and SIMON PINCOMBE
Britain's powerful fund managers stampeded into the Granada corral yesterday, with over 90 per cent of them accepting the bid for Forte. "Hostile takeovers are usually pretty close-run things, but this was a landslide," a senior merchant banker said.
Mercury Asset Management delivered the fatal cut to Forte's independence hopes with its decision yesterday morning to tender its 14 per cent stake to Granada. The move by Forte's biggest shareholder sent a number of last- minute waverers heading for Granada, dramatically underscoring the life- and-death power of the giant fund managers.
Gartmore, Royal Insurance and Sun Alliance are among those believed to have swung behind Granada, while NatWest said it had stuck with Forte. The big index tracker funds, which accounted for about 7 per cent of Forte, run by BZW, Legal & General, Hermes and NatWest, would normally have been expected not to take a decision on the battle. The vote count last night showed that close to 67 per cent of the shares - with actively managed funds holding 75 per cent - had accepted the bid.
MAM is estimated to have made more than pounds 100m on its shareholding during the two months of the brutal takeover battle. "After a long time deciding we concluded Granada should be the better steward of the assets than Forte," a spokesman for MAM said.
MAM decided that Forte was pushed into making corporate changes because of the bid, that its management record was poor and the yield on its assets inadequate, and that it had little confidence of improvement with the current team.
As Gerry Robinson, Granada's chief executive, yesterday celebrated victory, he sought to play down the widespread perception of MAM's key role. "This bid would have been won without the support of MAM. If you are looking for a professional fund manager then MAM acted in a professional manner. There is a lot of nonsense talked about MAM bringing this bid to us. They knew a day before we announced the bid, just like any other shareholders."
Granada and Forte's intense battle for the allegiance of the fund managers pointed up the power held by the big pension and insurance funds, which own about 60 per cent of UK equity. The 72 members of the Institutional Fund Managers' Association speak for a total of pounds 1,100bn in assets, not all of which is invested in the UK. Recent years have seen a tremendous concentration of power among the biggest players, with the top 25 institutional fund managers in Britain accounting for nearly half the total holding. "The rise of the power of the fund managers, and the concentration, has been one of the biggest changes in corporate life since the Seventies," said Peter Warrington of WM Company, which measures pension fund performance.
In making its decision yesterday, MAM was speaking for more than 30 corporate pension funds it manages on behalf of clients.
It was reported that Sir Stanley Kalms, chief executive of Dixons, in an unusual move, had specifically requested that his shares were not voted to back Granada.
Mercury's pivotal decision swung the spotlight on the personal influence of the key fund managers, particularly Carol Galley, MAM's vice-chairman. This is not the first time the 48-year-old fund manager has brought low a powerful figure. It was Ms Galley who swung the hostile bid for London Weekend Television in favour of Granada in 1994, turfing Christopher Bland, the next chairman of the BBC, out of a job. That was the first occasion that anyone outside the City had ever heard of Ms Galley.
But the Forte family has powerful friends in the media. And they have cast Ms Galley in the role of cold-blooded executioner who would sell her soul to produce a better return for the pension funds she manages and a chunkier bonus for herself in the process. During this bid she has been described as tough, aggressive, arrogant, insensitive and the most powerful woman in Britain. She is the pounds 800,000-a-year-plus female workaholic whose only release is to leave early from her London Bridge office for her home in France.
Predictably, her supporters see it differently. "She works effectively," one said yesterday. "But not silly hours. She is often out of the office by 7pm and, contrary to reports, does not fly to her home in France every weekend. She has a collegiate attitude to her work and only uses her private office for meetings."
Ms Galley is one of 240 fund managers at MAM. Originally from Newcastle, she was educated at the local Gosforth Grammar School. She read languages at Leicester University and joined the MAM library as a graduate in 1971.
Since then she has risen to become one of the country's most successful fund managers. The last set of published MAM accounts show that she received total pay and benefits of pounds 861,000 in 1994. The package included a performance- related bonus of pounds 522,000, earned over the period since 1989, and pounds 299,000 in pension contributions.
The same report also revealed that 219 MAM employees stand to share pounds 68.4m in a "golden handcuffs" bonus scheme if they stay on at the company for an "extended" period.
Comment, page 17
Who owns UK plc
Top fund managers
Prudential pounds 76bn
MAM pounds 72bn
Schroders pounds 64bn
PDFM/UBS pounds 48bn
Standard Life pounds 43bn
Norwich Union pounds 35bn
BZW pounds 34bn
Legal & General pounds 33bn
Hermes (BT/P0) pounds 28bn
Gartmore pounds 25bnReuse content