Meanwhile, in its effort to buy Cadbury PLC, Kraft Foods Inc. has an ally of sorts in the Great Britain's legal framework for takeovers, reported The Chicago Tribune. Unlike in the United States, United Kingdom-based Cadbury's board and management cannot fight back with deal-killing tactics such as a poison pill. The battle can only be for the hearts and minds of shareholders, and hostile bids are more frequently successful there than in the United States, said the report.
And in Britain, any takeover tussle is usually short-lived, not the sort of drawn-out, resource-draining donnybrook that sometimes occurs in the United States, the report added.
The U.K.'s takeover code sets rigid timetables to avoid prolonging the uncertainty hanging over both companies. And the U.K. takeover process is shepherded by one powerful regulatory body, the Takeover Panel, which avoids the lengthy and expensive court fights common to contested takeovers in the United States.
British takeover regulators were called into action this week after Cadbury asked the Takeover Panel to issue what's called a "put-up-or-shut-up" notice to Northfield, Ill.-based Kraft, a source familiar with the matter told the newspaper. So, the panel will soon give Kraft a deadline to make a formal offer, likely within 28 days.
Currently, Kraft has pending an informal bid worth roughly $16 billion. But a formal offer carries more weight and regulatory meaning under U.K. rules. Analysts expect Kraft to make a formal, and most likely higher, offer for Cadbury, the report said. Kraft has not commented on its plans.
The British system is also more shareholder-friendly than the U.S. system, analysts say. "Shareholders [of a target company] are definitely better off in the United Kingdom," John Coffee, a law professor and corporate governance expert at Columbia University, told the paper. The same could be said for would-be acquirers like Kraft, because the U.K.'s takeover code prohibits management and directors in a target company from taking "frustrating action" against a takeover bid. In other words, "you can't put in a place a show stopper like a poison pill," Coffee said.
Poison pills typically create more shares if a hostile suitor tries to take over a company, driving up the purchase price and making the deal less attractive for the acquirer.
Another common U.S. takeover defensestaggered terms for corporate directorsis effectively prevented in the U.K., said the report. That means a buyer can unseat a board of directors in one swift election.
Management in the U.K. does have one weapon, the Tribune said: It can rally shareholders against a low-ball offer.
That's what Cadbury has done so far, said the report. Its leaders initially reacted coolly to Kraft's bid, saying it "fundamentally undervalues" their company. But the tone changed a bit earlier this week when Stitzer acknowledged in an interview with The Wall Street Journal that a deal "would make some strategic sense."
Click hereto view a microsite that Cadbury has set up on the Kraft offer.
Andclick here for previous CSP Daily News coverage.
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