Kleinwort family likely to pick up pounds 200m

JOHN WILLCOCK

Financial Correspondent

Kleinwort family members are expecting a windfall of up to pounds 200m from the Dresdner Bank cash bid for Kleinwort Benson - an offer that the City yesterday accepted as virtually a done deal. Kleinwort shares fell 6p to 713p as market hopes faded of a rival bidder emerging and investors took profits.

The Kleinwort family holds roughly 20 per cent of the merchant bank's shares. Dresdner's cash bid is worth nearly pounds 1bn. Further details are expected to be announced by Kleinwort in about a week's time.

David Peake, the former chairman of Kleinwort, is still a non-executive on the board and one of the few remaining links with the family. He is married to the cousin of Sir Kenneth Kleinwort, a mainstay of the bank who died last year.

It is understood that Sir Kenneth's heir, Sir Richard Kleinwort, the fifth baronet, now controls most of the family shareholdings. Sir Richard works for Cardew & Co, a City public relations firm.

Dresdner Bank shares slipped 40 pfennigs to DM40.30 as German stock markets reopened after a public holiday on Thursday. While most German dealers said the bid would be positive in the long run, they noted it could weigh on shares in the short term until further financing details were known.

Dresdner's offer is likely to go ahead at close to 724p a share, analysts said yesterday, discounting stock-market talk that the UK merchant bank is holding out for more. They say the Kleinwort board is not in a strong negotiating position.

"Kleinwort will be very anxious to do a deal, mindful of what happened at Warburg," Martin Cross, merchant banking analyst at UBS, said.

Fellow UK investment bank SG Warburg was plunged into disarray after its failure to consummate a merger with Morgan Stanley last December. Its chief executive, Lord Cairns, resigned in February, morale suffered and key staff left the company. Warburg is currently selling its investment banking operation to Swiss Bank Corporation for little more than book value. The Dresdner offer by contrast is worth twice Kleinwort's current book value.

"If the deal falls through, and there is no bid premium in the price, Kleinwort shares could go down to 540p or 550p," said Phil Pickard, specialist financials salesman at the broker James Capel. This is the level at which Kleinwort shares stood in March before the latest bout of bid speculation.

Mr Pickard said he could see the final agreement between Dresdner and Kleinwort deviating from the original level by only a few pennies either way.