Enmities poison Miller bid for Cala

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The Independent Online
WHEN AND how is the bitter battle between the Edinburgh housebuilder Cala and the construction group Miller likely to end?

The saga, which has divided the close-knit Scottish business community, has left shareholders in the highly unusual position of having to decide between two identical bids after the Takeover Panel rejected Miller's appeal and upheld its controversial judgement.

The panel's initial ruling - that Miller could not raise its offer for Cala to its reserve price - hinged on a linguistic point which Miller claims is a technicality.

On 10 May Miller tabled its final pounds 98.6m bid worth 200p a share but reserved the option to increase it to 210p should a higher counter offer emerge from Cala's management buyout vehicle Dotterel.

However, the panel decided that in the event of a matching, rather than increased, offer made for Cala at 200p, Miller would not be permitted to raise its own offer.

City observers over the weekend suggested the management buy-out camp is indeed likely to raise its all-cash bid to 200p tomorrow.

Sources close to Miller described the situation as "ridiculous" and claimed the majority of shareholders, angry at being denied maximum value, backed the construction group's appeal.

"The Cala management, with the help of the Takeover Panel, are helping to frustrate the higher offer. The appeal should be a landmark decision," the source said.

Nonetheless, shareholders should be consoled by the fact that Cala has more than doubled in value since the bid saga began in March, when Geoffrey Ball, the Cala chairman, first attempted his management buy-out with a 165p a share offer.

Five weeks later Miller tabled a 175p a share offer, later topped by Dotterel's 190p a share bid. Finally Miller delivered what it hoped would be its knock-out bid with the reserve price option.

Now observers say there is no doubt that the bidding war is the most fraught Scotland has seen since Highlands Distillers made its move on Macallan Whisky three years ago.

In part analysts believe the unprecedented situation reflects just how undervalued the sector is. However, the increasingly poisonous atmosphere has also been fuelled by rumours of personal friendships and enmities playing their part.

Recent speculation in Scotland has focused on Dotterel's inability to pay a higher price but financial sources say that Morrison Construction, which has a 5 per cent stake in Dotterel, would contribute more equity to stop Cala falling into the hands of arch-rival Miller. Furthermore Sir Fraser Morrison and Mr Ball are well-known to be close personal friends.

To complicate matters further the Cala management bid for independence is being underwritten by the Bank of Scotland while the Royal Bank of Scotland is lined up behind Miller.

As if that wasn't enough Miller recently appointed Bob Speirs, who retired as the Royal Bank finance director in October, as its first chairman from outside the Miller clan.

But as far as analysts are concerned the saga has been going on for far too long while the Takeover Panel's judgement looks unlikely to speed things up.

"While this drags on we're still to get a formal offer on the table. It's in no one's interests to drag it out but the Takeover Panel has put a freeze on the timetable," one analyst said.