BZW accused of bullying Northern rebels

A big City row has broken out over alleged strong-arm tactics in the run-up to Northern Electric's confrontation with rebel shareholders at an extraordinary general meeting next week.

Dissident shareholders are complaining about the methods used by the team led by Simon de Zoete, deputy chairman of corporate broking at Barclays de Zoete Wedd, one of the advisers to Northern Electric.

Some shareholders, led by Guy Wyser-Pratte, a US-based arbitrageur, are determined to force Northern Electric's management to consider a new bid by Trafalgar House as soon as possible and have called an extraordinary general meeting next week to press their point.

Mr Wyser-Pratte claims that, in the run-up to the meeting, BZW is bullying supporters of the EGM proposal into dropping their demands.

"The debate should be decided on the merit or arguments and not on the bullying tactics of one of the largest institutions in the City," said Mr Wyser-Pratte.

His accusations are confirmed by one institutional shareholder: "I have never been put under so much pressure before. They are scraping the bottom of the barrel."

The alleged tactics used against the shareholders include repeated telephone calls, the contacting of senior executives at shareholding institutions and the threat of exclusion from privileged positions such as places on underwriting lists and syndicates.

"If this type of underhand pressure continues and the rights of shareholders become threatened, I will be obliged to complain to the Securities and Futures Association," said Mr Wyser-Pratte.

A senior source at BZW categorically denied that the company was involved in bullying. "It is absolute and complete nonsense that we are using strong- arm tactics. We are putting our point over in a very conservative way."

The EGM follows a long-running takeover attempt by Trafalgar House, which saw some arbitrageurs, including Mr Wyser-Pratte, taking large positions. Trafalgar's plans were upset when Professor Stephen Littlechild announced a review of the pricing regime affecting the electricity industry and electricity share prices tumbled.

Trafalgar withdrew its original offer but indicated that it would like to bid afresh at a lower level. To do that under City takeover rules, it required the support of the Northern board, which has steadfastly refused to co-operate.

With Northern shares trading at well below the level at which Trafalgar said it would bid, dissident shareholders joined together to requisition an EGM at which they hope to force Northern to change its stance.

The EGM promises to be a close-run event. Ownership of shares is spread across a wide number of investors. Institutions supporting the resolution are thought to include Hill Samuel, Schroders, Kleinwort Benson, Salomon, Scottish Value Trust, Laurence Keen and Brewin Dolphin. Salomon is the most important, with more than 5 per cent of the shares.

Recently, Prudential lined up its 8 per cent holding behind Northern Electric management, led by David Morris. Twenty per cent of the shares are held by private shareholders.

The company is planning shortly to launch a roadshow in the North-east in an effort to drum up support.

The row gives an insight into the back-room manoeuvrings and deal-making that often takes place between City institutions during takeover negotiations.

The Northern bid is believed to be Guy Wyser-Pratte's first major play in the UK market. Some British institutions are wary of his use of overtly aggressive tactics, for which he is well known in the United States.