View from City Road: Third time unlucky for Pitman?

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The Independent Online
So much for Lloyds Bank's misguided belief that it faced only technicalities in its pounds 1.8bn bid to buy the Cheltenham & Gloucester Building Society. Its Pyrrhic victory in the High Court sends it back to the drawing board with only the most unpromising set of options to ponder.

Top of the list will probably be an appeal against the vital aspect of the verdict on which it failed to win the court's support; the ruling that payments to the 27 per cent of the C&G's members who are of less than two years' standing would be unlawful.

That is a body blow to the scheme as structured, given the high voting hurdles that have to be crossed - among other things a takeover has to be approved by at least 50 per cent of members qualified to vote. Few of those excluded from the sweeteners are likely turn out in support simply out of the goodness of their hearts.

Yet the chances of a successful appeal look slim, given the unambiguous nature of the judgment handed down by Sir Donald Nicholls. The Vice-Chancellor's view that Parliament, worried about speculative money sloshing around in search of a bid, deliberately decided to bar recent members when it passed the legislation has a dauntingly final ring to it.

Of course Lloyds can now attempt to re-jig the deal so as to make what is on offer to them look a little less like a bribe. Yet all such sleights of hand would seem to fall foul of the same objection that they are designed to thwart Parliament's intentions.

Other possibilities look like desperate long-shots. Lobbying for a change in legislation is uncertain and time- consuming. And conversion to a bank would see any subsequent bid seemingly blocked by the Act for five years. As the months tick by the proportion of members sneaking under the two- year barrier will rise, of course. But this seems a counsel of despair.

It is all very unsatisfactory. There is no valid commercial or regulatory reason why this deal should not go ahead if the society's members wish it; if they do not see any benefit in preserving the mutual status of their organisation, they should not be forced to do so against their own interests.

Nevertheless, regrettable though the conclusion is, it is beginning to look as if it will be third time unlucky for Brian Pitman. The Lloyds chief executive seems likely to add a failed bid for the C&G to his unsuccessful tilts at Midland and Standard Chartered.