Quarto board shuns Hambro offer

A stand-off was developing yesterday between Quarto, the publishing group, and its major shareholder after the board shunned a tender offer to take control of the business.

J O Hambro Capital, which owns 26 per cent of Quarto, put in a 132.5p per share tender for a further 25 per cent of the company's shares last month, saying it had lost faith with the company's management.

But Quarto, which publishes the Bedside Karma Sutra, said J O Hambro Capital had been "opportunistic" with its offer, which it says seriously undervalues the company.

Quarto is registered in Delaware, despite being fully listed in London, and this situation has allowed J O Hambro Capital to put forward the tender for a 51 per cent stake without having to bid for the whole company.

"This violates the fundamental principles of the Takeover Code," Laurence Orbach, chief executive of Quarto said yesterday. "They are taking advantage of a loophole and are not treating all shareholders equally. The offer undervalues the company and they are not offering a premium to take control of the business."

Christopher Mills, chief investment officer of J O Hambro Capital, then demanded the board "express publicly its view of the fair value of Quarto and how it intends to realise that value". He added: "Quarto shareholders should be given more substantive comment from the board on the strategic opportunities it claims to be examining to enhance shareholder value."

Mr Orbach promised shareholders the board was exploring other options, including finding a competing bid for the whole company and finding private-equity backing for a management buy-out.

Other shareholders in Quarto are hoping a better offer will be forthcoming. "J O Hambro Capital has made a low-ball offer and it is inconceivable the board of Quarto can't come up with a better deal," James Morton, of European American Securities, said. Shareholders have until November to take up the J O Hambro offer.

The power struggle for the company came as it posted a 10.2 per cent drop in pre-tax profits for the first six months. The shares closed up 1.5p at 136p.