If this means anything, it is that there is still a lot of work to do before January 2003 when the restructuring is due to take effect.
Not a huge amount of information has been released by the group, but the 0.5% of the equity which existing shareholders are to be allowed to retain probably reflects the current economic reality.
The intriguing point is that shareholders are not to be allowed to vote on the deal and apparently the FSA is prepared to go along with this.
Presumably this is due to the existing structure of the group but it is hard for shareholders not only to lose their company but also to be told they are not allowed to consider the offer.
The restructuring also flags up the question of the involvement of the banks in the deals which ultimately led to the company being where it is today. There hasn’t been much indication that shareholders are contemplating legal action in connection with the saga but in these litigious days you can be sure that lawyers have been instructed somewhere.
On the bank’s side, the argument is straightforward. They are not in it for equity returns; they rank ahead of shareholders and if things go wrong it is shareholders who should bear the brunt of the pain.
But nowadays when a corporate embarks on a major acquisition, it can only do so with support from its bankers who carry out their own due diligence.
Their investment banking arm receives significant fees from the successful completion of the transaction and the whole process begins to look more like a joint venture than phoning up your bank manager and asking for an overdraft.
So it is little wonder that the banks would rather not give the shareholders the chance to vote on the deal. After all, they may be tempted to follow the Ferranti example and turn it down.
- Philip Sykes is head of business recovery at Moore Stephens.
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