Bottom Line: Strange moves from Guinness Mahon

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The Independent Online
HERE'S a funny thing: Guinness Mahon, financial adviser to Aberdeen Petroleum, stands to gain more in the short term from the takeover of its client than it would have done mounting a successful defence.

GM advised Aberdeen first to reject, then to accept a 17p-a-share bid from the rival oil production company, Pittencrieff. Initially Pittencrieff offered only shares. The volte face came when it added a cash alternative.

The merchant bank's fee is in the region of pounds 120,000. It will receive perhaps only half that if Aberdeen retains its independence.

In fact the bid is all over bar the shouting. Pittencrieff owns 40 per cent of Aberdeen and one large institutional investor - believed to be Kleinwort Benson - promised its 9 per cent, taking Pittencrieff to within a whisker of victory.

GM's explanation for its higher fee is that the higher one-off payment today should be seen partly as compensation for the loss of Aberdeen's continuing corporate business. In other words, if Aberdeen were to hold on to its independence GM would continue to receive retainer payments. The single payment now may be higher but the long-term fee stream would be lost.

So financial advisers nowadays have service contracts, do they? No doubt GM is convinced that the Pittencrieff deal is in the best interests of shareholders.

But the GM fee arrangement, worked out amicably in the course of agreeing the Pittencrief terms, is all the more notable because a possibly better offer was in the air.

Before capitulating to Pittencrieff Aberdeen itself said it could raise 18p for shareholders by liquidating assets. Another party - also considering an asset sale - was also in the wings, said to be looking at an offer of 20p a share.

Aberdeen and its advisers may rightly prefer a bird firmly in the hand. But to choke off an alternative with two weeks of the bid still to run seems rather peremptory.