Where exactly does the government stand on foreign takeovers?
Lord Mandelson, the Business Secretary, met with senior City figures on Thursday to discuss, amongst other things, takeovers and jobs. According to reports, the word Cadbury (LSE: CBRY) was not mentioned, but the context of the meeting is pretty clear.
Savaged by a dead sheep?
It had been previewed in the press as a warning to fund managers to resist foreign takeovers and asset-stripping, in the light Kraft's bid for ownership of the company. Contrary to expectations, the warnings seemed to be fairly tame and inoffensive: Institutional investors were asked to force bidders to be more open about their long-term plans for British businesses, and to consider long term as well as short-term interests. "This isn't about foreign versus domestic ownership. It's about responsible management."
Nothing terribly controversial in that. He was much more strident last month when he warned foreign predators "if you think that you can come here and make a fast buck you will find that you face huge opposition from the local population ... and from the British Government".
The discrepancy between the pre-meeting hype and the actual proceedings was interesting. As Andrew Hill in the Financial Times put it: "Promising other constituents -- unions, for instance -- that you'll give shareholders what-for, while charming them in the meeting itself, is classic politics."
Should we resist foreign takeovers?
But should the government really be concerned about takeovers, and foreign takeovers in particular?
For the workers concerned, it is undoubtedly a worrying time, but that in itself does not mean that the government should hinder the process of a takeover. If jobs are eventually moved to cheaper economies, that's sad for British workers, but good for foreign workers, who, let's face it, have just as much right to compete for employment. If a foreign worker is offering a better deal (and it's not always the case that they are), are we really saying the job should go to a more expensive British worker?
And from an investment point of view, when these companies are taken over, shares in British ownership are replaced by cash in British pockets, which can then be reinvested elsewhere, either here or overseas. Or if it's a share takeover, it results in more British ownership of a foreign-based company. I'm not convinced that a government is best placed to have an opinion on which of those options is in your best interests.
Whether the Business Secretary really wants to be getting involved in all this is open to debate, but with an election around the corner I'd think we can expect a more protectionist tone from politicians in general.
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