Anger as Marconi massacre wipes out 125,000 small shareholders

Private shareholders in Marconi yesterday lashed out at the telecoms equipment maker's management team for pushing ahead with a share consolidation programme designed to see about 125,000 individuals removed from the share register.

Marconi is carrying out the share consolidation, which will see every five shares consolidated into one share, to squeeze off the register those shareholders who own as few as four shares or less. It argues that the cost of communicating with those shareholders is about £3.60 per person per year - or £450,000 a year in total.

Shares in Marconi, which looks set to be promoted into the FTSE 250 index later this week, closed down 1.4 per cent at 88.75p last night, putting a value of £3.55 on four shares in the company. The share consolidation, which was approved at yesterday's annual general meeting, means the stock should trade at about 443.75p - or five times yesterday's closing price - when it takes effect today.

Marconi will send cheques to those 125,000 individuals for amounts ranging from the price of one share to the price of four shares. The company has agreed to pay out the sums owed to those shareholders on a gross basis and is taking care of the dealing costs.

John Devaney, Marconi's chairman, said: "The consolidation of the shares is an important further step in normalising Marconi's share register. The consolidation will help us achieve meaningful savings against the cost of managing a large number of very small shareholdings."

But the move has infuriated many private shareholders who only ended up with such tiny stakes in Marconi after the company did a complex financial rescue - which involved the writing off of about £3.2bn of the group's debilitating debts.

The restructuring deal resulted in equity shareholders getting just one new share for every 559 they owned. "Marconi has completely let me down," one shareholder told the AGM. "Everyone should get together to overturn this decision."

Another said the company should "rethink" the share consolidation plans while another, making reference to the consolidation, said: "I'm appalled at your devious behaviour."

Mr Devaney said: "What has happened, has happened. You can't go back.... For many people, it's an unsatisfactory outcome." The chairman, who said he received five to 10 letters a day from people who had lost money, added: "I'm not unsympathetic ... but we are where we are."

Shareholders also expressed anger over the company's financial rescue in general. Under that deal, Marconi's banks and bondholders got control of 99.5 per cent of the company. "There's been a disturbing lack of competence and ethics," said one.

Others criticised executive pay while another shareholder hit out at the amounts being paid to auditors and lawyers.

Mr Devaney said management retention and incentive plans were needed to ensure the top people stayed. "If senior executives had been lured away, we would not be standing here [now]," he said. He also noted that the company's creditors had wanted to ensure that the management team was retained and that their interests were aligned with those of shareholders.

It emerged last week that about 300 staff at the company will be granted share options over the coming weeks when management officially hit the first of five key targets under its incentive scheme.

Mike Parton, the company's chief executive and the biggest beneficiary of the scheme, will be awarded options over 3.5 million shares once the company has hit its short-term debt target. These are currently worth about £3.1m.