Enterprise routed as big names outgunned: Post-mortem begins over pounds 1.6bn bid fiasco - Missing cash element blamed for rejection by Lasmo investors

ENTERPRISE Oil's bitter two- month bid for Lasmo was heavily defeated, putting a question mark over the future of the chief executive Graham Hearne and leaving his embarrassed advisers asking how they misjudged it so badly.

Enterprise got just 32.8 per cent of the vote - including its own 9.8 per cent stake in Lasmo - but controversy in the final week and complaints about a lack of cash in the all-share pounds 1.6bn offer weighed against it.

As the post-mortem begins, Enterprise must not only rethink its future but decide what to do with its Lasmo stake, now worth pounds 30m less than when it was purchased for pounds 160m during Wednesday's controversial share raid.

Another group of American investors has complained about the manner in which Enterprise bought the stake, and it is understood that the Stock Exchange is investigating.

Although Enterprise appears to have won the backing of larger Lasmo shareholders, including Phillips & Drew, Legal & General, and Capital Group in the US - who sold part of their Lasmo stakes for up to 20 per cent above market value in mid-week - smaller institutions and private shareholders rejected the bid.

Blame was being targeted at Enterprise's principal advisers, SG Warburg and James Capel. 'You can't escape a disaster like this without a few brickbats coming your way,' said one corporate financier. Enterprise's advisers did not try to hide the scale of the defeat. 'We have been roundly beaten,' one said. 'I would not even characterise it as a near- miss.' He admitted Enterprise had been planning to underwrite half the bid to provide a cash sweetener, something many US shareholders wanted.

Another Enterprise adviser said the bid got off on the wrong foot when in April the Takeover Panel forced it to disclose its intentions after Lasmo shares rose rapidly. 'I would hesitate to lay the blame on the Takeover Panel, but they did not help. They knew our intentions and yet made us show our hand. We lost an important element any bidder has - surprise.'

Yesterday's vote, announced at about 4.45pm on the 10th anniversary of Enterprise's privatisation, brought to an end a tense few closing hours of the bid, during which Enterprise was asked by the Takeover Panel to disown agency reports it had won 43 per cent support by early yesterday morning. The report cited sources at Warburg, which denied involvement.

An analyst, who was against the bid from the start, said: 'Enterprise looks foolish. There was no logic to the bid. They are sitting on a paper loss in a company that can only pay token dividends. They handled it badly.' He said Mr Hearne was highly rated, but added: 'He staked a lot on succeeding. There will be questions but he will survive.'

Rudolph Agnew, the Lasmo chairman whose aggressive defence through accusations of skulduggery and taunts of megalomania enlivened a sometimes phoney war, said: 'The critical factors have been what the Lasmo management have achieved in the last 18 months, greatly helped by the absurd nature of the all-paper offer from Enterprise.'

Mr Hearne said: ''We are naturally disappointed. I still believe that the assets fit together well, the terms were right and the price a fair one. We were always conscious of our responsibility to our own shareholders and made it clear that we would not overpay. Enterprise remains a strong company with plenty to do in its existing portfolio. There will also be other opportunities to build on these strengths.'

An oil analyst said: 'Enterprise got it wrong from the start. They thought that Lasmo was out of favour and that Enterprise was in favour. They thought shareholders would ignore the fundamentals; that is, that there was a logic to a takeover. Lasmo faces two years of growth, while Enterprise is trying to arrest decline. Lasmo will become the preferred exploration and production play in the market.'

Sun Life, which sold 7.1 million shares for cash on Wednesday, is thought to have voted its remaining 1.6 million against the bid. Scudder, in the US, also rejected it.

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