Mergers Watchdog Paves Way For 'Cable Fines'

The City's merger watchdog will on Monday pave the way for a crackdown on companies which break pledges on jobs and investment made during major corporate takeover deals.

Sky News has learnt that the Takeover Panel is to publish a consultation paper setting out for the first time the prospect of imposing substantial penalties on foreign bidders amid a debate about Britain's approach to protecting strategically important companies.

Monday's paper will not include specific details of the scope of potential fines, insiders said, with final rules unlikely to emerge until next year.

However, its publication is likely to be welcomed by Vince Cable, the Business Secretary, who has been pushing for tougher sanctions against companies which renege on commitments made when acquiring UK-based businesses.

The issue sprang to prominence under the last Labour government, when Kraft Foods (NasdaqGS: KRFT - news) of the US broke a pledge to retain a Cadbury manufacturing facility in the UK.

It re-emerged earlier this year when Pfizer (NYSE: PFE - news) , the US drug-maker, made a string of proposals to buy AstraZeneca (NYSE: AZN - news) , its UK-based rival.

AstraZeneca has been free to invite Pfizer to enter fresh talks since the end of August, although it will not be until late November that the overseas company can make another unsolicited approach under City rules.

Under the existing regime, the Takeover Panel, which is an independent body, can force bidders for UK companies in any sector to make or clarify public statements about their intentions.

However, it is not deemed by ministers to have sufficiently robust powers to hold companies to commitments on issues such as jobs and research and development.

Speaking before a House of Lords select committee earlier this year, Mr Cable said he was not interested in introducing rules purely designed to protect the Union flag, pointing out that Britain's biggest manufacturer is Tata, the Indian conglomerate which owns Jaguar Land Rover.

"A crude nationality test has no merit," he said.

A flurry of deals this year has seen US companies take over foreign rivals in order to move their headquarters overseas for tax reasons.

In a Commons exchange with his Labour counterpart Chuka Umunna last week, Mr Cable said that many of the concerns about so-called tax inversions were "wholly unfounded", but added that "takeovers, although they are generally beneficial to the UK economy, should not be driven by artificial short-term tax considerations".

Speaking to Sky News on Sunday, Mr Umunna said: "Vince Cable is right and we support moves to ensure bidders for British companies keep to the promises they make in advance of takeovers proceeding, but I am not yet clear how exactly the Business Secretary proposes to do this beyond what is already provided for in the Code.

"The Business Department needs to provide further details so that these matters can be properly debated, not least in Parliament."

The Takeover Panel declined to comment.