With tomorrow's closing date for the bid fast approaching, Schroders, Northern's advisers, and BZW, the company's brokers, disclosed that they had bought shares in Northern and immediately pledged to reject the US offer.
The 1.5 per cent stake bought by BZW, along with the 0.8 per cent acquired by Schroders, means investors holding 17.34 per cent of the company have so far backed the existing management. Both BZW and Schroders paid 645p for the shares, well above the market price. Northern's share price dropped by 5.5p to 630p, which is 20p below CalEnergy's increased 650p bid price.
CalEnergy complained to the Takeover Panel, though advisers to the US predator admitted the tactic did not appear to break bid rules. Late last night the Takeover Panel said it had cleared the purchases. Though Northern is not believed to have been warned about the share purchases beforehand, the company was clearly delighted at the move.
A similar situation occurred during nursing home operator Goldsborough's defence against a hostile takeover bid by rival Westminster Healthcare this year. SBC Warburg, Goldsborough's advisers, bought a 4 per cent stake in the target.
Three big City investors have already backed the Northern board: the Prudential, Northern's biggest shareholder with 11.35 per cent, Foreign & Colonial with 1.5 per cent and another institution believed to be M&G with just over 2 per cent.