Outlook: At war over street furniture

FROM this side of the fence, it looks like the Napoleonic wars, Agincourt, Poitiers and Crecy all over again. The story so far. More Group, Britain's leading poster advertising company, last month agreed a pounds 441m takeover bid from Clear Channel of the US. Embarrassingly, this bid was then topped by JC Decaux, a family-owned French company which just happens to be one of More Group's more aggressive competitors, particularly in the fast growing market of advertising on street furniture.

As a consequence, Roger Parry, chief executive of More Group, had to withdraw his recommendation of the Clear Channel bid and he is now technically neutral, awaiting a decision from the competition authorities on the Decaux bid and/or whether the Americans decide to better it. That's the official position, anyway. However, Jean-Francois Decaux, the younger of the father and son team that runs Decaux, does not believe it to be the true one. He suspects that Mr Parry is against him and he cannot understand why, given that as things stand, his is the better offer and therefore the one More Group shareholders are bound to prefer. Could it be ancient national rivalries?

Whatever the case, Decaux's bankers, Lazard Brothers, seem to have been putting a number of concerns to the Takeover Panel. The question is, should Mr Parry or his officers be lobbying for a reference of the French bid to the Monopolies and Mergers Commission, given that their shareholders could lose out if this happens? The French bid is worth 80p a share more.

Mr Parry is obviously aware that he has to maintain a strictly neutral stance in these things. There has been lobbying from Clear Channel, but you would expect that. More Group and its officers, on the other hand, are under strict instructions to do nothing. Some interesting issues are raised by all this, none the less. Can companies really be expected to stand idly by and feign complete neutrality if they think a bid is anti- competitive and against the public interest?

Companies nearly always enjoin the competition authorities into the defence when faced by a hostile bid. The key point here, though, is that strictly speaking a defence can only be mounted on the basis that the board thinks the offer undervalues their company. It is then fair game to use any legal tactic available to see off the bidder. Plainly that is not the case in this bid since the board has already recommended a lower offer. However, the difference is a subtle one and even the most avid supporter of shareholder value would understand the difficulty most managements would have in being taken over by their head-to-head competitor.

If Mr Decaux does succeed, the last laugh could be on him. Research shows that despite the obvious advantages of monopoly and scale that occur when two fiercely competing companies merge, the end result in terms of shareholder value is nearly always disastrous. Why? Because fierce competitors are rarely compatible, culturally or in terms of their people, and the merged company is likely to become involved in years of debilitating infighting. We'll see.

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