My Lords, I draw attention to my entry in the register of interests, which shows that I have a professional capacity in the corporate finance sector. Amendment 56A concerns directors’ duties in mergers and takeovers. It is a modest measure, and I shall speak to it briefly and swiftly.
On Second Reading in the other place, the Secretary of State raised concerns about whether in mergers and takeovers there are the correct provisions in the code under which companies act. Indeed, public concern about the takeover of Cadburys by Kraft and the AstraZeneca/Pfizer situation led the Secretary of State at that time to say that the Bill would address those matters.
We have an excellent Takeover Panel, which is to be complimented. Since then, the panel has been hard at work introducing measures relating to matters that arose in Kraft/Cadbury, which have led to: a reduction in the time to make offers; long-term considerations to be given greater attention and the determining decision to be made not just on price; greater disclosure of bidders’ plans, fees and the financing of such offers; and the recognition of employees’ interests in takeovers. More recently, AstraZeneca/Pfizer raised other concerns about whether companies can really be trusted to honour the commitments that they made during a takeover bid. The Takeover Panel amended the code to allow companies voluntarily to make a new form of commitment, with a post-offer undertaking with which they would be required to comply, subject to expressly stated qualifications or conditions, which will strengthen the panel’s ability to monitor compliance with such undertakings by enabling the appointment of an independent supervisor, requiring written reports and suchlike.
However, all those issues centre on takeovers and do not deal with mergers, or even non-listed company mergers. Our amendment would enshrine the obligation for the directors of the company affected by all transactions to set out in a public statement when making recommendations how they have discharged their duties as shareholders. All those duties are laid out in the Companies Acts, and we want through the amendment to bring them to the forefront of directors’ thinking.
We are encouraged that after consultation during Committee, many in business and the City see that as a useful complement to the current work, role and position of the Takeover Panel. We are sure that that would fulfil the Secretary of State’s commitment during Second Reading and would also deliver for many practitioners a more dynamic and modern framework and approach. On a number of occasions, there have been transactions where a fulsome explanation was provided for the offeree directors’ recommendation where wider issues and considerations were fully taken into account.
I urge the Government to examine the letters issued by the chairman of Manchester United in May 2005, of Beale plc in January 2015, of Dixons Retail in June 2014 and the offer rejection letter of the AstraZeneca board in May 2014. Our amendment would make that practice, which is fully consistent with the Takeover Panel’s approach, mandatory. I beg to move.