View from City Road: Greentree does the right thing

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LASMO's acquisition of Ultramar looked like a tragedy in the making at the outset. Two years later it looks disastrous.

It is quite right that Chris Greentree, the chief executive of the oil company, should go in these circumstances. He had lost all credibility with shareholders, who have suffered a pounds 1bn loss in value, and it would not be surprising if he had lost much of his authority inside the company. Other chief executives who made ghastly acquisitions should take the hint.

The official word was that Mr Greentree, a laconic six-footer from Canada, was anxious for early retirement. The past two years had all been a bit too much for him. As well as the bid battle for Ultramar, he has faced the equally difficult task of selling its unwanted refining business while economic conditions and the oil price were laid out sick.

It is odd that change at the top has taken so long coming. Odder still that the company should have appointed Joe Darby, a director since 1990, as his successor. He was on the board at the time of the Ultramar bid and so must take some of the blame.

Although Ultramar had some good assets, it was saddled with a heavy debt burden and poor management. It deserved to be taken over but Lasmo, with its own management shortcomings, overstretched itself badly. The group's market value is not much larger now than it was when it asked its shareholders to back the bid with a mountain of paper. As predicted here at the time, Lasmo's shares have been in steady retreat, collapsing from more than 300p to 155p, down 8p yesterday.

They may fall further as Mr Greentree's departure - like Bob Horton's at British Petroleum last year - means Lasmo will probably halve its final dividend for 1992 to repair its balance sheet.

Despite a steady stream of disposals, the group's debt has remained at about 90 per cent of its net assets and is unlikely to fall much unless it makes even deeper cuts in exploration and development spending than already planned, as well as putting more assets up for sale.

Lasmo brought an end to the misery of Ultramar's shareholders. But it would not be wise to assume that another bidder is waiting in the wings to do the same for Lasmo's shareholders, more's the pity. Sell the shares.

(Photograph omitted)