Panel raps Lasmo over bid defence allegations: Rebuke for claim that Enterprise breached UK accounting rules

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The Independent Online
THE TAKEOVER Panel has rebuked Lasmo for claiming that Enterprise Oil, which has launched a pounds 1.4bn bid for its rival, breached UK accounting rules.

Lasmo was warned about 'excessive or emotive claims' and the panel said the allegations in the company's defence document released on 25 May 'were stronger than it considered acceptable'.

Enterprise, whose auditors KPMG Peat Marwick signed off accounts without question, complained strongly to the panel about Lasmo's claims that it had inflated profits by pounds 240m over five years.

Andrew Shilston, Enterprise's finance director, said: 'We feel totally vindicated. It was tantamount to being told that we had broken the law. This exposes the lack of credibility of Lasmo.'

What was described as 'a week of fighting' took place at the panel's offices as both sides hurled claim and counter-claim.

However, Lasmo was unrepentant, saying yesterday's ruling was a victory. 'No one has said we were wrong,' a spokesman said.

'They (the panel) are not disputing the claim, just the way we said it. We are not retracting a thing. All the panel is saying is that instead of saying they have breached accounting rules, we should have said they may have.'

Lasmo alleged that two Enterprise acquisitions in the late 1980s, of Beryl Properties and Texas Eastern, were treated differently in its UK and US accounts.

In the US the purchases were treated as acquisitions and the full asset value of pounds 600m was recorded in the accounts. In the UK they were treated as mergers and Enterprise booked pounds 65m.

Lasmo's defence document said: 'Enterprise's accounting treatment for certain major acquisitions is, Lasmo believes, in breach of UK accounting standards.' And: 'Both UK and US accounting standards require asset purchases of this type to be recorded at the prices paid for them.'

In its conclusion to this analysis, Lasmo stated under the heading 'Is this treatment permitted?' that it 'believes Enterprise's accounting treatment for these purchases contravenes UK Accounting Standards'.

Lasmo, and its auditor Ernst & Young, drafted in Coopers & Lybrand to help prepare the analysis of Enterprise's accounts.

The panel is believed to have consulted independent accountants on the matter, though its statement said it was not the panel's job to query the correctness of Enterprise's accounting.

But the panel said that, given the seriousness of the allegation, Lasmo should have 'noted the possibility of alternative views or its conclusion should have been expressed in less definitive terms'.

The panel accepted that Lasmo believed it complied fully with the Takeover Code in the preparation of the defence document.

A spokesman for KPMG said the claims were 'unjustified, unfounded and unfair'.

British Gas's chairman, Richard Giordano, denied rumours citing British Gas as a possible white knight for Lasmo. Mr Giordano, who is on a Latin American tour, said in Buenos Aires: 'We are not making a bid.'