City & Business: Not guilty - here's your penalty

The Takeover Panel is quite rightly launching an early examination of whether or not brokers and advisers should be allowed to buy, during the course of a bid, shares in a firm they are defending against a hostile takeover.

This is an issue that is best discussed in a neutral environment well away from live bids. Otherwise, as just shown by the Northern Electric case, intense stresses and vested interests get hopelessly entangled in points of principle.

Last week, the bid by the US company CalEnergy for Northern Electric ended in the US predator's narrow victory. And it was the purchases (with the Panel's permission) by Northern Electric's broker, BZW, and its adviser, Schroders, of their client's shares which contributed to that tight finish.

The 2.4 per cent the two firms had collectively amassed in Northern Electric was enough to ensure that when the bid closed on 20 December, CalEnergy was just a few shares short of victory. The Americans only managed to muster up the additional support they needed to win control of Northern when the Panel extended the bid deadline to Christmas Eve.

The consequence, for the Panel, is that this case has in effect confused the broader question of share support by advisers. And worse, that confusion has largely been generated by the Panel itself.

The abject failure of the Panel to produce a clear ruling on why it chose to extend the closing date for the receipt of acceptances of CalEnergy's offer, in the knowledge that this would change the outcome of the bid, has created a great deal of uncertainty in City offices.

At the heart of the matter is the link that people are making between advisers buying shares and the question of fee arrangements.

BZW has been singled out for attention because it failed to disclose to the Panel a discretionary performance-related fee of pounds 250,000 when it first discussed the question of buying shares in Northern. The broker volunteered the information two days after those discussions, but that did not seem to make a difference. And the Panel's actions seemed irrational. It says that it accepted the fees were entirely unconnected with the share purchases, that there were no irregularities, and that had it known about the pounds 250,000, that would not have affected its permission for the advisers to buy Northern shares. Yet still it ordered the crucial extension of the bid timetable.

It is not surprising then that people are making a connection between the question of fee arrangements and the issue of advisers buying shares in their clients' companies.

The problem is that the Panel has handed out a punishment while saying that no crime was committed - a response which was bound to raise eyebrows and indeed has done so. The difficulty for the Panel, now, is that if it moves to publicly exonerate BZW, that action would make a mockery of its decision to penalise the firm's client through the loss of its independence.

That is some punishment and does not equate easily with the "justice" which, the Panel said, required it to allow CalEnergy more time to garner the additional acceptances it needed for victory.

At the same time, the Panel has also imposed, in effect, a penalty on BZW by freezing permanently the pounds 250,00 fee payment which had been agreed with Northern Electric. Again there is a punishment but still there is no crime.

The worry is that the views which are forming in the City on the broader issue of share-buying by advisers are being shaped by the perception of what did happen during the Northern bid.

It is easy in these circumstances to argue that if share-buying had been outlawed then the confusion would never have arisen in the first place. The danger, though, is that if you do ban a practice you can merely drive it underground, which is altogether more unhealthy.

The Panel is quite right to advocate openness but punishing those who are open, as BZW ultimately was, is hardly the best way to encourage others to follow suit.

Midsummer Santa

I Can never quite remember whether it was the great pop singer Roy Wood or the great retailer Sir Stanley Kalms who first uttered the immortal words, "I wish it could be Christmas every day".

Both characters have had a vested interest in the phrase. Roy, as a member of the popular music combo Wizzard, presumably benefits from the endless re-airing of the tune in the run-up to Christmas. Sir Stanley, as chairman of Dixons, is well aware of the huge importance of Christmas sales to his company's performance.

I wonder,though, whether it is Christmas or the following "sales" period which is becoming more important to Sir Stanley and his fellow members of the retailing fraternity. Initial soundings suggest that Christmas spending was "steady" rather than "stunning" in the high street. However, there is great optimism that the sales will represent something of a bonanza.

If this is the case then it might explain why my local Dixons began its sale on 23 December. It was long ago that I gave up believing that the January sales ought to be in the year's first month. Yet, there is something faintly disagreeable about sales beginning before Christmas.

Dixons, of course, was not alone in its pre-emptive price reductions. House of Fraser, with clothes and shoe shops, was pasting sales stickers on its merchandise and in its windows well before Father Christmas had finished loading his sleigh this year.

I am not convinced that this is a sound retailing strategy. Since the recession of the early Nineties, consumers have become extremely high- street-wise. Having grown used to shops holding seemingly permanent "sales", consumers are no strangers to the art of value seeking.

In fact, this year there were signs that some shoppers were deferring their spending to the last minute to take advantage of the bargains, real or imagined.

This habit will only become more widespread if the retailers overtly encourage it with a flurry of premature "sales". That would mean more Christmas sales at lower margins and presumably fewer sales in the "sales" proper.

My big fear is that all this might become the first step by the retailers towards making Christmas appear every day. With seasonal merchandise already appearing in the shops some time in the late summer, we could start seeing our first "January sales" in September. This is not to be encouraged.

Happy New Year.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent