Co-op puts heat on Regan

Wholesale Society boss informs bidder's chief adviser of mystery payments to offshore company
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The Independent Online
The takeover battle between the Co-operative Wholesale Society and Lanica Trust, the shell company controlled by Andrew Regan, took another bizarre twist this weekend when the CWS revealed that it is investigating a "significant payment" by Hobson, Mr Regan's previous vehicle, to an offshore company.

The CWS is claiming that payments to Trellis International, a Cayman Islands registered company, were made in connection with the negotiation of a lucrative contract extension between the CWS and FE Barber, its former food manufacturing businesses, which was sold to Hobson in 1994 for pounds 111m.

The CWS has been made aware of the payments in recent weeks, but it has no internal record of Trellis International - or any other third party - having an interest in the negotiations, which were concluded 10 months before Mr Regan sold FE Barber to Hillsdown Holdings for pounds 120m.

Graham Melmoth, chief executive of the CWS, has written to Lord Hambro, chairman of Hambros Bank, which is advising Lanica on its bid for the CWS, demanding that Hambros investigate the matter immediately, "given the suspicious nature of the circumstances".

According to the letter, which has been obtained by the Independent on Sunday, the concerns of the CWS centre on the "relatively low" pounds 2.85m paid by Hobson to have the contract extended and the timing of the extension, which came early in the agreement's life.

The letter goes on to question a significant payment made to Trellis International "purporting to be for services rendered in connection with the negotiation of the extension".

"We want to make Lord Hambro aware of the company he is keeping," said a CWS source, who added that the company had "much more information" about Trellis International than was being disclosed in the letter.

The letter will add to the difficulties of Mr Regan, whose campaign to break up the 155-year-old Co-op movement has been bedevilled by leaks and resistance from the CWS board, which in effect controls the large and complex society. On Monday, the CWS announced a 21 per cent fall in profits to pounds 41.5m.

On Friday, Mr Regan postponed the announcement of a bid of between pounds 1bn and pounds 1.5bn for the whole of the Co-op, which spans banking, insurance, retail and funeral businesses, after the CWS obtained an injunction against him, his partner in Lanica, David Lyons, and Mr Green "from using any confidential information" about the CWS to mount a bid.

The bid itself is being mounted by Galileo, a subsidiary that Mr Regan set up for the purpose with fellow shareholders Schrod-ers Investment Management, Jupiter Tyndall and Killik, Lanica's brokers.

This weekend, Galileo's advisers attempted to play down Lanica's role in Galileo, saying it was "only one of several shareholders" in the consortium.

"Galileo regards [the injunction] as a frustrating action, designed to distract the members of the Co-operative movement from the real issue, which is the poor performance of the Co-op over the last 25 years," said a source close to Galileo.

The Stock Exchange was also planning an announcement about its inquiry into Lanica share dealings just prior to its suspension from the Exchange in February but will now wait for the court proceedings to be resolved.

Mr Regan, Mr Lyons and Mr Green have until Tuesday to submit affidavits detailing all the information that has been disclosed to them.