Mayflower submits to bid talks

Troubled bus builder ousts top three directors and discloses accounting irregularities
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The Independent Online

Mayflower, the ailing bus builder, last night agreed to meet a potential bidder, rounding off a tumultuous day that saw the ousting of its three top executives, the disclosure of accounting irregularities and wild gyrations in the company's share price.

In a statement issued after the stock market closed, Mayflower declared its "willingness" to talk to the directors of Melrose, a shell company formed by the three businessmen who once ran the mini-conglomerate Wassall.

Earlier in the day Melrose issued a statement disclosing that it had approached Mayflower a week ago to indicate its interest in making an offer for the company and inviting the board to enter discussions.

The Melrose disclosure followed an announcement from Mayflower that its chief executive, John Simpson, was leaving the company along with the finance director David Donnelly and the joint managing director John Fleming. Mayflower's chairman Rupert Hambro, has also indicated his intention to step down as soon as a successor can be found.

Mayflower, which until recently counted the former prime minister John Major among its directors, also announced that it had uncovered "accounting irregularities" in its main bus-building business, TransBus, which would increase its net debts by £20m to about £196m.

A spokeswoman said that the emergence of the accounting problems was not the sole reason for the removal of the three directors, but it was "the... final nail in the coffin".

Mr Simpson has been under pressure to quit from institutional investors after two profits warnings in the past three months prompted an 80 per cent decline in the share price. The shares closed 31 per cent lower at 6.25p last night having fallen 63 per cent to 3.5p at one point in the day before Melrose revealed its bid interest. At the peak, Mayflower was valued at £985m. Its market capitalisation now is £22m.

Melrose, which is run by Chris Miller, David Roper and Simon Peckham, said it was not in a position to say what price an offer would be pitched at until it had carried out due diligence. It also said that any offer would be accompanied by the raising of new equity to reduce "significantly" Mayflower's debts.

Mayflower's new chief executive is Alan Jamieson, an accountant who was parachuted in a month ago as chief restructuring officer to help sort out the business. Bruce Wright is joining as interim finance director.

Last night's statement from the Mayflower board said that while its priority was to secure the company's financial position by reaching a successful conclusion to talks with its lenders, it was willing to explore further Melrose's interest. Mayflower said the accounting irregularities related to delays in passing on payments from customers to one of its finance providers - a practise which appeared to have been going on for some years. Mr Major was a member of Mayflower's audit committee until he resigned from the board last year.

Mr Simpson and his fellow directors are technically entitled to two years' compensation for loss of office, although company sources indicated it would fight to limit the pay-offs in view of Mayflower's financial predicament. Mr Simpson earned £487,000 in 2002.