As the US outlook brightens and US companies look to spend some of their hoarded cash on acquisitions abroad, they have many things to ponder and prepare for, not least how takeover rules differ in other jurisdictions.
This came to the fore again recently when two UK takeover targets managed to give their respective suitors—one from the US and one from France—the cold shoulder.
For US firms hoping to pick up a sweet deal in the UK—perhaps as an easy entry point into European markets--the failed bids for note-maker De La Rue and real estate outfit Capital Shopping Centres Group provide a valuable lesson on the importance of good prep-work, good advice, and a good understanding of the finer points of foreign takeover laws.
The two failed bids have in fact once again sparked shareholder and investor debate in the UK over the need to change provisions in the UK Takeover Code to address certain shortcomings in terms of bid disclosure.
But unless and until such changes are furthered, it behoves US firms to learn a lesson from Simon Property Group of the US and François-Charles Oberthur Fiduciaire of France—who bid for Capital and De La Rue, respectively.
Long story short, neither Oberthur nor Simon Property Group managed to get their bids before shareholders, as the Board and management of the target companies refused to formally enter into talks on the bids—saying they were too inadequate to warrant serious consideration.
Investors in the respective companies did not push the issue, and the two bidders respectively stalked off from their targets before reaching takeover deadlines.
This highlights the issue: UK companies are only required to even disclose a bid when: “following an approach to the offeree company, the offeree company is the subject of rumour and speculation or there is an untoward movement in its share price”, according to Rule 2.2 of the UK Takeover Code.
Of course, untoward movement in share price is generally determined by the Board of the company, as is untoward rumour or speculation. Hence, much debate over when exactly public disclosure should occur and whether additional guidelines should be set up to give clearer guidance.
For US companies, the success of a bid—not just in the UK but in any foreign jurisdiction--may be dependent on presupposing Board or management opposition and having war-time tactics in place to handle that opposition based on the specific vagaries of that country’s takeover regulations.