Outlook: Cassidy should not give up the battle

The confirmation that Prudential is to back the Liberty board in its battle with the company's founding family puts an interesting new spin on this corporate bunfight. Until now the position of the retailer's chairman, Denis Cassidy, has looked pretty hopeless. The unholy alliance of the Stewart-Liberty family and rebel investor Bryan Myerson, which is trying to oust him, already accounts for 44 per cent of the votes. And they have signed up another 3 per cent from two more sources. Barring a late split in the marriage of this "odd couple" they will succeed in ousting him at an emergency meeting next month and appoint Mr Myerson and the family's financial representative to the board until a new chairman can be found. They will then water down Mr Cassidy's plans to spend pounds 43m on the Regent Street store and, er, that's it.

But the Pru's intervention may provide a wake-up call to other investors and make the family think again. The Pru, which holds 4.45 per cent of the 120-year-old business, has decided that if the family wins this bitchy battle, Liberty's future will not look too pretty. The board and its advisers will resign and the group's bankers will review its loan facilities. How clever is that?

Liberty's performance has been none too special under Mr Cassidy but it seems this battle is more about personalities. The Stewart-Liberty family has fallen out with the chairman. They didn't like the way he ousted two of their family from management positions and the powerful Elizabeth Stewart-Liberty was unimpressed with Mr Cassidy's decision not to close the Regent Street store for the whole day of Princess Diana's funeral. But this is no reason to throw the company to the wolves.

Mr Cassidy is right to say that it is for the board, not the shareholders, to appoint the chairman. And his point that the family is attempting to gain control of the business without paying a premium is valid too. But with powerful minority factions like this, it will count for nothing.

Mr Cassidy is right to create a stink as there are important corporate governance lessons here. And he may win the day. Families have changed their minds at the 11th hour before - witness the Clark's Shoes battle. It could happen again here.

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