Institutional shareholders in DFS, the furniture retailer, were today urged to abstain from a vote on Lord Kirkham’s £496 million bid to take the company private, a day after two of the British retailer’s biggest investors said they would vote against the proposal.
Pensions & Investment Research Consultants, the closely watched corporate governance advisors, urged stakeholders to sit out of the vote on September 7.
“Because there’s only one truly independent director [Michael Blackburn]... we’re recommending investors abstain,” PIRC spokesman David Somerlink said.
Mr Somerlink said that in a takeover situation PIRC would never recommend investors reject a deal, as a matter of policy.
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But PIRC is concerned that the company’s remaining two non-executive directors, who have ultimate responsibility for offering shareholders impartial advice, have failed to meet guidelines set by last year’s Higgs recommendations for good corporate governance.
One of them, former Iceland chairman Malcolm Walker, is still under investigation for alleged insider dealing.
Though sources close to the company admitted it was true not all the non-executives complied with the Higgs code, it was “strange” that shareholders should be concerned about the quality of corporate governance at this “late stage”.
“Do you think it’s a fair price or do you not is essentially what it comes down to,” one said.
But another source admitted that a number of leading shareholders had questioned the issue of governance in meetings with Blackburn held earlier this week, as well as the terms of the bid.
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He refused to say how those meetings with “nearly all” the major shareholders had gone, though a number would seem to have been left unimpressed.
Aviva PLC subsidiary Morley Fund Management, one of DFS’ biggest shareholders with a 6.37 per cent stake, yesterday said it would vote against the bid, as did Prudential’s fund management unit M&G, which owns a further 7.6 per cent.
Reports have suggested that shareholders owning around a third of the company have signalled their intent to vote against.
Perhaps crucially, the National Association of Pension Funds, whose members between them hold more than £600 billion of pension fund assets, is to issue recommendations to its members within the next few days.
Kirkham owns a 10 per cent stake, and for the bid to succeed has to secure the support from 75 per cent of the remaining shareholders. No leading shareholders have come out in support so far.
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Neither Mr Blackburn nor Lord Kirkham, who founded DFS, were immediately available for comment.
The independent directors yesterday said they would have to consider their positions at the company if shareholders blocked the takeover.
This afternoon DFS shares were trading 2p up on the day at 432p, 13p below the level of the Kirkham’s bid.
The shares have risen by around 6 per cent since he said on March 4 that he was considering taking the company private.