View from City Road: Warburg has some explaining to do

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The Independent Online
Enterprise and its advisers, SG Warburg, are not going to be allowed to forget their disastrous bid for Lasmo in a hurry. The City is still seething over the privileged treatment meted out to PDFM during Enterprise's desperate last-ditch attempt to swing the bid in its favour; it is in no mood to bury the affair. The Stock Exchange is already investigating (not that much can be expected from that quarter judging by recent pronouncements) and it is just possible the DTI could be drawn in too.

At the very least a change in the rules, so that such cash purchases in the closing stages of a bid are outlawed, now looks inevitable. Warburg's role in all this also requires close scrutiny. It is plainly anomalous and wrong that bidders should still be allowed to offer a cash premium to hand-picked supporters - this at a time when companies and others are being forced by rules designed to secure equal treatment for investors to go through ridiculous contortions to get any information at all on their affairs into the public domain. For Warburg the fallout from this episode is doubly bad. Not only did it bloody its good name by engaging in such tactics, but having used the ultimate weapon, it still failed.

Many in the City refuse to accept that what occurred was a mere misreading of the markets - the official explanation for the debacle - and mutter darkly about something more sinister. Mistakes are often made in the heat of a takeover battle but rarely ones as bad as this one. Why did Warburg embark on such a desperate strategy when it had already warned its client that to do so would so alienate everyone else in the market that it would almost certainly prove counter- productive? Warburg has a lot of questions to answer.