Outlook: Tarmac/Aggregate

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The Independent Online
SIR NEVILLE SIMMS, chairman of Tarmac, is being accused of letting ego get in the way of the creation of shareholder value. Merger talks with Aggregate Industries broke down earlier this week amid bitter disagreement over just who was going to be in charge - Sir Neville, or the head of Aggregate, Peter Tom.

Scandalous, many cried. Management ego has undermined a merger which was clearly in shareholders' interests, just like Glaxo Wellcome and SmithKline Beecham. And because Tarmac seems to be the company more obviously in need of treatment, it is all Sir Neville's fault for not agreeing whatever demands Mr Tom might have had.

In truth, however, it seems to be less Sir Neville who is to blame than Mr Tom. The two had agreed a division of management functions which seemed reasonably fair. Mr Tom would be chief executive, Sir Neville chairman, and the two of them would jointly chair the committee charged with integrating the companies after the merger.

At the last moment, however, Mr Tom changed his mind. He wanted Sir Neville out of the picture altogether and if he wasn't prepared to go, then the deal would be off. Since Mr Tom appears to have tried this tactic twice before in his climb to the top, and with some success, he might reasonably have expected it to work this time round as well.

The first time was when Mr Tom reversed his family company Bardon into the larger Evered in the early 1990s. In the process Roy Kettle, chief executive of Evered, agreed to step aside and become vice chairman. Shortly afterwards he left entirely.

Much the same thing happened when Bardon was reversed into Camas, again a larger company, to create Aggregate Industries last year. For years these merger talks had foundered on "management issues". Eventually it was agreed that Alan Shearer, chief executive of Camas, would become non executive chairman of the combined company. Then, inexplicably, it was announced that he would step down altogether, so as to "break the impasse".

Plainly Mr Tom is something of an operator, but it is hard to understand why shareholders in Tarmac should want to help him in his endeavours unless there is something in it for them. This was meant to be a "no premium merger", not a takeover. For a takeover, which is what Mr Tom now seems to be demanding in all but name, it is customary to pay a premium.

Who knows, perhaps Mr Tom will eventually get his way, but since when was it part of the fiduciary duty of directors to agree to sell themselves short?