Foundations rock at Land Securities

The property giant just wants a quiet life, but boardroom upheaval and bid intrigue have undermined its stability

It's an unlikely arena for a corporate battle. Boring old Land Securities, the largest quoted property group in the UK, used to be viewed as one of the more pedestrian companies on the FTSE 100. It chipped away at its land and properties, steadily redeveloping them and generating tidy profits along the way. Butlers in dark suits served you tea on silver plates and no one called anyone else by their first name. Shareholders occasionally grumbled that the company's market capitalisation was less than the net value of its assets, but it didn't really matter. Land Securities was big and dependable, if a little unadventurous. A bit like Ian Henderson, its chief executive.

But then there was a boardroom spat. Two senior executives have gone and Land Securities is on bid alert, with two rival property groups circling the business.

For Mr Henderson, who has been with the company since the age of 26 and was due to retire next year, it is a nightmare. "We just need some time and a bit of peace and quiet to get on with our jobs," he pleads. No chance.

His plans have been turned on their head by the loss of Peter Walicknowski, the director of strategy and business development, who was regarded as Mr Henderson's heir apparent, and Manish Chande, the chief executive of Trillium, the company's facilities management division, which also bids for PFI contracts.

The chatter that Mr Chande had approached German bank WestLB about mounting a bid for the company has fanned the flames. "The story is nonsense," claims Mr Henderson. "We have a great team. The boys love working here."

Land Securities denies that its garden is anything but rosy. But, say sources close to the company, this isn't the case.

In 2000 Mr Henderson made changes at Land Securities. In came Mr Walick-nowski, ex-head of the European arm of Lend Lease, the Australian property developer responsible for the Bluewater shopping centre. His appointment was followed by the £348m acquisition of Trillium. With it came Mr Chande, who had built up the business from scratch. Known as a "detail junkie", he is understood to have made over £10m from the sale.

Observers say the pair never fitted in with the company's culture. While much of its stuffiness has been blown away by Mr Henderson's changes, it is still characterised by its "old boy" property types in their pinstriped suits, and the fine silverware brought out for lunches.

Critically, however, Mr Chande and Mr Walicknowski did not see eye to eye. One Land Securities insider notes: "Here we had two guys with naked ambition. There was no meeting of minds."

Mr Henderson says: "I was never really aware of it. I never witnessed any disagreement at board meetings. I don't understand where all this came from."

Land Securities insists both men left of their own accord, Mr Walicknowski to pur- sue his career elsewhere and Mr Chande to have a quieter life. But a source with links to both calls this "preposterous". Mr Chande's nose was put out of joint when he was offered the finance director's job, says the source. He was aiming higher.

The dispute reached the ears of the shareholders and, via a non-executive director, they ordered an end to the unrest. Or so the story goes. Peter Birch, the company's non-executive chairman, sticks to the party line: "I have no knowledge of that."

Mr Henderson has received written and verbal assurances from Mr Chande that the story isn't true. But a source close to WestLB says conversations had taken place between the head of the bank's principal finance arm, Robin Saunders, and parties with links to Mr Chande.

WestLB, however, says it is not interested in Land Securities.

All this noise has awoken other potential predators, including Donald Gordon of Liberty International and John Ritblat of British Land. Two years ago Mr Gordon threatened to shake up the industry when he took a 3 per cent stake in Land Securities. Instead he sold his stake last year for a tidy profit. He says: "We are keeping a watching brief on Land Securities. It's a big piece of property and there is the matter of who's going to run it. That is all I will say at the moment."

Mr Ritblat has never hidden his ambition to acquire the company. However, British Land is heavily geared and would need a backer with deep pockets. If he was serious then he could turn to the US for support. City analysts recall him boasting that he could sell the Broadgate and Meadowhall developments to US inves- tors "without leaving his desk".

Mr Henderson admits "there may be people out there", but insists "we have a better story". This shows the company ratcheting up its developments (including the redevelopment of Birmingham's Bull Ring shopping centre), selling its surplus property (its portfolio is half the size it was in 1999), and becoming "customer focused" (offering tenants more services).

"Unlike our friends at Regent's Park [Mr Ritblat lives on the edge of the London park] we are using our old property skills to create value from development," says Mr Henderson.

To this end he's right: research by HSBC shows Land Securities has outperformed its rival in terms of total annual returns. But its performance has hardly been inspiring. In the three years to December it produced a 4.7 per cent return, ranking it 58th out of 64 property companies.

Land Securities is eclipsed by many smaller groups, which arguably have weaker management. Perhaps, then, the best way to unlock the value in the company, which has a market value of £4.5bn, would be to break it up.

Mr Henderson argues that the company's size can be used to its advantage now it is bidding for public sector PFI work through Trillium. "Who would you partner with, Land Securities or a venture capital backed company whose investors want an exit in 18 months?"

On Tuesday, he will face City analysts eager to learn what's going on. One analyst who will be present estimates there is a 50 per cent chance Land Securities will be subject to a bid this year. If so, Mr Henderson won't get his peace and quiet.