As the British watchdog on takeovers set a deadline of January 30 to decide the buyer for Corus between Tata Steel and CSN, it launched an investigation into recent cases of insider trading before major deals were finalised.
The Financial Services Authority (FSA), the regulator of all financial services in Britain, is investigating four recent major takeovers in which the practice of insider trading led to some people making huge profits on the market. All four deals involved leaks of confidential information.
Research by FSA revealed that insider trading could have taken place before as many as a third of takeover announcements in 2004. The FSA did not name the companies involved in the four deals. The investigation has been launched in consultation with the Panel on Takeovers and Mergers, which regulates and supervises takeovers.
On the Corus issue, the panel has set a deadline of January 30 to resolve the "competitive situation" between Tata Steel and CSN. Failure to do so by then would lead to an auction.
In a ruling, the panel stated: "At the current time, both Tata and CSN are entitled to announce revised offers for Corus. Following discussions with the parties, the panel executive has ruled that the last date for Tata and CSN to announce revised offers for Corus shall be January 30, 2007.
"If a competitive situation continues to exist shortly before January 30, pursuant to Rule 32.5 of the code, the panel executive may require any revised offers to be published in accordance with an auction procedure, the terms of which will be determined by the panel executive."
It said that each of the three parties had agreed to the ruling. Corus said that in light of the ruling, it had decided to adjourn its shareholders meeting planned for Wednesday to a later date. Shareholders were to vote on the two competing offers.
On the four takeover deals under investigation, the FSA said in its latest Market Watch report: "We are holding detailed discussions with all the key parties to those deals - the advisers, lawyers, PR firms, printers, issuers, debt and equity providers. We will compare these deals with deals that did not have a leak of information.
"In this review we will meet specific 'deal teams' to go through the chronology of deals, undertaking a high level study of IT systems and security and reviewing hard-copy filing systems together with a sample review of documents.
"We are particularly interested in understanding how conflicts are managed and what use is made of information barriers such as Chinese walls and, related to this, wall-crossing procedures."
The so-called 'Chinese walls' are supposed to ensure that sensitive information does not leak from investment banks' deal advisers to their trading desks. There have been several high-profile mergers and acquisitions in the last two years, mainly from foreign investors, including some from India. Britain received more foreign direct investment last year than any other country.
According to the Organisation for Economic Cooperation and Development (OECD), Britain received $164.5 billion in foreign investment, compared to the US' $109.8 billion and China $72.4 billion. In Britain, most of the foreign investment was spent on acquiring British businesses.