This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: U.K. Lawmakers Urge Curb on Hedge Fund Takeovers

By Laura Board

LONDON ( TheStreet) -- A committee of U.K. lawmakers Thursday, July 25, revived the debate about limiting the voting power of hedge funds during takeovers and called on the government to study merger policies in comparable jurisdictions amid skepticism about the benefits of M&A.

The Business Select Committee issued its recommendations in response to a year-old report by economist John Kay on how to combat "short termism" in the City. That report was commissioned in the wake of frustration about the-then Kraft Foods' (KRFT) controversial 11.9 billion euro ($18.2 billion) purchase of Cadbury in February 2010, which was facilitated by the arrival of hedge funds on the storied confectioner's share register.

The decision to commission the Kay report also reflected wider disquiet about the rash of overseas takeovers of British companies in recent years and the ensuing impact on tax revenues and jobs. Thursday's report was the work of a committee of lawmakers chaired by Labor MP Adrian Bailey.

The lawmakers recommended that Business Secretary Vince Cable revisit the idea of introducing differential voting rights between short-term and long-term shareholders to restrict the role of hedge funds and arbitrageurs in bid outcomes. Though government members and regulators have previously dismissed the idea as unworkable, the committee said Cable told them "that his instinct was to go back and consider introducing differential votes."

"We recommend that the Department produces a feasibility study which clearly outlines the risks and benefits of introducing a policy that differentiates between shareholders and voting rights based on the length of time a share has been held," the lawmakers said.

Like Kay, the lawmakers Thursday stopped short of advocating any curbs specifically directed at foreign buyers, as did Business Secretary Cable when he responded to the Kay report last November. British law gives governments limited scope to intervene in mergers and the state has shied away from stretching the definitions of "public interest" and "national security" to facilitate meddling.

"We recommend that the Government conducts and publishes an assessment of the takeover regimes of other similar economies with a view to learning about the impact that takeovers have had on their companies and economies," the lawmakers went on to say. "Furthermore, it should summarize which positive elements may be incorporated into our domestic system to strengthen our economy and ensure that takeovers benefit, rather than damage our economy."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.30 -0.92%
FB $118.08 0.55%
GOOG $695.81 0.50%
TSLA $234.18 0.80%
YHOO $35.97 -0.11%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs