THE Wm Low bid to take over Budgens will result in the Dundee-based
supermarketeers showing a loss probably in excess of #2.5m as a result
of fees and having to pay out for underwriting commitments which are no
longer required.
Managing director Mr James Millar said yesterday that the cost will be
treated as an extraordinary item in the current year's accounts. But
again there was no real indication as to why the talks between himself
and Budgens' Mr John Fletcher broke down with Mr Millar content to
emphasise the responsibilities to the Takeover Panel.
Most unusually, last Friday the Panel had agreed that the formal offer
documents for the #136m bid need not be sent out as Wm Low did not feel
it was able to recommend what had been agreed as a merger to its
shareholders. The question of Mr Fletcher's compensation, which would
have approached #3m, was not a factor.
Mr Millar pointed to the Low share price which yesterday spurted 17p
to 269p as being a sign of City confidence in the company. He added that
there was the need to restore some credibility with the institutions.
But normal business was continuing with imminent store openings in
Dumfries and Northallerton.
He added that the company has one of the highest ratings in the food
retailing sector and that the shares were now near the 280p level seen
before the bid was announced and when there was a premium on the price
because of the Ron Brierley IEP holding.
In contrast, Budgens shares collapsed 36p to 110p amid rumours that it
is considering taking legal action against Low. But a depressed sounding
Mr Fletcher denied that point. The question of his compensation had
never been raised, he said.
It appears that it is unlikely the Panel will disclose the real reason
for the breakdown in negotiations -- the last occasion of a similar sort
was Trafford Park Estates bidding for Wingate, which is probably a
takeover to have escaped most people's close attention.
The pressure is now on Mr Millar to make Low perform even better as
the company is now under closer public scrutiny than at any time since
it came to the market in 1973. Whether the likes of Tesco will pounce is
conjectural; but that will underpin the shares.
