Union up for sale as era of discount houses reaches end

Union, once one of the most prestigious financial institutions in the City, is up for sale amid expectations of substantial job losses at the company which made its reputation as a discount house.

One of the names in the frame to buy what remains of Union is Joseph Lewis, the reclusive millionaire who owns a chunk of Christie's auctioneers, and already has a 24 per cent stake.

Graeme Knox, a non-executive director who is taking over temporarily as chairman of Union, said the company had received several unsolicited bid approaches over the last few weeks and was pursuing discussions with the interested parties, which he declined to name.

The bid talks helped push Union's languishing share price up from 86.5p to 95p. The company, which has warned it expects to make an operating loss in 1996 of pounds 1.7m, is reorganising the top management. George Blunden, the son of a former deputy governor of the Bank of England, will leave as group chief executive at the end of the week with Ian Martin, the group's finance director.

Mr Blunden's sudden departure follows his own attempts to clean up Union's business since he was appointed in 1992 from Warburg's discount house.

The discount houses are specialist banks that have traditionally had a monopoly on daily dealings with the Bank of England in bills of exchange. The Bank uses these dealings to set interest rates.

But the Bank is radically restructuring the way it sets interest rates and is ending the privileged position of the City's discount houses by opening up dealings in short-term money market instruments to a wide range of banks, building societies and securities firms of UK or continental ownership.

Union, which dropped Discount from its name a few years ago, has told the Bank it does not intend to maintain its once privileged dealing position after 3 March, and will wind down its positions over the next few weeks.

It is also in advanced discussions about selling its Glasgow-based equity market-maker Aitken Campbell.

Mr Knox said he would accelerate the current strategy of building fee-based businesses and withdrawing from proprietary trading ones. Union will be left with two main business, Union Fund Management and Union CAL, a derivatives broker.

"The remaining parts of Union which have had, at best, a volatile profits record will be progressively closed down and the assets realised in an orderly fashion," Union said.

This leaves substantial scope for job losses from the firm, which is still shackled to the somewhat grandiose group structure which derived from its roots as a discount house.

"We are therefore taking steps to reduce substantially the running costs of Union which, of necessity, entail the regrettable departure of many able and conscientious people for whom there is no longer a role," Union said.

Mr Knox declined to give further details of how many of Union's 170 employees would be affected by the restructuring although yesterday he began a 30-day consultation programme with employees ahead of what is expected to be a "substantial programme of redundancies".