When the outgoing Chairman of
Cadbury calls for
new regulation of takeover bids it leaves a sour taste in the mouth. Presiding over another sell-out and than complaining about the alleged role of hedge funds in the bid smacks a bit of the pot calling the kettle black. We have repeatedly argued that current takeover rules are stacked in favor of the bidding party. Simple rules like restricting the right to vote to a certain percentage and to shareholders holding shares for longer than one year and taxing short-term capital gains on the same level as ordinary income (without any let-out for foreign holders, esp those located conveniently in tax havens like the Cayman Islands) would go a long way to return control of public companies to long-term shareholders. Preventing new owners of companies from dumping excess staff on the social security system financed by the taxpayer would prevent new owners from pursuing a 'slash-and-burn' strategy. The argument that any company that is listed is open to bids does not hold water either. Selling a company as a whole should only be a last recourse and subject to extremely onerous rules. Listing a company means above all that any shareholder should be - and is - able to sell his shares at any time. Anyone investing does so in the knowledge that he can sell again. That does not mean that the company itself should be sold. Investors should hold shares because they think that they will be worth x in a number of years, not because they can flip them in a few nano-seconds (High-Frequency Trading is a new cancer that is spreading rapidly!). The rules set by the Takeover Panel are plainly self-serving as the Panel is basically controlled by representatives of the corporate finance industry that profit handsomely from merger and acquisition activity.
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