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Aug 31, 2010

UK’s Takeover Panel looks back on slow year

But deal making is picking up this summer

It hasn’t just been a slow year for the UK’s M&A bankers. Regulators have also spent much of the last 12 months twiddling their thumbs. In July, the Takeover Panel, which regulates takeover activity in the UK, released its annual report, in which it notes that the lack of activity led it to cut back staff.

‘In the light of the reduced level of bid activity, the executive’s headcount has been reduced somewhat, both in permanent staff and in secondees, and, given the pressures arising from these other issues, I would like to thank all members of the executive for their continuing commitment and professionalism,’ explains Sir Gordon Langley, the Takeover Panel’s chairman, in the report.

The panel reveals there were 90 takeover proposals that ‘became unconditional, were withdrawn or lapsed’ in the 12 months to March 2010. That contrasts with 104 in the previous year. It was also the slowest year since 1994, during which there were 84 takeover proposals.

Thankfully, there were a few big deals to keep the panel focused. The main event, obviously, was Kraft’s £11.7 bn ($18.1 bn) acquisition of UK confectioner Cadbury. Many of the issues raised during this transaction – such as the role hedge funds should play in big transactions – remain unresolved.

One of the latest figures to get involved in this discussion is Richard Lambert, director general of the Confederation of British Industry (CBI), an influential industry body. In response to the panel’s consultation paper on the Kraft/Cadbury deal, Lambert says: ‘The view is that company ownership and, in particular, the location of head offices, can make a significant difference to decisions about where to undertake research and development, and to create new jobs. All this would suggest that the UK economy is gradually being weakened as the ownership of businesses shifts overseas.’

In the submission, Lambert also backs plans to curb the influence of short-term traders during takeovers, while insisting that the UK should not go down a protectionist route. Lambert is an influential figure and his submission gives the panel plenty to mull over.

The panel’s other main concern this year was what to do about illicit position building in Principle Capital Investment Trust. The panel decided to ‘cold shoulder’ for three years three investors who failed to reveal they were acting in concert when they bought shares in the business. It was the first time the panel had taken such action since the early 1990s. While they are being cold-shouldered by the panel, the concerned individuals cannot take part in any takeover activity involving a UK-regulated company.

With summer in full swing in the UK, you’d think any revival of activity would at least have to wait until the autumn, but there was some activity in July. First of all, BP announced it would sell $7 bn worth of assets to US company Apache. This will go toward the estimated $30 bn it needs to raise to cover costs arising from its oil spill in the Gulf of Mexico.

In addition, Reckitt Benckiser, the household goods provider, is diversifying its product range by buying SSL International, which is best known for owning the Durex condoms brand.