The Takeover Panel found itself the subject of much City scrutiny during August following its decision to hand control of Welsh water company Hyder to WPD, despite a last-ditch appeal against the decision by rival bidder St David Capital (SDC), a company formed by Nomura International's Principal Finance Group.
Most interest focused on the panel's decision on 10 August, only a day before the deadline for final bids, to require sealed bids, either on a fixed or formula basis. As the panel now admits, neither SDC nor WPD were happy with the use of formula bids – which allows each side to bid a variable amount over and above the other party's offer. SDC did not to favour the sealed bid process at all as it did not raise its offer above its last bid of 360p per share.
To make matters worse, WPD's financial advisers Schroder Salomon Smith Barney then managed to miss the 4.30pm deadline on 11 August (day 46 of the takeover battle and the last day of new bids under the Takeover Code), leading SDC's advisers to argue that WPD's sealed bid was now invalid. In the end, the panel rejected SDC's appeal and Hyder has gone to WPD at 360p a share. The uncertainty over the outcome of the takeover battle was certainly of no benefit to Hyder's shareholders, whose peace of mind is one of the main arguments in favour of using the panel's Takeover Code in the first place.
But a Legal Week vox pop of heads of corporate and other senior corporate partners at the leading City firms indicates that strong support for the panel remains. Typical comments included "an excellent, professional organisation"; "it is run by practitioners who know what the issues are and they are flexible and react swiftly"; "their statements are well drafted, succinct and they clearly understand the points", and "it is head and shoulders over any other system".
Nevertheless, several partners levelled criticism at the formula system of the sealed bid process – "a sudden death play off" – and said that they would prefer to rely on a more controlled bidding process. Clifford Chance head of corporate, David Childs, is among those partners who are full of praise for the panel, but he admits that the Hyder bid has prompted an interesting debate.
Other partners at City firms say that sometimes the time pressures of responding swiftly to events leads the panel to make "impure" decisions. Others suggest that the City institutions that submit themselves to the panel's rules are starting to lose their faith in its decision making.
With most of the City's banking community now owned by foreign entities many of the old allegiances to the panel have been eroded. Some partners feel that the financial advisers are no longer frightened by the power of the panel. One suggests that the forthcoming overlap of authority with the Financial Services Authority (FSA) will prove useful, (the overlap is in the policing of market abuses) as it will remind financial advisers that they could face the loss of their practising licenses if they do not stick to the rules. Nomura's decision to accept the panel's decision indicates that for the time being, the banks will still fall in line with a panel ruling. But the Hyder ruling exposed the panel to sustained attacks in the national press.
Add to this the Government's clear desire to transfer the panel's powers to the FSA, and it appears that the future of this City institution remains uncertain.
l Freshfields acted for Nomura with four heavyweight partners – Barry O'Brien, David Crook, Deirdre Trapp and Simon Marchant – involved. Allen & Overy did the business for WPD with corporate partners Michael Scargill and Mark Gearing leading the advice. A five-partner team from Slaughter and May, including corporate partners Nigel Boardman, David Frank and Martin Whelton, acted for Hyder.