Fidelity raises preference stake in WPP

FIDELITY, the Boston-based investment manager, last week bought another 5 million preference shares in WPP Group, the troubled advertising giant, because it thought them 'good value' in spite of its threats to vote against dollars 1bn ( pounds 530m) refinancing proposals.

'I think they are good value on the terms that are on the table at the moment,' said Anthony Bolton, senior investment director.

Fidelity lifted its holding in the preference shares to 10.9 per cent from 8.6 per cent.

It believes that the refinancing, which will be voted on at a shareholders' meeting on 5 August, gives the banks too much of WPP's equity at the expense of the preference shareholders.

Mr Bolton said Fidelity was one of a group of institutions that have been discussing the terms of the refinancing regularly. They account for between 30 per cent and 40 per cent of the preference shares.

Fidelity wants the banks to negotiate improved terms for preference shareholders. It has suggested a warrant issue, among other proposals. But the banks, according to Fidelity, have been completely intransigent, although there have been two meetings in the past three weeks.

Fidelity would not commit itself to voting against the proposals, but said it was prepared to. The only institution to have publicly said it would vote 'no' is Klingenstein, Fields & Co, the New York investment adviser that controls about 4.5 per cent of preferred shares.

WPP Group needs 75 per cent of the preference share vote.

Mr Bolton said: 'This is about shareholders' rights and we have been prepared to take a stand . . . Unless shareholders take a stand they will have less and less notice taken of them.'