Bid rules tightened after Kraft

Tough new takeover rules are set to come into force in the wake of Kraft's controversial £11.5 billion bid for Cadbury last year.

The Takeover Panel today published a series of rules in its Takeover Code aimed at giving much greater protection to companies which face a bid.

After Kraft closed down a Cadbury factory, which it said it would keep open, the new rules require much more disclosure from bidder and target on what their plans will mean for staff.

The panel said in recent bids there had been too many examples of bidders having a tactical advantage over their target which damaged the company and its shareholders. The new rules include a shorter "put up or shut up" period so that companies do not have to suffer protracted "virtual bids".

A bidder must declare its intention within four weeks of making a putative bid approach. That would rule out the kind of assault Sir Philip Green made on Marks & Spencer for several months through 2004 without making a formal bid.

The identity of the bidder will also have to be made public immediately.

Bidders will be forced to make much greater disclosure on the massive fees they are paying, including broken-down details of fees paid to all its specific advisers ranging from banks to PR men. This should also mean much more publicity over how much of these are "success fees", which are paid only if the bidder wins.

The panel has included new rules enabling trade unions or other staff representatives to make their views known to investors.

The rules also effectively ban "break fees", which are paid by target companies to the bidder if the bid does not come off. These have become standard practice and usually amount to 1% of the value of the bid.

Paul Whitelock, corporate finance partner at Norton Rose, said: "Is this bad for bidders? It certainly means that they are going to have to be pretty well prepared before they make an approach. For target companies it takes away a lot of uncertainty and is broadly good."