Killik joins queue to distance itself from Regan bid

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Killik & Co, the stockbroker, yesterday became the latest company embroiled in the Co-op affair to distance itself from Andrew Regan, Lanica Trust and Galileo, the vehicle set up to launch his failed pounds 1.2bn bid for the Co-operative Wholesale Society.

In a statement, the firm said it condemned "the use of dishonest tactics" and sincerely regretted its name had been associated "with any improper behaviour". It had severed all links with Mr Regan.

The attempt by Killik to distance itself from Mr Regan, following the collapse of his bid attempt and the launch of a Serious Fraud Office inquiry into dealings between the CWS and one of his former stock market vehicles, follows similar moves this week by Schroders, Hambros and Travers Smith Braithwaite, the solicitors. HSBC James Capel also said it had resigned this week as stockbroker to Lanica Trust.

The moves coincide with the launch of an Exchange inquiry into possible insider dealing in the shares of Lanica Trust, which soared from 58p last October to a peak of pounds 20.50 in January before they were finally suspended at pounds 19.50 in March.

The inquiry will focus on the extent to which investors were aware of Mr Regan's planned bid for the CWS at the time they bought into the company.

It is understood that when Galileo was set up with a share capital of pounds 9.6m, more than three times the net asset value of its 90 per cent-owning parent Lanica, investors were invited to subscribe for shares without knowing for what they were putting up seed capital.

Admitting that it had bought shares on behalf of 200 investors in early December 1996 at around 200p a share, Killik said that at the time of the purchase nobody within the firm was aware that Lanica was planning a bid for the CWS. "The purchases made by the partners and staff fully complied with the SFA conduct of business rules," the statement said.

According to Killik, a further pounds 2m was invested in Galileo, including pounds 122,398 from partners and staff of the firm, although at the time of the investment no attempt was made to discover for what purpose Galileo had been set up. It was only some weeks later, in January 1997, that Killik asked and was told that Galileo had been set up for the purpose of bidding for the CWS.

Killik concluded its statement by saying that "no one within the firm has seen any CWS confidential documents, nor were they aware that such documents were in circulation until this issue became public".

Killik said it had been strongly influenced in its decision to recommend investment in Lanica Trust and Galileo by the pedigree of Lanica's advisers and other backers. This sort of "blind" investment, backing an entrepreneur who had made money for investors in the past, as Mr Regan had, was not unusual, a spokesman said.

Separately, the Co-operative Wholesale Society announced that it had promoted Alan Prescott to the position of deputy chief executive. Mr Prescott played a key role in seeing off Mr Regan's pounds 1.2bn bid. Graham Melmoth, chief executive of the CWS, said: "I want to pay special tribute to Alan Prescott for his work in recent weeks in leading the management team and advisers which so emphatically defeated the attempted bid by Galileo."

His promotion came as details emerged of the Co-op movement's proposals for new legislation that would protect its traditions and stimulate its growth. The legislation has been proposed by the UK Co-operative Council and is supported by the Co-op's political wing.

The Co-operatives Act would propose the appointment of a co-operatives commissioner who would advise the government on co-op matters. The Act would make it easier for co-ops to raise capital and to use financial instruments available to quoted companies.

Other proposals include a clarification of the share ownership rules, which would state that co-op shares are always worth pounds 1 and do not offer the prospect of capital growth.

It would be an attempt not just to protect the movement from predators but to encourage new co-ops to be formed, and to update the 1965 Industrial and Provident Society's Act which was based on 19th Century legislation.

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