Saatchi nemesis targets D&B

By Polly Fergusson

By Polly Fergusson

21 November 1999

David Herro, the fund manager who forced Lord Saatchi out of the advertising group Saatchi & Saatchi four years ago, is now pushing Dun & Bradstreet, the information provider best known for its Moody's credit-rating subsidiary, to put itself up for sale.

The move reflects a lack of shareholder confidence in management. The share price has dipped by more than 25 per cent in the last 12 months, despite a 50 per cent year-on-year profit rise in 1998 to $280m (£172m) on revenues up 6.6 per cent to $1.93bn.

Harris Associates, the Chicago-based investment management firm for which Mr Herro works, is the largest shareholder in Dun & Bradstreet. It is working hard to convince other shareholders that a sale is the only option.

Harris claims that at a recent meeting it organised shareholders representing nearly 50 per cent of the total shares in Dun & Bradstreet voted overwhelmingly for it to put itself on the market.

"A sell is really the only option," said Bill Nygren, a partner in Harris. "The value of the company is at a significant premium to the stock price and it would be difficult for other alternatives to deliver a present value competitive with a transaction."

But talk of a takeover has been stonewalled by senior management at Dun & Bradstreet, and interim chief executive Clifford Alexander has told investors that he does not want to sell the company.

"We disagree with the proposals by Harris Associates," said Bill Doescher, senior vice president at Dun & Bradstreet. "With Moody's Investors and Dun & Bradstreet we have two very powerful brand names. With our new aggressive strategy we have the initiatives we need for success."

Harris has a 12.6 per cent stake in Dun & Bradstreet. Earlier this year it forced chairman Volney Taylor to resign, and a replacement is yet to be found.

But shareholders have been effectively stopped from forcing a takeover by a poison-pill provision under which no shareholder can hold more than 15 per cent of the firm.

Harris has invited other investors to vote on removal of the provision at the next shareholders' meeting, which is due to take place early in the new year. "If this poison pill is removed then it will become very hard for Dun & Bradstreet management to argue that they are doing the right thing in refusing to sell," Mr Nygren said.

Over the past year, Dun & Bradstreet has embarked on a series of structural changes to improve earnings, including the disposal of two businesses and the setting up of a new ecommerce subsidiary. It has also cut jobs in the data gathering unit, and has not ruled out further redundancies. Analysts are expecting further resignations and management changes.

The only business to show a profit within Dun & Bradstreet has been Moody's Investors Service, which has shown double-digit revenue growth in the last year.