Smaller Companies: Hostile bid splits board at Blystad

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The Independent Online
A BOARDROOM row has broken out at Blystad Group, the oil drilling contractor, following a pounds 7.5m takeover bid for the company launched last Friday by Abbot Holdings.

The row stems from a potential conflict of interest between two different camps among Blystad's directors. The bidder is a private company controlled by Alasdair Locke, the former chief executive of Kelt Energy, the oil and gas independent that ran into severe financial difficulties after a disastrous takover in 1989.

Abbot's all paper offer - valued at 5.4p a share - has been supported by the three Norwegian Blystad brothers who control about 65 per cent of its equity.

But the company's other directors and Henry Ansbacher, its financial adviser, have rejected the terms as 'entirely inadequate'.

A key reason for their opposition is that they believe the Blystad brothers have a conflict of interest. Blystad, formerly KCA Drilling, is owed pounds 3.6m by a company in which Thomas Blystad has an beneficial interest.

The loan was due for repayment in March. About two months ago the independent directors started action for its return.

Meanwhile, Abbot and Blystad's independent directors had been in friendly talks over a possible bid by Abbot. The discussions broke down recently, but since Abbot had signed an agreement not to launch a hostile offer, there was a stalemate. However, the brothers are thought to have forced through a waiver of that condition, leading to the bid.

As a result, a bitter wrangle has developed between the two camps. The independent directors have asked the Takeover Panel, the City referee on takeovers, to rule whether there is a conflict of interest. The Panel is expected to consider the issue at meetings this week.

The bid comes at a time when Blystad's own prospects look uncertain. The company is due to repay dollars 5m owed to its banks this December. It incurred a loss before tax of pounds 4m compared with a pounds 290,000 deficit in the previous year. The result reflected a pounds 4m write down in the value of Songa Moon, a semi-submersible rig.

Mr Locke says his offer provides the best opportunity for Blystad's shareholders to retrieve something from a group that has paid no dividends for seven years. However, shareholders should sit tight for the time being.