SSSB ruled off-side in Castorama bid

Kingfisher's £3.2bn bid to take over the remaining shares of the Castorama DIY business descended further into farce yesterday when the French group disputed the independence of the investment bank appointed to rule on the value of the British company's offer.

Castorama challenged the independence of Schroder Salomon Smith Barney (SSSB) saying it had links with Kingfisher. It pointed out that SSSB is financial adviser to Compass, the catering group also chaired by Kingfisher's chairman, Francis Mackay.

It intends to challenge the bank's appointment in a French court today. Kingfisher plans to defend the appointment and press ahead with plans to buy-out the remaining 45 per cent of the shares in Castorama it does not already own.

The French directors of Castorama also criticised SSSB for the issue of a broker's note on 6 May saying the Kingfisher offer of €67 per share was fair.

The French directors said: "The failure of Kingfisher to disclose the close ties between its chairman and SSSB, together with SSSB's untimely statement on price on the eve of its appointment, are clearly shocking and call for a fundamental appraisal of SSSB's appointment."

SSSB was chosen from a shortlist of three banks. The others were JP Morgan and Dresdner Kleinwort Benson. The Castorama directors say they already knew that SSSB was acting for Homebase on its planned stock market flotation but had not been made aware of the Francis Mackay link. This was despite Castorama's advisers, Merrill Lynch, spending three days on due diligence on the matter.

SSSB issued a statement saying it was comfortable it would be independent. "We have considered the position carefully and we are satisfied that despite Castorama's fears to the contrary we are able to provide a totally independent view on the fairness of Kingfisher's proposed offer," a spokesman said.

Kingfisher said the French, under Jean-Hugues Loyez, the Castorama chief executive, were embarking on just another delaying tactic. "Of course it is extremely frustrating for Kingfisher and we doubt that Castorama's minority shareholders will thank Mr Loyez for trying to impede the bid in this way. But it is transparently just another ploy to scupper the implementation of the deal he agreed in 1998," a Kingfisher spokeswoman said.

Mr Loyez, who has resigned from the Kingfisher board over the attempted takeover, said he had spoken to Mr Mackay on Sunday night. "He was in America and he was kind of tired. He said 'let the lawyers talk together.'"

Mr Loyez arrives in London today to lobby Kingfisher shareholders to oppose the deal. Kingfisher holds an extraordinary general meeting on 7 June to seek shareholder approval.

Last week 70 Castorama managers wrote to Kingfisher's chairman seeking clarification over Castorama's longer-term future. Kingfisher will meet the managers in London on 31 May. It has already assured them there will be no job losses.