Schroders gloats over Lasmo bid: Guide rubs salt in wounds of rival

SCHRODERS, the merchant bank, has staged an astonishing finale to this summer's controversial and unsuccessful pounds 1.6bn bid by Enterprise Oil for rival oil explorer, Lasmo.

Schroders, which acted for Lasmo, has sent its clients 12 lessons on how to handle takeover bids.

The document, leaked to the Independent on Sunday, is being seen in the City as an unprecedented attempt to rub salt into the wounds of a rival adviser - in this case Warburg, which advised Enterprise.

Warburg bore most of blame for the failed attempt, denting its prestige as the City's leading merchant bank. It also came under fire from the Stock Exchange over a controversial market raid on Lasmo shares during the bid's closing stages.

And now Schroders, which spearheaded Lasmo's defence in return for a pounds 6m success fee, has delivered the coup de grace with its pointed missive on how not to lose a hostile bid.

In recent years, the City's old 'club rules' have been breaking down. Whereas in the past merchant banks have criticised one another to clients in private, this is the first time that such an attack has been published on this scale.

Although Warburg is not mentioned directly in the 'lessons', it appears in a damaging press item, and each lesson is accompanied by pointed remarks from newspaper and stockbroker commentaries on the Enterprise bid.

Schroders is understood to have sent the 13-page guide, Lessons from the bid by Enterprise for Lasmo, to most of its 100-plus corporate clients, including Grand Metropolitan, BAA and the soon-to-be- privatised Post Office.

David Challon, Schroders' group director of corporate finance, said: 'We usually carry out an internal review of the main issues in bids. This time we decided to make it available to number of our clients.

'Each transaction takes knowledge of the merger and acquisitions a bit further. In this case, several particular issues came across. The document is intended to be a subjective analysis of the key points. We would aim to let our clients know. . . that's why we have a relationship with clients.'

The move is thought to have caused concern in the Enterprise camp. One of the company's advisers admitted: 'I can't recall ever seeing a document like this before. There is an element of wanting to rub our noses in it a bit.'

FROM THE SCHRODER GUIDE:

A hostile bidder must move before the target company's recovery story is established.

Security ahead of the bid is crucial. The more people who are involved in bid preparation, the more it is likely to leak. (The Enterprise bid was prompted by a leak.)

A successful defence develops key arguments and deploys them the first day.

A bidder is discredited if he has to change his ground (another Enterprise error).

The existence of a large number of US shareholders in the target introduces problems for both sides.

Reliance on paper leaves the bidder vulnerable. There is nothing like cash. (Enterprise refused to offer cash.)

If the bidder is going to rely on paper, keep it simple. (Enterprise used warrants.)

A successful defence can make it impossible to introduce a cash underwriting when part way through the bid (as Lasmo's defence did).

An objective of the defence in an all-paper offer should be to ensure that the bidder wastes his cash ammunition.

The target must have good commercial arguments deployed by a credible management.

Crates of champagne should be kept on ice for the last day. This is not a facetious point.