Foreign firms may face multimillion-pound fines if they break commitments on protecting jobs and investment once they have taken over British companies, Vince Cable has said.
The business secretary said the coalition was prepared to introduce legislation to ensure there could be no "wriggle room" for companies to abandon commitments such as those given by US drugs company Pfizer in its failed bid for British rival AstraZeneca.
But Cable said the government may go even further and widen the public interest test – where a strategic part of the economy is at risk – to offer greater protection against hostile takeovers. The business secretary also spoke of a tough approach to force companies that refuse to enter negotiations to sign up to commitments.
Speaking on BBC1's The Andrew Marr Show, Cable said he favours foreign investment in Britain. He said: "It's actually good for Britain to have inward investment. We have had very good foreign companies investing here, the [Indian-owned] Jaguar Land Rovers of this world. We want more of that."
But the business secretary said that there are lessons to be learned from the recent attempt by Pfizer to take control of AstraZeneca with a £69.4bn bid approach. Pfizer offered undertakings to protect AstraZeneca's research and development (R&D) work, including keeping 20% of the combined company's R&D workforce in the UK. However, in 2010 US food group Kraft was rebuked by the Takeover Panel, the City body that polices deals, for breaking a promise during its successful bid for Cadbury to keep open the UK company's Somerdale factory in Somerset. In future, companies could face severe financial penalties such as multi million-pound fines if they fail to live up to such commitments.
Cable said: "There will be cases where there are vital national interests, in this case large-scale investment of R&D. The question is how you protect it. What the government did then [during Pfizer's proposed takeover] was to engage in negotiations to seek assurances. Where we now have to strengthen that is to make sure that with any commitments made there is no wriggle room."
In a subsequent article for the website Liberal Democrat Voice, Cable said that the law may need to be tightened to ensure that foreign companies cannot use one aspect of the current legislation to abandon their commitments. The current law says that commitments could be reviewed if there is a "material change of conditions".
The business secretary also raised the prospect of widening the public interest test to protect vital sectors of the economy from hostile takeovers. At present, ministerial intervention is limited to takeovers where there are concerns over national security, media plurality or competition. Broadening the test has not yet won the support of the Tories.
Cable wrote: "As Liberal Democrats, we see a role for a narrow, specific intervention, compatible with our European legal framework, used as a last resort rather than a first response. To pursue a military analogy, we need a laser guided smart missile, not a cluster bomb." The business secretary said the Lib Dems might also seek to force commitments on companies that refuse to enter into negotiation.
He said: "Supposing companies don't want to negotiate or they are not willing to give the assurances you need. You then need some fall-back powers. You need a last resort where the government can intervene, can invoke the public interest."
Chuka Umunna, the shadow business secretary, said: "Labour has led calls for a strengthened public interest test to apply to proposed takeovers and mergers in order to protect Britain's R&D and science base, which the business secretary – three months on – now appears to be coming round to.
"Vince Cable says he wants commitments given by the hostile bidders who target British companies to have more teeth, a move which Labour would welcome. My offer to work with Vince Cable to achieve these aims, on a cross-party basis, remains open."
The business secretary also used his interview to hit back at the Commons business select committee's claims that the government had lost the taxpayer £1bn by underselling Royal Mail. Shares were priced at 330p and now stand at around 473p.
"There was a real risk this would never happen. The taxpayer would then have been left with billions of pounds of liability. It is all very well to be wise with hindsight. It is facile. At the time it was very clear that the correct judgment was made. That was the view of the independent advisers, it was as a result of extensive market survey, it was the advice of the officials, it was the advice of the Conservative minister who was responsible for the sale that we could not sell at a higher price. Under those circumstances there was no alternative but to do what we did."
Cable also described Tory plans to change the law to increase the threshold for trade union strike ballots are "potty".
He said: "I don't think there's any need for them. We have far fewer strikes than we had in the past and industrial relations are generally very good. The particular proposal that they are making that no strike should be valid unless over half of the union members have voted for it is simply potty. Most MPs wouldn't be validly elected if that was the test. We have got police [and crime] commissioners with 15% turnout. I think the proposal is nonsense."
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