David Roper, Chief Executive of Melrose: Seconds out as Grinder aims to land killer blow

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The Independent Online

Since Philip Green's summer wrestling bout with Stuart Rose over Marks & Spencer ended in a reluctant submission from the challenger's corner, the stock market fight club has had precious little to savour - until now.

Throwing off the satin robes and striding into the ring has come David "The Grinder" Roper and his three-strong tag team from Melrose.

The Grinder is the nickname Mr Roper acquired as the chief financial inquisitor at Wassall, the deal-hungry conglomerate of the 1990s. Last week he and his amigos applied a first headlock to Novar, a stuttering industrial combine which recently unveiled its own leotard legend in the form of Stephen Howard, the former Cookson chief executive now charged with throwing Mr Roper and his crew into row H.

"It's not a hostile bid to the shareholders," Mr Roper says of his £750m offer for Novar. "We're trying to give them a choice. It's only hostile to the Novar management."

And without wasting any time, The Grinder gets into position and applies a rather painful headbutt to Mr Howard's reputation.

"It was pretty staggering to be honest. We woke up one morning and heard that there had been a change of chief executive at Novar. We actually thought we'd been rumbled. We then looked a bit more closely at who it was and what his track record was and we actually thought to ourselves well, Christmas has come early."

Ouch! No doubt Mr Howard felt that one. He was hired by Novar in October just before Melrose was forced to go public in November with its plans to bid. Since the bell rang and seconds were out, things have been simmering away nicely. The publication of Melrose's official offer document last week saw the fighting get properly dirty. The Grinder moves in for more.

"There's a graph in a our offer document which shows his track record and the share price of Cookson while he was running the business and I'm afraid it's a pretty sorry picture," he says.

"He presided over a massive acquisition spree which one can only turn round and say proved to be pretty destructive in terms of shareholder value. So while I don't particularly want to gratuitously have a go at Stephen Howard, I think it was a pretty curious appointment that Sir Graham Hearne [the chairman of Novar] made.

"From everything we know it was done with no process whatsoever. Normally for a chief executive of a company of this size there is a notice period given of an impending change of six or nine months or even a year, whatever it is. However, this came out of the blue. The appointment was of a non-executive who had been on the [Novar] board for four years, who had recently left Cookson a few months earlier and who, according to Graham Hearne, was 'available'. We think that's actually pretty extraordinary to be honest and from what we can hear, and we've spoken to some of Novar's shareholders, there was no consultation whatsoever."

It's probably time to intervene at this point on behalf of Mr Howard before he suffers some permanent injury. He is keeping schtum until Novar's official defence document appears. The crux of the Novar argument, however, is that Mr Howard has been busily reviewing the group's three main areas of operation - aluminium extrusion, cheque printing and building systems - and has received interest from several interested buyers.

Melrose's offer is too low to win a bid, says Novar, and shareholders are far more likely to get more value out of their holdings if they let Mr Howard get on and break the business up PDQ.

Mr Roper and his friends from the Wassall days don't have an unblemished record themselves. Their mini-Hanson conglomerate, which owned businesses from Thorn Lighting to Metal Closures Group, fell out of favour with the stock market and was put out of its misery by a £627m bid from Kohlberg Kravis Roberts (KKR), the US private equity giant. That offer came in at a hefty 43 per cent premium to where the Wassall share price was before KKR's interest. There is a hint of luck, to say the least, about the Wassall story according to the Novar camp.

However, while Mr Roper and the other members of the Melrose team - Christopher Miller, another Wassall founder and a former acolyte of Lord Hanson, and the lawyer Simon Peckham - can strike without retaliation, they are understandably making the most of it.

Mr Roper is sceptical that Mr Howard can get together fully formed bids for the attractive bits of Novar in time to present to shareholders, given the stringent Takeover Panel timetable that governs public company bids.

"It's been rumoured or suggested that Stephen Howard is trying to bust the group up in a short period of time. In order to have a result under his belt in the context of the bid timetable he's going to have to get a pretty good deal on the table and a clean bid.

"It's not going to be enough for someone to say 'we will offer x hundred million'. Has it been cleared by anti-trust authorities, what are the warranties and indemnities, what are the pension fund obligations that they are taking over?"

Novar's £270m pension fund deficit could well prove tricky for any buyer of the company or its assets. The pension fund trustees are going to want to know how much of any disposal proceeds will be going to shore up the pension gap, which means Novar shareholders might not get the full benefit of any sales.

Cheque printing, a largely US business, has proved Novar's best business, certainly in terms of generating cash. It is, in the words of Mr Roper, the "golden goose" that lays the egg that has allowed Novar to pay big dividends and keep shareholders off the management's back.

"They are very good at increasing the yield on the dividend but just look at what's happened to the share price." Over the past five years it went from a high of 215p to a low this summer of 114.25p. Following the Melrose bid it is now 163p.

Melrose, on the other hand, is basically offering to take over the running of the company and supposedly do it better, not sell off assets piecemeal. It is asking Novar shareholders to simply swap their existing shares for new Melrose shares, although there is a cash sweetener for those who want it.

The prospect of a rival bid for the whole of Novar is similarly unlikely, says Mr Roper. Which buyer would seriously want to pay hard cash to take over the whole of Novar, with all its attendant complications and spread of businesses between the US and the UK, just to get at one particular division?

Certainly Mr Roper is being given every encouragement with the Melrose project. When the shell was floated on AIM just over a year ago as a bid vehicle looking for deals, it attracted some of the City's most formidable, and battle scarred, talents.

Anthony Bolton, the Fidelity fund manager who stubbed out Michael Green's dream of becoming chairman of ITV, is a supporter. Likewise Andy Brough at Schroders, Charlie Curtis at Deutsche Bank and other investors from JP Morgan, Gartmore, Threadneedle Asset Management and Jupiter.

"They were writing cheques for £1m to give us seed capital but they said 'this is not what we really want to be doing. We want to be writing out cheques for a hell of a lot more than this when the right deal comes round'. And finally we didn't let them down. This time this one has made it into the light."

Hostile times

Title: Chief executive of Melrose.

Age: 54.

Pay: Will get £275,000-a-year basic if the Novar bid succeeds but will earn anything between £3m-£20m from a special share deal. He made about £9m from the sale of Wassall in 2000.

Education: Cranbrook school in Kent and Nottingham University, where he got a 1st in metallurgy and material sciences.

Career: Started out training as an accountant at KPMG and joined SG Warburg investment bank. Co-founded Wassall in 1988 through a reverse takeover of JW Wassall, a shoe retailer. An acquisition spree built a conglomerate that included Thorn Lighting and General Cable, a US business which Wassall floated for $760m. After Wassall was bought by KKR in 2000 he started playing golf. A rapidly shrinking handicap made him realise he ought to get a job again.

Family: Divorced. Has three daughters.

Hobbies: Apart from the golf he has played rugby for Blackheath, when it was a force in the game, and for Kent.