. . . The agreement also effectively sees some infrastructure that was once owned by the U.K. government being renationalized by another European state.
Vince Cable, the deputy leader of the U.K.'s third party the Liberal Democrats, said in a statement Friday that the deal, which has yet to be approved by shareholders and regulators, underscored the need for a "public interest test" in such merger situations, due to concerns about jobs and service.
"Millions of people rely on Arriva for transport services and thousands of jobs are dependent on the company," he said.
"A takeover proposal such as this further underlines the need for a public interest test to look at the impact on jobs, service and the wider economy, as well as the long-term stability of the company."
Cable's remarks come against a background of renewed concern about whether the U.K., which has a relatively relaxed approach to takeovers by foreign companies, should redraw the rules.
Sparked by the acrimonious takeover of U.K. confectioner Cadbury PLC by U.S. company Kraft Foods Inc. (KFT), which ended in January with Cadbury's acceptance of a GBP11.9 billion deal, politicians and business leaders have spoken of their worries about the number of U.K. companies that have been taken over by overseas firms. Peter Mandelson, the U.K. business secretary, called recently for a wide-ranging review of U.K. takeover law.
Although the Cadbury situation stoked some hostility to foreign takeovers in the U.K., most politicians and business leaders haven't advocated blocking such takeovers on the grounds of foreign ownership. They have focused instead on the need to tighten up rules governing shareholder behavior and disclosure during bid situations.
A particular concern is the influence of hedge funds and other short-term shareholders, who were seen to play a dominant role in the Cadbury situation. Roger Carr, the former Cadbury chairman, said in a recent speech that over a quarter of Cadbury's share register fell to hedge funds during the bid situation, effectively disenfranchising longer-term institutional investors. He made a series of recommendations addressed at limiting the influence of hedge funds in U.K. takeover situations.
The U.K. Takeover Panel, which regulates merger and acquisition activity, is consulting on whether to change the rules.
The Liberal Democrats say that shareholders who acquire stock after a bid situation is in progress should effectively be prevented from voting or selling their shares.
U.K. M&A practitioners like bankers and lawyers resist such sweeping changes to the code, arguing that restricting the influence of hedge funds would inadvertantly impact longer-term shareholders too by limiting their ability to buy and sell shares, and could have make it harder for struggling or badly-run companies to find better new ownership.
Experts have pointed out also that such a change to the takeover code likely wouldn't have prevented Deutsche Bahn from acquiring Arriva, whose shareholder base is dominated by long term institutional investors, many of them U.K.-based.
"Arriva is far less dominated by overseas investors than Cadbury," said Scott Moeller, of the Cass Business School in London.