Treg ups the odds in Kepit battle

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The battle for control of the pounds 500m Kleinwort Benson European privatisation Investment Trust intensified yesterday after TR European Growth, a leading contender, upped its original offer and set a deadline for investors to agree its terms.

TR European (Treg) said it was prepared to increase its cash offer for the Kleinwort trust (Kepit) from 99.25 per cent to 99.4 per cent of its formula asset value. Shareholders have until 13 September to accept.

The new Treg offer will be discussed by Kepit directors next week. But one source said there was "nothing new" in Treg's offer and the Kepit board was unlikely to recommend it to its 65,500 shareholders.

Instead, the board is expected to recommend shareholders wait until details of nine other offers are fully evaluated.

James de Sausmarez, retail managing director at Henderson, Treg's manager, said: "There must not be any cosy City fix behind closed doors. This is our open offer to shareholders. We hope that Kepit directors will recommend it. They must put up or shut up.

"There is a timetable and the clock is ticking. If the Kepit board does not want to accept the offer then it must explain to its shareholders why not."

Mr de Sausmarez' comments are the latest in the increasingly bitter war of words between Treg and Kepit.

Kleinwort Benson launched the trust in February 1994, aiming to provide capital growth from investing in privatised European state-owned firms.

More than 85,000 investors invested pounds 500m into the trust. However, a combination of tough market conditions and poor investments has resulted in its share price often being below net asset value.

In a move to narrow the discount, Kleinwort Benson Investment Management (KBIM), the trust's managers, announced in early July a planned buy-up of 60 per cent of Kepit share capital.

On 31 July, Treg announced its own bid to provide a cash exit for Kepit shareholders by liquidating the trust. The latest offer is an improvement on that original deal.

Shareholders are also being offered the chance to exchange their Kepit shares for Treg C shares, eventually converting them into ordinary Treg shares and warrants. Treg argues that its net asset growth has outperformed Kepit's in the past two years.

Kepit directors, however, argue that shareholders would have to pay substantial liquidation fees to Treg, plus up to pounds 18m for liquidating the trust.

This is more than the claimed cost of turning Kepit into a unit trust, Kepit's most recent plan, which could also provide investors with a cash exit.

Ben Siddons, a director at KBIM said: "There are no significant differences between this latest Treg offer and the previous one and I would be surprised if the Kepit board did not reject it."

Mr Siddons said it was important for shareholders to wait until their board has had a chance to discuss all the expressions of interest received in the past week, including his own company's.