View from City Road: Brewer should drop Fleming
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Your support makes all the difference.GREENE KING, the regional brewer, ought to replace Robert Fleming as its merchant bank and financial adviser. After the failure of the bid for its Thames Valley rival, Morland, Fleming deserves nothing more.
Greene King launched its pounds 100m bid with the support of 43.5 per cent of the shares, as the Whitbread Investment Company was forced to sell by the controversial Beer Orders. At the outset most commentators thought that with 6.5 per cent to go Greene King could not possibly fail. It did: but more worrying for Greene King's long-term reputation were withdrawals of acceptances in the last 10 days, which made the result both humiliating and embarrassing.
Greene King must accept some blame, but questions must also be asked of Robert Fleming's role because, as the company's adviser in the City, it presided over at least three tactical errors.
First, the opening paper offer of about 490p and cash alternative of 450p was also declared final. The move left no room for manoeuvre and was seen as arrogant. And if WIC's predicament meant that Greene King had to declare the first offer final, there was no reason to let the bid run the full 60 days. An early guillotine would have shackled what turned out to be a stout defence by Morland.
Second, small print in the Takeover Code prevented Greene King publishing annual results during the bid process. The rule may be odd but it is there in black and white and Fleming should have spotted it.
Third, Morland investors were given little reason to turn against a management that has provided a good run of financial results. Greene King and Fleming's attack concentrated on how Morland could not survive the changed beerage environment. Greene King will certainly benefit from greater sales to the free trade, but it does not follow that Morland - reliant on its tied estate - automatically suffers.
The expenses of the bid amounted to pounds 3.8m. Sensibly, Greene King agreed to pay the full amount only in the event its bid was successful. In the event this looks wise. There may be a lesson here for other users of the City's services.
Companies - particularly those with less experience of the City and its foibles - should be sure they get their money's worth.
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