Outgoing Cadbury head calls for UK M&A re-think

LONDON Feb 9 (Reuters) - Cadbury Plc's CBRY.L outgoing chairman joined calls for Britain to re-examine its long-standing openness to takeovers and the role of hedge funds in bid battles, after the chocolate maker's $18 billion sale to Kraft Foods Inc (KFT.N).

Roger Carr, the veteran dealmaker who also chairs power company Centrica Plc (CNA.L), suggested Britain consider making deals harder to clinch and hedge funds less pivotal.

"In recent times, something has happened to the system that appears to tip the playing field towards short termism," Carr said in a speech at Oxford University.

By mid-January, hedge funds and other short-term holders made up 31 percent of Cadbury's shareholder register, up from just 5 percent in September, Carr said.

"In the final analysis, it was the shift in the register that lost the battle for Cadbury -- the owners were progressively not long-term stewards of the business but financially motivated investors judged solely on their own quarterly financial performance," he said.

Regulatory filings show a clutch of hedge funds including Och Ziff (OZM.N), Eric Mindich's Eton Park and John Paulson's Paulson & Co had bought or sold stakes during the bid battle.

The takeover of Cadbury has already prompted disquiet from figures such as Business Secretary Peter Mandelson and Richard Lambert, head of business lobby the Confederation of British Industry.

Mandelson did not hinder the takeover but has called for a debate about whether investors take a sufficiently long-term view and whether foreign ownership of UK assets could harm jobs in areas such as research and development (R&D).

Critics counter that hedge funds provide liquidity in the stock market and buy stakes from institutions eager to book profits despite their supposedly "long-term" attitude.

They also say a free market in control of companies keeps Britain competitive and query whether foreign control automatically spurs job losses.

CHOCOLATE FANTASY

Carr suggested halving the threshold for disclosing the buying or selling of shares during a takeover to a holding of just 0.5 percent in a bid target -- a level that would have forced more hedge funds to publish their holdings.

Britain should also consider raising the acceptance threshold for a takeover from just over 50 percent, and could even mull barring new investors, who buy shares during a bid battle, from voting on a target's future, he said.

Long-term holders could be rewarded with tax breaks on dividends or capital gains.

He also took a swipe at "political rhetoric" and said lawmakers should decide their stance "before the next assault on our industrial landscape rather than bemoan their fate after the ship has sailed".

Carr said many customers were mourning "a chocolate fantasy of their childhood", rather than a global business shaped by successive mergers and acquisitions (M&A).

Cadbury agreed to an improved offer from Kraft after resisting its approach for five months. [ID:nLDE6111CO]

Carr said the hostile bid, which yielded some 400 million pounds ($623 million) of fees for advisers, had been "unexpected and disruptive," according a text of the speech.

"It comes out of the blue, destabilises the business, disturbs the momentum, distracts the people -- it adds to the workload, diverts management, becomes all consuming, demands utter commitment." (Editing by David Holmes) ($1=.6415 Pound)