L&G to keep hold of Farnell shares

LEGAL & General is to hold on to its shares in Farnell Electronics, despite voting against the management last week over its controversial plan to buy the US company Premier.

David Rough, investment director of L&G, said the shares would be retained because they were in various tracker funds. A sale would unbalance the portfolio. The split vote was good news for corporate governance, he added. "If nothing else, it shows that high-risk deals cannot be nodded through, and we got a damned good turnout."

The Farnell EGM last week saw 77 per cent of the shares voted - one of the highest turnouts ever for a deal of this sort, well above that for the vote at British Gas's controversial AGM last year, which could only muster just over 50 per cent.

Sixteen per cent voted against, concerned that Farnell was paying too high a premium for control of Premier, that the deal would dilute earnings and that Farnell would be loaded with too much debt. But a comfortable 84 per cent voted the deal through.

Dick Barfield, chief investment manager of Standard Life, another refusenik, said the rebellion was not a one-off. "We don't expect these situations to crop up frequently, but where it is a question of price, we have a duty to say no." He declined to say whether Standard Life would now sell its 2 per cent stake in the company.

Andrew Fisher, Farnell's finance director, will attend a meeting tomorrow at the UK offices of Premier in Horsham, Sussex, to begin implementing the takeover. "We are delighted the vote went in our favour, and that shareholders took the time to examine the arguments."

Farnell Premier, as it will be known, will have its shares quoted on the New York Stock Exchange and in London. Trading in the American Depositary Receipts should commence in April.

The merger will create the third largest electronics distributor in the world.