W.G. Runciman

Back in the summer of 1988, I wrote a Diary describing what it had been like as the chairman of a public limited company to fight off an unwanted takeover bid. I ended the piece by saying that although in the opinion of some stockmarket buffs the company’s shares might in due course be valued at double the price of the unsuccessful offer, I did not think that my readers would necessarily be wise to reach for their stockbrokers at once. But they would have been. In April of this year, anyone who had bought the shares at the unsuccessful cash offer price of £3.28 would have received a circular letter from me saying that the Board recommended shareholders to accept a cash offer from a Swedish company which worked out, if you include the grossed-up dividend retained by the offerees, at £7.03.

What had happened was this. The Swedish company bought the 28.5 per cent stake still held by the failed predator of 1988 at a price of £4.25 and launched a bid for the rest at £5.20 – the price in the market at that time being £4.47. We immediately pushed out a circular to shareholders dismissing the offer as laughably inadequate. But our advisers, whose kindest word for the tactics of the failed predator of 1988 had been ‘childish’, took an altogether more serious view of the Swedes. They had a big bank behind them; they had first-class London advisers; and they had good reason to pay a hefty premium for a foothold in the EC in advance of 1992. We knew that £5.20 would only be a sighting shot, and that however vigorous our defence we might have to consider seriously the level of price at which it would be our duty to our shareholders to accept. The ritual exchange of arguments in successive circulars followed its course as laid down in the rules in a spirit which was combative but clean. The financial press gave us a fair hearing, and our advisers skilfully timed our release of material information to maximum advantage. But we knew that the company’s fate would in the end be decided by the attitude of one Scottish investment institution which held a now critical 8.5 per cent stake, and which would, however happy with our performance, have a price in their minds at which they would be bound to say yes. In an atmosphere of eerie calm, therefore, we waited to see what the Swedes’ real offer would be and how the Scottish institution would respond to it.

Normally, an institution in this position asks the chairman of the target company to come and talk to them before they make up their mind, and I was accordingly standing by with my well-honed arguments in my head and my shuttle ticket to Glasgow in my pocket. But it didn’t work out like that. The Swedes fired their second shot at £6.25, which was enough to make us sit up and pay attention but not enough to make us feel that our shareholders should be recommended to accept. But suppose this wasn’t their final offer? £6.25 or even £6.50 might not be enough. But at £7.50, say, we would have to be hanging out the bunting and composing hymns of gratitude on our shareholders’ behalf. My prospective interview with the Scottish institution was starting to take on a different hue.

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