Royal Bank rules out higher price for Midshires

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The Independent Online
ROYAL Bank of Scotland has ruled out the possibility of raising the offer price for Birmingham Midshires Building Society beyond a range of pounds 605m to pounds 630m, despite claims that it significantly undervalues the society.

Birmingham Midshires is facing renewed protests from policyholders angry that it is being sold at a "knock-down, bargain basement price" much lower than its likely market value. The society said the offer, made last August, valued the company at 12 times its earnings, while a spokesman for Royal Bank said the multiple was over 14.

But policyholders complain that the City now sees much greater value in societies which have converted to banks. Northern Rock trades at a multiple of 24 times earnings while Halifax is at 30 times earnings.

Save Our Building Societies, a St Alban's-based lobby group, is aiming to gather 100 signatures of Birmingham Midshires members, enough to force a special meeting to discuss the bid. So far, the group has gathered 60 signatures.

The group also questions a part of the deal under which Mike Jackson, chief executive of Birmingham Midshires, will be offered a senior executive role within Royal Bank, including a seat on the bank's board of directors. John Leighfield, chairman of Birmingham Midshires, will also be offered a position.

Bob Goodall, a spokesman for the lobby group, said: "We believe the takeover is wrong in itself. But, apart from that, is the price on offer seriously undervaluing Birmingham Midshires? We argue the society is worth a lot more than the bank is offering."

Mr Jackson said: "We are continually reviewing the stock market, and the prices in the banking sector, with our advisers. We are working towards achieving the top end of the agreed range and we have no current plans to seek to review the value with Royal Bank of Scotland." A spokesman added that Mr Jackson and Mr Leighfield had been absent when the board of the society voted on the offer from Royal Bank.

Royal Bank claimed market prices for banks are unusually high and Birmingham Midshires described valuations as "freakish". Both said there were no plans to bring the bid further into line with the markets. "You are seeing a unique set of circumstances where the banks are significantly overvalued," a spokesman for Royal Bank said.

City analysts view the bid as low - even taking into account assurances given by Royal Bank that staff would keep their jobs for three years. "If I was a policyholder I would prefer to get more money for it," one leading analyst said.

On the basis that the offer price would be shared evenly between the 1 million policyholders at Birmingham Midshires, each can expect around pounds 630 in cash or shares. If the society was sold on a valuation similar to other converted societies, it is believed that policyholders could expect up to twice as much.

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