Scholl board scrapes through in vote called by rebel shareholders

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The Independent Online

The board of Scholl, the healthcare products group, narrowly survived a crucial vote called by rebel shareholders at an ill-tempered extraordinary meeting yesterday.

The meeting was called by a group of dissident shareholders who want the company to sell itself and who proposed that three of their representatives should replace three current board members.

The dissident shareholders won 41.9 per cent support for the resolution that would have led to the new board appointments and 40.5 per cent of the vote for the one that would have resulted in the three board members being deposed. Both votes required a majority.

Gordon Stevens, chairman, started the meeting by calling for questions on the resolutions and then tried to stymie Brian Myerson, a director of the UK Active Value Fund and one of the rebel shareholders, when Mr Myerson said peace talks held before the meeting had broken down due to the "intransigence of the board".

Mr Stevens told him a broad-ranging speech was not appropriate for the meeting, before giving way to him on condition he did not give "a long tirade", and that he kept to the narrow subject of the resolutions.

After a couple of minutes of heated exchanges between the two men another shareholder declared: "Mr Myerson's remarks are entirely appropriate. You ought to hear the debate."

Mr Myerson, encouraged by this, said the board had been vehemently opposed to establishing whether the business would be worth more if it were sold to a third party. Its structural fault was its high distribution costs.

Mr Myerson said the board's behaviour had been questionable. "Why concentrate on personal attacks on ourselves, with the hiring of private investigators? We are not going away, we will intensify our campaign," he promised.

After Mr Myerson sat down, Julian Treger, his colleague and fellow director of the UK Active Value Fund, took to the floor and immediately clashed with the Scholl chairman over whether Mr Stevens had earlier confirmed to him that he had received takeover approaches.

"I would not have talked to you about something like that under any circumstances," Mr Stevens fumed.

"I attempted to explain to you that I found your analysis superficial in the extreme. Please do not put words into my mouth," he added. "I am sick and tired of these innuendoes you and your group describe."

Mr Treger said he and the fellow dissident shareholders, who own just more than 15 per cent in Scholl, cared very much about the company. "We have a pounds 23m investment, far larger than yours," he told the board.

The UK Active Value Fund's average purchase price is believed to be under 170p a share, so it is showing a healthy profit so far. Yesterday Scholl shares closed down 5p at 210p.

It emerged yesterday that the Scholl board had made last-minute attempts to cancel the meeting by alleging there was a technical problem with the resolutions that prevented them from being put to the meeting.

A lawyer for the rebels said he was contacted by the company 22 hours before the meeting and told there were legal objections to the resolutions. The UK Active Value Fund then arranged for a meeting with a judge in the Company Court to try to get a mandatory injunction to force the board to put the resolutions to shareholders, when the board backed down.

After the meeting the Scholl chairman said he hoped the management would be allowed to drive forward the company's strategy without further cost and distraction. Mr Stevens said during the meeting that the rebel shareholder affair had cost the company about pounds 500,000 in additional costs.

One board director said it had taken up 14 hours a day for seven weeks.

In spite of the rebels' defeat, the board will continue discussions with JO Hambro & Partners with a view to appointing a non-executive director.