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By Denise Bedell-Bleeker
The UK Takeover Panel, in a move only seen twice in 40 years, last week decided to give three investors the 'cold shoulder'-a disciplinary action that sounds more like a line from a BBC drama than a regulatory response to underhanded dealings by big investors.
However, this cold shoulder is much more than a theatrical gesture.
Under the rule, no institution may work on deals with investors for a specified period, and they are effectively banned from any M&A activity with UK-regulated firms-including buying or selling shares.
In this case, the three investors-well-known British activist investor Brian Myerson, Brian Padgett and Daniel Posen-were given a three-year sanction after breaking Takeover Panel rules requiring that parties acting in concert disclose that fact and make a mandatory bid for a company if their total shareholdings surpass 30 percent of company shares outstanding.
The three men worked together to purchase 6.7 million shares of Principle Capital Investment Trust, a fund that Myerson started and continued to manage along with Padgett after Invesco Asset Management and hedge funds QVT and EIM bought a majority stake.
After the three main stakeholders in Principle Capital fought with Myerson early last year over management and wind-down of the portfolio, he and fellow investors Padgett and Posen began working in concert to buy up Principle Capital shares.
According to the Takeover Panel findings, the three investors passed the 30 percent rule, and therefore should have disclosed the fact that they were working in concert and made a mandatory takeover bid for Principle Capital.
In its ruling, the Panel noted that justifications given by the three investors were "co-ordinated, disingenuous and dishonest." It said: "Mr. Myerson is a sophisticated and experienced investor and knew well that his conduct had to be hidden from investigation." Although one appeal has already been denied, Myerson is continuing efforts to have the ruling overturned.
Looks like Myerson, Padgett and Posen won't be rubbing shoulders with the British corporate finance community over the next few years.
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