Board split threatens to derail GRE auction

A BOARDROOM split is threatening to derail the takeover auction for the insurance group, Guardian Royal Exchange, with the GRE chief executive John Robins understood to favour a "go-it-alone" strategy rather than accepting any of the offers that have emerged so far for the group.

The board of GRE is due to meet this morning to consider two rival bids that have been tabled with its advisers, Morgan Stanley, by Royal and SunAlliance and Eureko, the umbrella grouping comprising nine European insurance groups.

However, Mr Robins, who has just taken over as chief executive from John Sinclair, is believed to have been persuaded by a recent circular from HSBC Investment Bank that the group should reject the offers and attempt to stay independent.

It is believed that several of the executives, including Mr Robins' deputy Peter Owen who would take over as chief executive under the plans, may be on his side.

The fact that Mr Robins has been swayed by the opinion of a rival bank has angered Morgan Stanley, who were called in after a takeover approach from AXA last year, ostensibly to handle an auction for the group, at the suggestion of Sir Anthony Tennant, a senior adviser to the firm who sits on the GRE board in a non-executive capacity.

The Takeover Panel was yesterday asked to investigate the role of HSBC following a complaint that it was acting for Mr Robins independently of the GRE board. But the panel has decided not to take any action after satisfying itself that HSBC has no formal advisory role, despite the fact that Mr Owens, the GRE deputy chief executive, is believed to be close to the bank.

"Morgan Stanley has been acting with one arm behind its back," said one of those involved with negotiations.

The circular by HSBC insurance analyst Nick Bunker 10 days ago, said that the group would be worth 473p on breakup, considerably more than either bidder was willing to offer in cash terms. Morgan Stanley has told the GRE board that the figure is "not realistic".

Royal last week made an indicative offer of 390p a share, with Eureko believed to be ready to offer 400p.