View from City Road: White squires look to future

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ALASTAIR Ross Goobey, the new chief executive of the pounds 20bn Postel Investment Management, was spreading the word about 'white squires' among fellow pension fund managers in Eastbourne last week.

Whereas white knights are friendly bidders, Mr Ross Goobey's white squires are institutional investors who adopt an understanding attitude towards the industrial companies that they part-own, supporting long-term development of their businesses in the face of temporary trading problems.

A company owned by white squires would be better able to make its investment decisions without keeping a wary eye on this year's earnings per share for fear of being taken over. This could have benefits both for the development of British industry and for the reputation of the City's fund managers.

Existing problems are illustrated by Lucas Industries, which has determinedly maintained its hefty research and development spending to protect its market position. Its reward has been to become known as the City's favourite takeover target.

Mr Ross Goobey says he would be willing to be made an insider (and therefore unable to deal in a company's shares).

The emergence of white squires would give the institutions further privileges over poor, benighted private investors. And it would, partially at least, remove the discipline of the market that takeovers provide. What would happen if a white squire was unhappy with management plans, or was unwilling to remain so supportive? Would it ever sell to a hostile bidder? Nevertheless, white squires represent a useful step away from short-termism.

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