Shareholder action against Trafalgar grows: American firms threaten legal moves over Davy payment

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SOLICITORS acting for two former shareholders in Davy Corporation, the engineering contractor, have had 'a number of inquiries' from other shareholders interested in joining the battle to force Trafalgar House to pay the second instalment of the takeover consideration.

Bear Stearns and Gruss Partners, two US institutions, wrote to Trafalgar on Thursday threatening legal action unless Trafalgar pays pounds 1.9m compensation.

This follows Trafalgar's takeover of Davy in June 1991, due to be paid for in two instalments, 50p a share immediately and 45p when one of Davy's customers, Midland & Scottish Resources, drew a pounds 118m letter of credit to pay for the Emerald rig. Midland was unable to draw down the letter and the second payment was not made.

The two shareholders claim that Trafalgar's offer document failed to make it clear that the draw-down was subject to Midland & Scottish complying with conditions set by the Department of Trade and Industry.

Trafalgar says these complaints were considered and dismissed by the Takeover Panel and it will resist the claims 'with the utmost vigour'.

Trafalgar's shares closed 5.5p higher at 75p. That is 15p above the price of the pounds 204.5m rights issue, which closes on Tuesday, making it likely that the fund- raising will be comfortably subscribed.