Comment: Allders plays a good hand over the duty-free

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The Independent Online
The proposed sale by Allders of its duty-free business is a small enough deal - not at all the usual stuff of controversy. Swissair is making it so, however. Its demand that its pounds 145m offer for Allders' duty-free business be put to shareholders is causing quite a stir. The department store group's management has a fiduciary duty to its owners to secure the best offer for the retail chain. And Swiss Air is promising pounds 15m more for the business than the price already agreed with BAA.

Allders was bulldozed into recommending the BAA offer, the argument goes, because the airport owner, by petulantly announcing its intention to end the Allders management contract at nine months' notice, threatened to make the operation even less viable than it is already.

But while it is always nice to find a reason to have a go at a wicked monopolist like BAA, in this case the argument doesn't bear much scrutiny. First, Allders had a fairly stark choice on Friday 17 May, when its deadline for bids expired, between a real offer of pounds 130m from BAA and a far from copper-bottomed promise of a bid from Swissair. Having suggested it might offer as much as pounds 200m before scaling back its estimate to just pounds 120m during the process, Swissair had hardly behaved in a way that would instil any confidence in its ability to come up with the goods.

Second, management (and shareholders) were rightly quite chuffed to have bid BAA up to pounds 130m from early soundings of pounds 100m. This is a company, after all, about to lose a significant chunk of its business in 1999 when duty-free within the European Union is abolished. In those circumstances, pounds 130m in the bag was a pretty satisfactory prospect.

Far from painting themselves into an embarrassing corner, Allders' management appears to have played a reasonbly good game of poker, using the spectre of Swissair to weaken BAA's otherwise strong hand and extract a sensible price for a business it quite clearly want shot of.

Allders will have to go through the motions of backing BAA, because the contract it has signed says it has to. But in truth it will be as happy as anyone to accept the higher offer. If, as seems likely, this is nothing but Swiss bluster, investors can relax, knowing that the risk of BAA walking away has been eliminated.

Downside in a glowing report

The Government is rather pleased with the economists at the Organisation for Economic Co-operation and Development. Although its growth forecast was unsatisfactory from the Chancellor's point of view, Mr Clarke himself could scarcely have written a more glowing end-of-term report on his own management of the economy.

Indeed, some of the choicest phrases in yesterday's annual report on the UK economy have a whiff of Whitehall about them. Accolades like "sound foundation for sustained economic recovery", "a more flexible and less inflation-prone economy", and "a better jobs and inflation record" could have been lifted from any of the Chancellor's recent speeches. Only a cynic would suggest that Britain's pounds 10m annual contribution to the OECD budget influences the organisation's assessment.

However, the report is not without its criticisms of macro-economic policy. One observation is that the premium investors demand for holding long- term gilts rather than bonds issued by the US and German governments has increased since late 1994. "One interpretation of these indicators is that there has been scant progress in building long-run UK monetary policy credibility through 1995," the survey concludes. Clearly the markets think prospects for continued growth and low inflation are not as good as the OECD makes out.

Now why is that. The answer lies with what you think Mr Clarke will do with interest rates and the public finances. Will he raise interest rates later this year if the balance of evidence from the economic statistics tilts towards higher inflation? Will he stick to published spending plans and match tax cuts with further spending cuts in his pre-election Budget. Or will he cut interest rates willy-nilly and repeat last year's trick of putting the improvement in the public finances off for another year? The markets think the latter. And you know what? They are probably right.

Texas twist to Hinchliffe saga

For a businessman whose company, Facia, is privately owned, Stephen Hinchliffe generates an awful lot of column inches. Serious business people must be finding it all a bit galling, for there are presumably plenty of more important, interesting and successful entrepreneurs that could be written about. But no, for the moment Mr Hinchliffe wins hands down in the publicity stakes. In part this is explained by the expectation that this curious rag-bag collection of other people's left-overs will one day attempt to go public. A chequered business history, the fact that he and his finance director face proceedings by the DTI for disqualification as directors, and the odd rumble from creditors, adds spice to the brew. Now there's a new twist. A company called Texas American Group, an outfit even more incredible than Facia itself, is planning a bid. At least, Facia has the merit of being a quite substantial retailing empire, even if it is made up of trading names that nobody else wanted. Texas is not even that. There's the obligatory golf course (a must for any aspiring leisure empire), some time-share properties in the Canary Islands, and a few hotels. Then there's William Grosvener, who most people know as a PR man. He's chief executive.

The company's most valuable asset, it seems, is a Nasdaq share quote in the United States. This it plans to use liberally in the acquisition of Facia, both as a method of buying the company from Mr Hinchliffe and other shareholders, and as a way of refinancing the business. All this is dependent on a satisfactory two way audit. Mr Hinchliffe wants to satisfy himself that Texas is for real and Texas wants to satisfy itself that Facia is for real. So there you are. If it works, the seemingly unthinkable - Facia going public - gets to happen after all, albeit in the United States. As for what happens to Mr Hinchliffe, who knows? Does he get to stay or will he be off to pastures new? All will no doubt be revealed in the next exciting installment of "Hinchliffe; Britain's most written- about businessman".

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