Shareholders pledge to vote down Kirkham's bid for DFS

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The Independent Online

Lord Kirkham is under mounting pressure to reconsider his £496m plan to take DFS private in an attempt to counter increasing opposition to the deal from institutional shareholders.

M&G and Morley, which own more than 14 per cent of the furniture retailer, have said they plan to reject the 445p-a-shareoffer from Lord Kirkham, the chairman and founder. The offer, which was structured as a scheme of arrangement, can be blocked if 25 per cent of shareholders vote against it. Lord Kirkham cannot vote his 10 per cent stake.

One major shareholder called for DFS to restructure the offer in order to allow investors to benefit if the company's fortunes revive once it is de-listed. He said the option of "some participation in the upside in some form or another" might persuade him not to vote against the deal. For now, he said: "I won't be accepting the offer."

A spokeswoman for Morley said: "We like the company and its prospects and would very much like to stay invested in it. But we consider that the proposed offer is inadequate."

DFS is thought to have considered re-tabling the bid as a conventional takeover offer, which would mean Lord Kirkham could de-list the company with backing from just 51 per cent of investors.

But one investment banker close to the deal said the move was unlikely. "Because it's a leveraged buyout, bank financing is dependent on a certain level of acceptances," the banker said. To force minority shareholders to cede control, Lord Kirkham would need acceptances from 90 per cent of shareholders, which "he would struggle to get", the banker added.

Meanwhile, all three of DFS's independent directors have threatened to resign if the deal is blocked. Mike Blackburn, Malcolm Walker and Kevin Morley said in a statement: "If the proposals are not approved they [the independent directors] would clearly have to consider carefully their positions."

Shareholders dismissed the threat as a "non-event". One said: "It's rubbish. In the event of a vote against they will have lost all credibility and in the event of its going private they are going anyway."

Another option for Lord Kirkham would be to increase the value of the bid by allowing investors to keep the 17p-per-share final dividend. One shareholder said: "To pay the dividend would cost him less than what is going to happen to the value of his 10 per cent stake if the offer doesn't go through. The shares will fall by more than 17p."

Shares in DFS slipped 3p to 430p yesterday, showing the City believes the bid will fail.

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