Elliott Bernerd kicks off takeover battle for Chelsfield

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The Independent Online

Chelsfield was put up for auction yesterday after the property company's independent directors failed to recommend an £858m indicative bid from its chairman and founder, Elliott Bernerd.

The independent directors, led by Sir Bruce MacPhail, did not reject the 305p-a-share "proposal" however. The independent committee will now consult shareholders, some of whom were already making it plain yesterday that the bid undervalued the company. The independent directors said they "believe this [Bernerd] proposal may not fully reflect the long-term value of Chelsfield". The shares rose 4p to 315.5p.

Earlier this week, the committee rejected a 300p-a-share approach from Mr Bernerd's consortium, which speaks for 30 per cent of the company.

In taking the new offer to discuss with shareholders, the independent directors extracted what they believe to be a major concession from Mr Bernerd's side. He has committed his consortium to backing a better rival offer, if one emerges, after his 305p offer is recommended.

In this way, the independent committee believes it can, in effect, start an auction of the business. A statement from the independent directors talked of "certain other potentially interested parties". Other possible bidders were being deterred by Mr Bernerd's strong position and the fact that he could have held out as an awkward minority shareholder, should other investors accept a bid from a rival.

Standard Life Investments, which has a 3.3 per cent stake in Chelsfield, dismissed Mr Bernerd's approach. Helen Driver, a fund manager at Standard Life, said: "The proposed offer of 305p significantly undervalues the group. Any bid below 400p undervalues the company.... The bid process has been protracted and the disclosure provided by the company has been poor."

Mr Bernerd's initial approach was in the spring of this year. Industry sources said shareholders had grown impatient with the bid process. They said that, while 305p-a-share was not "materially different" from the 300p approach rejected by independent directors, the independent committee felt that it needed to sound out shareholders before it made further decisions.

The shares were trading under 200p before the first approach was revealed, though Chelsfield's last stated net asset value was 349p. The "adjusted" NAV being used by the independent directors is 299p.