Outlook: Emerson/Astec

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The Independent Online
SO MUCH for shareholder power. Emerson Electric, the heavyweight of the US electronics industry, yesterday landed the knockout punch in its battle with London's fund managers by launching a bid recommended by independent directors, to buy out the minority shareholding in Astec (BSR). Eleven months after stepping into the ring with Emerson, institutional investors have not only suffered a painful defeat. They are also about pounds 40m worse off.

Astec is an obscure manufacturer of power drives that earlier this year became the focal point of a debate of high principle in the City: can a majority shareholder bully others into accepting a bid for their shares? The saga started in January when Emerson made an informal bid to buy out the minority shareholders at 111p. If they refused, it would pack the board with its appointees and cut Astec's dividend.

Since then, Astec's share price has headed south as the company was hit by the slump in the Far East. Since January, profit forecasts for the company have halved. The slump was so severe that Emerson's 85p a share bid is more than double Astec's share price immediately before the bid.

True, institutional investors can question the judgement of the independent directors, who yesterday meekly accepted the bid despite having rejected 111p a share as derisory earlier in the year. However, the fund managers should face some penetrating questions about putting their trustees' money on the line for a matter of principle.