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Sir Rocco risks running out of ammunition

City & Business
IT'S terribly unfair, but more often than not hostile takeover battles are won or lost in the first 48 hours. First impressions count. The most compelling image from Granada's pounds 3.3bn grab for Forte last week was that Sir Rocco Forte was not at the helm when the first shot was fired, but 250 miles away shooting pheasant.

Gerry Robinson, Granada's chief executive, could hardly have hoped for a better start. Sir Rocco inevitably looked out of touch with his company and in love with gentlemanly pursuits - the kind of man who might prefer tinkering about with "trophy" hotels such as the Savoy to the nitty-gritty of running the core businesses of Happy Eaters and Travelodges.

But there was much more potent ammunition to come. Granada and its adviser Lazard Brothers proceeded to do a complete demolition job on Forte's management. By using 1990 as the base date for their analysis, they have painted a devastating picture of management failure. Over the five years, the Forte share price is down 40 per cent against the stock market, earnings per share are down 41 per cent and dividends are down 24 per cent.

First, second and third blood to Mr Robinson, then. We have yet to hear Sir Rocco's defence. His vitriolic attacks on Granada, detailed on page 3, will carry little weight with shareholders, I suspect. As far as shareholder value is concerned, it's an open and shut case. Sir Rocco would be crazy to fight this battle on the two companies' respective track records.

The interesting question is not whether Forte shareholders will yield, but whether Granada is wise to expand so aggressively into the hotels and restaurants business.

Its experience in the industry is almost entirely through motorway service areas - hardly the most competitive end of the catering industry. Motorists pull in when they urgently need fuel or a meal or a pee, emphatically not because they like Granada service stations better than Welcome Breaks or Blue Boars. Motorway services are virtual monopolies. Just because Granada makes money from service stations does not mean it can successfully run hotels and restaurants where there is real competition.

It is on this vulnerable spot that Forte will have to focus its firepower. Diversification outside core areas of expertise is not popular in the City. Forte needs to portray Mr Robinson as an expansionist gone mad, so hungry for his next big acquisition that he could imperil the entire company.

For the truth is that Granada is rather boxed in. The TV rentals business looks dull and mature. And in conventional TV it has got as big as its going to get, following the acquisition of LWT.

Even on this ground, however, Sir Rocco may find it hard to inflict a deep wound. Mr Robinson boasts he knew little about television when he arrived at Granada. The creatives distrusted him at first. John Cleese famously called him an "ignorant upstart caterer". Yet a few years later Granada TV is thriving and even the luvvies now love Mr Robinson.

It is too early to write off Forte. We haven't seen the defence document yet. And the Council of Forte remains an imponderable. But five days into the bid, Forte is looking as vulnerable a Yorkshire pheasant.

Split at the top

THREE days after Cable & Wireless proves conclusively that you can't run a company with two chief executives, British Telecom announces a boardroom shake-up that gives it . . . two chief executives. BT's Sir Iain Vallance is splitting his chairman and chief executive role, handing over the chief executive post to Peter Bonfield of ICL. But Sir Iain continues as a full- time executive chairman. That, to my literal mind, means BT has two chief executives.

Sir Iain insists he will stand back from the day-to-day running of the business, taking more of an ambassadorial role.That is fine in theory. It may be difficult in practice, especially as Mr Bonfield has spent all his working life in the computer industry and has an awful lot to learn about BT.

As Lord Young and James Ross so spectacularly demonstrated at Cable & Wireless, the slightest friction between executive chairman and chief executive can have horrendous consequences.

Lord Young and Mr Ross had been sparring for months. The tension came to a head last weekend with the threat of mutiny. Both of them were sacked on Tuesday. The damage to the company's reputation, its strategy and its relationship with joint venture partners around the world will take years to gauge.

Meanwhile, shareholders are left wondering how things could go so wrong in such a seemingly Cadburially correct boardroom. The non-executive ranks were filled with intelligent, eminent people. Mr Ross repeatedly reported his misgivings to the most senior of them as far back as six months ago. Yet the boil was inexplicably allowed to fester.

The episode has all the makings of a classic case study for MBAs. Who knows, it may one day appear on the curriculum at Manchester Business School, where Mr Ross just happens to be chairman.

Greenbury gagging

TWO weeks ago I wrote that the Greenbury Committee had been "nobbled". We were the first newspaper to report that its key recommendation on pension disclosure had been watered down.

Members of the committee are at last waking up to the danger. Geoff Lindey, chairman of the National Association of Pension Funds' investment committee, spoke out last week. "Powerful voices" were trying to block Greenbury, he said.

As we report today, Tim Melville-Ross, head of the Institute of Directors, has also raised his head above the parapet. "It's absolutely not what we intended," he told the Independent on Sunday.

But if a watered-down Greenbury is to be avoided, all the great and the good who sat on the committee have to speak out loudly, unitedly and soon.

One problem is that the committee has been disbanded and so cannot easily agree a common response. Another may be that its chairman Sir Richard Greenbury, chairman of Marks and Spencer, had a ghastly time running the thing. The last thing he will want is to return to the fray.

That's a pity. It will be a sad day for shareholder democracy if those "powerful voices" prevail.