THE National Association of Pension Funds (NAPF) yesterday advised its members to reject Lord Kirkham’s £496 million bid for DFS — the sofa company he founded — on grounds of corporate governance.
The NAPF advice to shareholders came a day after Pensions & Investment Research Consultants, another investor lobby group, cited a similar reason for urging DFS shareholders to abstain from voting on the bid.
The NAPF, whose members manage £600 billion of pension funds between them, said that it had not analysed financial aspects of the bid when making its recommendation.
Andy Fleming, spokesman for the NAPF, said: “The main proposal is not at issue with us. That is an investment matter for shareholders to decide for themselves.”
He added: “Our concern, on a purely corporate governance basis, is that the independent committee (of directors) recommending the proposal is not independent.”
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The non-executive directors Kevin Morley and Malcolm Walker have been on the board for at least ten years eac, and have recommended Lord Kirkham’s takeover bid to shareholders. Major investors, including Morley Fund Management and M&G Investment Management, which together control 12 per cent of DFS, have pledged to block the deal at its special general meeting on September 7, saying that it undervalues the company.
Denying that the non- executive directors lacked independence and thus credibility, a spokesman for the non-executive directors, said: “Both those non-executive directors were re-elected with a margin of over 90 per cent.”
A source close to the deal said: “This is a complete red herring and does not go to the heart of the issue. The offer on the table is on par with other takeout multiples in the sector.”
Mike Blackburn, the senior non-executive director, has also come under scrutiny over his entitlement to a six-month payoff if Lord Kirkham’s bid succeeds. The NAPF said: “It is highly unusual for any non-executive directors, who normally have a letter of appointment, to be employed on this basis. In our opinion, the lack of independence makes it more difficult for the committee to be seen as acting in the best interests of shareholders.”
Neither Lord Kirkham, who is the DFS chairman, nor his bid party, were available for comment last night.
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DFS shares eased 2¾p to 430½p yesterday.