Financial News

  • 18 July 2014, 17:33

Ex-Cadbury Chair Warns On Cable Takeover Plan

The former chairman of Cadbury has warned that Vince Cable's proposal to legislate to prevent some foreign takeovers of British companies would send damaging signals about the openness of the UK economy.

Speaking exclusively to Sky News, Sir Roger Carr said that the Business Secretary's intended reforms could put future governments in "an invidious position" to intervene in deals that should properly be left to the market.

Sir Roger, a former president of the CBI who now chairs BAE Systems, the defence contractor, presided over the sale of Cadbury in 2010 to Kraft Foods of the US.

Kraft was censured by the UK Takeover Panel, which regulates mergers, for reneging on a promise to retain a key Cadbury manufacturing facility in the UK.

Mr Cable wants to give the Panel enhanced powers to fine foreign companies which do not honour commitments to preserve jobs or research spending.

He also wants to introduce a "last resort power" which would allow ministers to block a deal that they decided was contrary to the national interest.

But Sir Roger said the proposals could prove to be counter-productive.

"Legislating to protect all British companies from foreign takeovers risks undermining the UK's reputation as an open economy," he warned.

"Giving the Government a right to intervene through a last resort mechanism in deals where the public is exerting pressure on it to do just that may put it in an invidious position."

He said that if such a power had been available to the last Labour Government during Kraft's takeover of Cadbury: "Ministers may have felt obliged to intervene driven by public sentiment for the brand, which was not supported by investor sentiment for the company or the economic performance of the business".

The debate about foreign takeovers has been stoked in recent months by Pfizer's unsuccessful attempt to buy AstraZeneca, the British-based pharmaceutical group, for nearly 70bn.

Pfizer made a series of pledges about UK jobs and scientific research during the discussions, but doubt was cast on the ability of the Government to enforce those commitments.

'It is right that buyers of UK companies should feel obliged to honour commitments made in the heat of battle," Sir Roger said.

"My concern, however, is that circumstances may change such that financial penalties imposed on the company become neither fair to the company, its employees or investors or appropriate to the revised economic circumstances."

He added that the principle of "comply or explain" to hold company bosses to account had been broadly effective.

"It may well be the appropriate course of action for ensuring bid promises are honoured in the future," Sir Roger said.

Another major foreign takeover of a London-listed company is expected to take place as soon as Friday, with the Financial Times reporting that AbbVie is poised to unveil a 31bn takeover of Shire, another big drug developer.

The deal would involve a so-called inversion under which AbbVie would shift its headquarters from the US in order to benefit from lower corporate tax rates.

That mechanism, which also underpinned Pfizer's interest in AstraZeneca, has prompted outrage among US politicians, who have vowed to put an end to what they deem to be an "unpatriotic" practice.

Advertisement