate of Cadbury had been decided by the interests of short-term hedge funds that took control of 
a large portion of the company’s shares during the takeover battle.

‘Something has happened to the system that appears to tip the playing field toward short-termism,’ he said. ‘In the final analysis, it was the shift in the register that lost the battle for Cadbury; the owners were progressively not long-term stewards of the business but financially motivated investors judged solely on their own quarterly financial performance.’ Short-term investors made up 31 percent of the share register by the takeover’s conclusion in January, a rise from 5 percent in September 2009, 
he added.

The takeover was already unpopular, given Cadbury’s long roots in the country. The business traces its history back to 1824, when a Quaker called John Cadbury began offering coca beverages alongside his existing lines of tea and coffee. But Carr’s concerns are based in the modern financial world of derivatives, leveraged hedge funds and takeover codes. He said the UK needs to work out what kind of takeover regime it wants ‘before the next assault on our industrial landscape, rather than bemoan their fate after the ship has sailed.’

Online dealsIn his suggestions, Carr said the takeover threshold could be raised to above 50 percent to make it harder for hostile bidders to achieve their aim, and that shares bought during the bid period could have their voting rights removed. He also suggested bringing in tougher disclosure rules on the buying and selling of shares and derivatives.

According to press reports, the speech was well received by the people who matter – the UK’s Takeover Panel – and a consultation paper on corporate acquisitions may soon be launched looking into areas like takeover thresholds. 
The UK has traditionally been open to a lightly regulated financial market, encouraging merger activity and short-term speculation. Cadbury may be gone, but its 
sale could mark a turning point 
in UK attitudes.

Tech boom
New York boutique investment bank Gridley & Company has unveiled the results of its annual M&A survey, which attempts to uncover upcoming trends in the information services industries. 
It spoke to around 80 senior executives and finds 80 percent of them expect to be active as either buyers or sellers, while 28 percent say they will be fundraising during 2010. In the internet area, Google is unsurprisingly expected to 
drive a lot of the activity.

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