Warburg 'negligent' in bid advice to Yeoman

SG WARBURG, the merchant bank, and the lawyers Linklaters & Paines were subject to a furious courtroom assault yesterday as Yeoman International, the Irish leasing firm, opened its pounds 115m legal action against the two advisers.

Yeoman is claiming that Warburg and Linklaters were negligent in their advice when it paid pounds 93m for CLF, a rival leasing company, five years ago. A pounds 12m loss was discovered at CLF's subsidiary, Technology for Business (TFB), four months after the purchase, forcing the group into an emergency pounds 15m rights issue. More problems were discovered and Yeoman eventually sold CLF in 1990 for pounds 1.

Anthony Boswood QC, for Yeoman, told the High Court that Warburg had advised the company on the takeover. Warburg had also advised Yeoman on the listing of the enlarged group, sponsored the share issue, organised the underwriting and put together the bank syndicate that raised pounds 41m for Yeoman. Mr Boswood said Warburg had been 'unprofessional, negligent and incompetent on all counts'.

He said Linklaters had also been negligent, and that this had the effect of 'compounding Warburg's negligence'.

Mr Boswood's main point concerned the due diligence carried out on CLF before the takeover. Since it was a recommended offer, the bidder was allowed access to confidential financial information. No such details were obtained by Warburg or Linklaters, he said.

Yeoman claims it was advised not to apply for this information by Robert Gillespie, the Warburg director in charge of advising the company. Warburg offered a remarkable explanation for this, Mr Boswood said. NM Rothschild, the merchant bank advising CLF, refused to hand over the data under clause 19/4 of the Takeover Code, which says that any information supplied to the offeror must also be available to any other bidders.

Mr Boswood said Bill Staple, the Rothschild director advising CLF, flatly denied refusing to provide this or any other information on these grounds.

The QC also said that Linklaters became aware of TFB's problems on 14-16 December 1988. He disputed the firm's claims that it had warned Yeoman of the problems.

The High Court has set aside 20 weeks for the hearing.