By GEOFF SENESCALL
A David and Goliath battle looms as Guinness Peat Group (GPG) picks a fight with the London Stock Exchange in a bid to derail its proposed mega-merger with Deutsche Borse.
In the past three weeks, Sir Ron Brierley's corporate raider has been buying shares in the London exchange after gaining an initial holding through its British merchant bank and stockbroking subsidiary Brown Shipley.
With just under 1 per cent of the shares, GPG is understood to be the first large shareholder in the exchange to take such a strong stance against the merger of the two European heavyweights.
Sir Ron, speaking from Wellington yesterday, said it was too early to see how much support from other shareholders had been gained after the release midweek of a fiercely critical letter to the exchange.
"What we are doing is declaring our intention, on the basis of what has been disclosed so far, to not only vote against the proposal, but to actively canvas the defeat of the merger, not for any other reason than it simply seems to be a lousy financial deal," he said.
Most of the controversy so far had been about the high-technology iX exchange to be based in Frankfurt and linked to the Nasdaq. It had not focused on the financial aspects of the overall merger between the principal exchanges.
"I am amazed that there hasn't been greater emphasis on what seems to be an enormous disparity between the financial position of London and that of Frankfurt, plus the constitutional advantages to Frankfurt, even in terms of immediately emerging with 50 per cent of the capital of the new organisation," said Sir Ron.
"It just seems an extraordinary conclusion to such a world-famous financial institution as the London exchange."
The letter to the London exchange highlighted the financial implications of the merger. Sir Ron said it was "painfully clear that the London exchange shareholders are getting the worst deal by far. How this can be billed as a merger of equals is beyond comprehension."
It said that while the London exchange had shareholders' funds of £267 million, Frankfurt had a negative £21 million. Furthermore, it questioned why Frankfurt should be allowed to "grab 50 per cent of London's surplus cash." London had £192 million of cash whereas Frankfurt had £36 million.
The letter also dismissed as "dross" an information memorandum issued last month by the two exchanges giving details of how iX would operate.
Sir Ron told the Business Herald that he thought the process had been hijacked by a group of banking institutions that had their own vested interests.
He called for the full listing of the London exchange shares, which currently are traded in a special market run by one broker.
"The supreme irony is the fact that the London exchange, of all companies, has not permitted shareholders to obtain an open market rating for its shares."
The exchange existed purely for the purpose of creating a market for shares. By listing, he said, shareholders would be able to consider an offer from Frankfurt or anyone else.
AdvertisementAdvertise with NZME.
Latest from Business
Bruce Cotterill: After six months is the Government on the right track?
OPINION: Momentum is on the rise, but plenty more to do.