Cable Plots Tougher Foreign Takeover Rules

By Mark Kleinman, City Editor

Vince Cable is to set out new proposals to force buyers of key British companies to make watertight commitments aimed at protecting jobs and research budgets.

The Business Secretary is expected to detail plans that would oblige foreign bidders for UK businesses to offer binding guarantees to the City's takeover watchdog in order to prevent the erosion of Britain's knowledge base.

His pledge will come less than two months after the American pharmaceuticals giant Pfizer's interest in a £69bn takeover of AstraZeneca ignited a political storm in Westminster about a perceived threat to scientific research and development in Britain.

Mr Cable is understood to want to strengthen the powers of the Takeover Panel, which oversees mergers and takeovers involving British companies, but his plans will nevertheless fall short of the more stringent regulatory framework for which Labour has been calling.

The Business Secretary's proposals are expected to be set out later this weekend.

It was unclear on Saturday whether Mr Cable would require legislative change to push through his proposals or whether there would be a formal threshold above which acquirers of UK companies would be forced to adhere to any new rules.

Currently, the formal public interest test which gives politicians power to intervene in corporate deals is restricted to areas such as media plurality and financial stability.

The Takeover Panel, which regulates mergers and acquisitions, can force foreign bidders for UK companies in any sector to make or clarify public statements about their intentions.

However, it is not deemed by ministers to have sufficiently robust powers to compel companies to make legally-binding commitments on issues such as jobs and R&D.

Promises made by Kraft on UK jobs and manufacturing were reneged upon

That became a politically sensitive issue under the last Labour Government, when Kraft Foods of the US reneged on a pledge to retain a Cadbury manufacturing facility in the UK.

Speaking before a House of Lords select committee earlier this week, Mr Cable said he was not interested in introducing rules purely designed to protect the Union flag, pointing out that Britain's biggest manufacturer is Tata, the Indian conglomerate which owns Jaguar Land Rover.

"A crude nationality test has no merit," he said.

Hinting at a possible strengthening of the Takeover Panel's powers, he also said that an extension of the national interest test could risk breaching European Union law.

Ian Read, Pfizer's chief executive, said in May he regarded commitments to UK jobs made during the recent bid situation as legally enforceable.

When Pfizer abandoned its offer two months ago, Chuka Umunna, the Shadow Business Secretary, reaffirmed his commitment to subjecting the deal to a public interest test if a fresh approach was made under a Labour administration.

"While Labour was standing up for British jobs and British science throughout this takeover bid, David Cameron and his ministers were cheerleading for it when one of the primary motivations behind the deal was financial engineering - cited by the AstraZeneca board as one of the execution risks justifying rejection of the bid," he said at the time.

Pfizer was forced to walk away from its bid after a string of rejections by the AstraZeneca board, despite a desire from some of the UK company's shareholders for it to engage with its suitor.

AstraZeneca could invite Pfizer to enter fresh talks towards the end of August, although it would be late November before the US company could make a new unsolicited approach under Takeover Panel rules.

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