On the money

During the bid battle between Guinness and Argyll for the hand of Distillers,
Ernest Saunders promised the target company that if he won he would appoint a
notable independent Scot – accountant Tom Risk – as chairman.

This played very well in Scotland, where Distillers was an iconic company.
Whether it clinched the victory we shall never know, but the issue was so finely
balanced it probably did and Saunders got his prize.

But just weeks later, before Risk had chaired a board meeting, Saunders
ditched him, hoping to take the job himself. He completely misjudged the mood.
Uproar ensued. Some of his key City advisers resigned, the press coverage was
hostile, the shares fell.

Contrast this with what happened earlier this month when Lakshmi Mittal, the
Indian steel magnate, did something similar at steel company Arcelor Mittal. It
is only a few months since Mittal launched a hostile bid for Arcelor, whose
board resisted strongly.

In the succeeding months, the price went up, but one of the defining moments
in overcoming opposition and winning board support was when Mittal offered not
to run the combined business himself but to give the chief executives’ job to
someone in whom the Arcelor side had confidence.

Opposition melted and Mittal duly got his prize. Now, however, that chief
executive has been ousted and Mittal has taken the job back, but no one seems to

The shares actually went up a bit, no advisers have resigned and the general
view among analysts is that it is good because it will make the integration
easier: that change in City ethics over the two decades since Big Bang.

Anthony Hilton is finance editor of the Evening

Related reading