On the 11 July 2016, Theresa May launched her campaign to become leader of the Conservative Party and Prime Minister. I have already blogged about some of the noteworthy company law-related content here. Within her campaign speech was the following interesting paragraph:
‘Because as we saw when Cadbury’s – that great Birmingham company – was bought by Kraft, or when AstraZeneca was almost sold to Pfizer, transient shareholders – who are mostly companies investing other people’s money – are not the only people with an interest when firms are sold or close. Workers have a stake, local communities have a stake, and often the whole country has a stake. It is hard to think of an industry of greater strategic importance to Britain than its pharmaceutical industry, and AstraZeneca is one of the jewels in its crown. Yet two years ago the Government almost allowed AstraZeneca to be sold to Pfizer, the US company with a track record of asset stripping and whose self-confessed attraction to the deal was to avoid tax. A proper industrial strategy wouldn’t automatically stop the sale of British firms to foreign ones, but it should be capable of stepping in to defend a sector that is as important as pharmaceuticals is to Britain.’
Barely a week after Theresa May made this speech, Japan’s SoftBank initiated a £24.3 billion takeover bid of ARM Holdings plc. ARM is a world-leading microchip design company. A few years ago, ARM was one of three world-leading technology companies based in Cambridge, with the other two being Autonomy Corporation plc and CSR plc. In 2011, Autonomy Corporation plc was taken over by Hewlett Packard. In 2015, CSR plc was taken over by Qualcomm. It now appears that ARM too will become owned by an overseas company (the board of ARM is recommending the takeover and the 49% premium being offered on the shares is an indication of how much SoftBank wants to acquire ARM).
Given her comments a week previously, one might assume that the Prime Minister would be concerned about yet another ‘strategically important’ UK company being taken over by an overseas company. After all, the founder of ARM, Herman Hauser, stated that the takeover would be ‘a sad day for technology in Britain.’ In fact, the Prime Minister’s spokesman stated that the takeover was ‘a vote of confidence in Britain,’ a sentiment that was echoed by the new Business Secretary. Of course, the reality is that, following the referendum result, the significant drop in the value of Sterling when compared to the Yen simply meant that SoftBank was able to acquire the shares in ARM for less than in the past.
A week is indeed a long time in politics. And the Prime Minister has been criticised for her apparent lack of consistency. It should, of course, be noted that the takeover might benefit all involved. SoftBank has provided assurances in its firm intention to offer announcement that it will at least double the employee headcount in the UK, and the government will be keen to see that these assurance are upheld. SoftBank has also stated that it intends to preserve ARM as an organisation, along with its senior management and business model. Despite this, there will be many who will be concerned that another world-leading UK company is no longer independent.
This is Part 1 of a two-part blog post. The second part will look at the ability of government and regulators to block takeovers, and will also look at previous discussions relating to foreign takeovers of UK companies.