CITY DIARY
CHRISTOPHER FILDES
I cannot but warm to the `damn-you-all' statement from Sir Antony Hornby and Lord Harcourt. So the takeover panel thinks their firms—Cazenoves and Morgan Grenfell- broke the code when acting for American Tobacco? Other people might have responded with a mealy-mouthed tut-tutting: 'Utmost good faith—utmost respect for panel—utmost importance to uphold code—utmost two No Trumps.' But these City pillars do not so easily bend. `They cannot agree with the con- clusions of the panel since both are firmly of the view that, so far as they are concerned, they have complied with the code in every respect.' A pity about the footnote that neither Morgans nor Cazenoves would answer any further press inquiries : it lent a touch of the Charles Pooter—q left the room with some dignity, but caught my foot in the mat.'
But this direct challenge to the panel's authority has been made on ill-chosen ground. I have not found anyone in the City who thinks that Morgans and Cazenoves, given the existing conventions, were right; or indeed anyone who can confidently advance an explanation of their behaviour. Members of the Stock Exchange Council are severally, and I dare say collec- tively, furious with them. What their principals, American Tobacco, must think of all this I can only conjecture. The whole case for their partial bid of 35s is that they already have a holding in Gallaher which they bought cheaply; so control of Gallaher costs American Tobacco less than it would cost anyone else. If the price of clearing things up is a bid for the whole of Gallaher, this arithmetic is blown sky high. For that matter, the arithmetic suggests that no one but American Tobacco would have bid 35s in the first place; so that the great pre- emptive strike was unnecessary.
Mr Cecil King in the Café Royal's Napoleon Room—that joke wasn't lost on anyone—pro- svided one of the great business occasions of our time. It was understood that, as a small shareholder in the International Printing Cor- poration, he intended to say a few words; and Mr Hugh Cudlipp put him in to bat first wicket down. A genial, pink-faced figure : Churchillian slurred s's coming over the ampli- fier. Since he'd been in the chair throughout the year's trading, he owed certain explanations about the poor figures: the Daily Mirror price and its advertising rates had been pegged down by the Government: over such matters the board had of course no control. . .
And then, with undiminished geniality, Mr King mentioned matters that did seem to be within the board's control, or should have been.
• That computer, now, at Paul Hamlyn : 'for some months Paul Harnlyn had virtually no accounts': cost, half a miffion pounds. . . . That profit forecast which developed a £450,000 bole . . . Mr Cudlipp, who as a chairman was a brilliant editor: Mr Rogers, who as managing director was 'unduly dilatory in an important appointment': Mr Cartwright, finance director —tad I still been chairman I should have taken steps to strengthen the financial side of the business.' . . . And then the coup d'etat: 'To face me at the board meeting was more than their courage could run to': instead the com- pany secretary was sent 'trembling to see me at 8.15" one morning to give me three hours' notice to clear out.' Well, said Mr King—still looking and sounding like Father Christmas at Harrods—he didn't propose to hawk his griev- ances round Fleet Street: he wished the whole meeting well, and that included the board. He evoked no reply, and for that moment none seemed possible.
After this high drama, low farce. A share- holder who thought that to have Mrs Barbara Castle's husband as an employee was 'very unhealthy'; and another to say that he'd grown a beard but it might not be permanent; and another to express such confidence in the new board as to propose another £5,000 a year for them all round, and would they make sure that Scotland was properly represented? This last chap also proposed the resolution to fix the auditors' pay, and I think he got Deloitte Plender an unconvenanted £500 extra.
This astonishing bull market—which, as mea- sured by the Financial Times index, now shows a rise of 70 per cent in less than two years— has divided the City into two camps: those who can't see why the market is so high; and those who can't see what will stop it going higher. Indeed, the number of people who can answer either of these questions is rapidly dwindling. So here, to heap irony upon irony, are brokers L. Messel: what, asks Messels, will break the boom? Only the return of the Conservatives to power.
The core of this argument is familiar: that share prices are now sustained chiefly by lack of faith in the value of money. Messels' circu- lar, The Gulf between the Parties, puts it this way: 'It may be said that a real boom in the gilt-edged market and a proper slump in equity shares will have to wait on the advent of a Tory government when 'money might p.ossibly become more honest.'
I might add that the most obviously anti- capitalist part of Labour policy—nationalisation —has been the shareholder's best friend. Would you care to hold London Midland and Scottish Railway now? Or Consett Iron? Don't the com- pensation terms look generous—especially if the money was reinvested in other equity share,? As in fact it was: so that with increased demand and reduced supply, share prices shot up. Then there was corporation tax, which made it un- attractive to raise new equity capital; and capital gains tax, which locks shareholders in and stops them selling. So the supply of equities was further reduced, and up went prices again.
The market professionals can never have had such a year. As they stuff fat commission cheques into their pockets, they complain ever more bitterly about the Government; how it has quite undermined confidence and made the life of business impossible. Then the 1RC pro- motes another whacking great takeover, and pumps public money into the companies con- cerned or straight into the market; and the boys, like Mr Liberace, cry all the way to the bank.
As with the caucus race, so with the aluminium smelters: everybody has won and all shall have prizes. All three of the companies who wanted smelters shall have them; but, so that our EFTA partners may be happy too, the smelters' capacities are reduced to a level where they are at best, barely viable. Sixty-two million pounds of public money backs this. The Con- servatives (you may remember) had to choose whether to site the new 150 million steel strip mill in Wales or Scotland: disastrously, they put half in each. Now we have a three-way split. Government must be a hard life: decisions, decisions, decisions . . .
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