A safer way to clinch a takeover

NOW that Asda parent Wal-Mart as well as Sainsbury has confirmed that it may bid for Safeway, it seems certain that the Competition Commission will get involved as both offers imply a reduction in the number of supermarket chains from four to three.

On these grounds, the Morrison bid should have a clear run at Safeway while the others are blocked. But this may be politically too difficult for the Commission and it will seek to examine all the Safeway offers as a package.

Clearly those promoting the Morrison-Safeway deal need to avoid a reference, because Morrison's is the least financially attractive bid whatever its other merits.

Therefore, they need what one might call a safer way to do the deal. Rather than have Morrison bid for Safeway, why not have Safeway bid for Morrison? This would take advantage of the 40% surge in Safeway's share price in the past weeks - underpinned as it now is by bid fever - and solve the problem of the collapsing Morrison share price.

Sir Ken Morrison and family still control a huge chunk of his company's shares, so success would be assured and there could be no possible grounds for a competition referral. Once completed, they could change the name and let the Morrison management take over.

Old-school ties

THE looming takeover battle for supermarkets group Safeway is clearly good news for the City, starved as it has been of revenues, but it is important in a wider sense too.

The situation is remarkable in recent times in that all the advisers are representatives of the old-school City, even if they are currently under a wider umbrella of foreign ownership.

It reflects a distinct reaction to the excesses laid at the door of the American investment banks during the bull market mania. The more the latter's misdemeanours over Enron are exposed, and the more willing the investment banks have been to pay hundreds of millions of dollars to settle potential lawsuits against them, the more British boardrooms believe that these dealmakers should in future be kept at arm's length.

Thus it is that Rothschilds led the investment bankers' bids and deals tables for last year and the small boutiques and corporate finance houses set up for the most part by refugees from the big banks have also enjoyed a steady and growing flow of business.

Their secret is simple. They try to offer genuine impartial advice. They do not have quarterly targets for the amount of business they must bring in, nor huge origination and sales organisations which have constantly to be fed with deals. Nor are they fixated by the size of their annual bonuses. Unlike the US banks, it does not cost them £10m or more a day simply to open their doors. And belatedly clients are rediscovering their merits.

The sadness is that there is only Rothschild of the old names left to enjoy the return to sanity. Until last summer, of course, there was also Lazard but it lost its nerve and brought in American Bruce Wasserstein to head it - a man who stands for everything that Lazard did not and who, it must be said, looks increasingly like a dinosaur in a world that has discovered evolution.

Robert Fleming, too, succumbed to the embrace of Chase, and disappeared within months, Even Cazenove lost sight of what made it unique - its partnership structure - and set off down the road to a share listing. God help it if it ever gets there.

The really intriguing one, however, is Schroders. It allowed itself to be bought by Citigroup and merged into Salomon Smith Barney a couple of years back and many, including me, thought that was the end of it. But that judgment was premature.

Despite moving to Canary Wharf, it seems to have preserved its culture and because it is still seen as Schroders it has avoided the stain that has afflicted its rivals, and indeed the scurrilous activities of some of its new-found colleagues in the United States.

I suppose the big question, though, is how real and enduring any of this is likely to be. Does the shift mark a lasting reaction against the global houses and their naked pursuit of their own agenda? Or will companies forget how they were taken for a ride in the bull market when the good times return and the dealmakers once again come to nibble seductively at their ears?

One would like to think that the lessons have been learned and that they will be remembered. But to be realistic is to have doubts.

Perhaps the best that can be said of the current climate is that we should enjoy it while it lasts, for it may just be an interlude - the ultimate dead-cat bounce of a whole way of life.

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