Outlook: Wainhomes

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The Independent Online
WHEN BILL AINSCOUGH announced in March that he was taking his housebuilding business, Wainhomes, private once more, he did so with the now ritual broadside against short-termist and unsupportive institutional shareholders.

Well, one of those institutions has decided to support him after all. In fact the Pru is being so supportive that it has rejected his 140p-a- share offer, and will remain a large minority shareholder with a12.5 per cent stake.

The Pru reckons Mr Ainscough was trying to buy back the business on the cheap. The fact that his offer was 30p a share less than the price at which Wainhomes had floated five years earlier tends to bear out its suspicions. Nor was Mr Ainscough's buyout proposal made any more palatable by the fact that he would emerge with a 73 per cent stake in the business, entitling him to a pounds 5m share of the annual profits after debt servicing.

With a minority shareholder of the size of the Pru breathing down his neck, Mr Ainscough may find his room for manoeuvre more limited than he had assumed. But he is certainly out to make money which is why the Pru has decided that its own investors' interests would be best served by hanging onto Wainhomes' coat tails.

This is the first time the Pru has taken such action but it may well not be the last. It contemplated a similar tactic in the Saga management buyout and only agreed to go along with the buyout at Cala because the management bid had been tested against a rival offer.

The way that small-cap companies have been treated by the market and deprived of access to capital, deserves some sympathy. But there is also a lot of hogwash talked about their plight. Those with longer memories can recall the days when the small-cap sector was the flavour of the month.

The Pru has put the managements of those businesses on notice that they will find it harder to get away with lowly-priced buyouts under the cover of disallusionment with the market. If more institutions follow suit, it could bring a whole new dimension to corporate governance.