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| Under fire |
| Robert Cole / Dec 09, 2010, 00:12 IST |
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M&A: It’s usually wise to keep a bid approach secret, especially when there's doubt about its seriousness. But things are different when the target is vulnerable, as De La Rue has found. The leak of an approach from a French rival has put the UK banknote printer on the back foot.
Responsibilities for keeping the market informed shift during the course of a bid approach, such as the one that Oberthur has made for De La Rue. In general, the predator should make the running in the early days. If a preliminary bid approach is swatted away, the predator can show its seriousness by unveiling a formal offer.
All sides can and should keep schtum if the bid is going nowhere. There is no sense in talking about any old approach. Baseless M&A talk distracts and even destabilises targets, while the disclosure of talks whose outcome is uncertain can expose companies to mischief. In this instance, De La Rue might have found it harder to fill its chief executive vacancy.
UK takeover rules put the burden of responsibility for keeping the market informed on to the target when news of the bid leaks out, as it did in De La Rue’s case. If a company’s share price is rising, and an undeclared bid approach might be fuelling the increase, it is the duty of the board to tell shareholders what is, or might be, going on.
De La Rue met its obligations with a statement published on December 6. But it appears to have misjudged the determination of the French raider and it may have given itself a better chance to defend itself against an opportunistic bid by making its position public at an earlier stage. It now finds itself under fire.
The banknote printer’s better course of action may only be discernible with the benefit of hindsight. But if De La Rue had told the market about the Oberthur approach sooner, it would have had a better chance to air its misgivings to a sympathetic audience. It could have raised its doubts about deal financing and the risk that, in complying with due diligence requests, it shared commercially sensitive information with a suitor that is also a rival.
As events have unfolded, Oberthur has drawn the tactical advantage. To retain independence, De La Rue will now have to mount an extra stout defence.
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