Man Utd, Take Three. The Independent Business. Michael Harrison's Outlook:
My Colleague Jeremy Warner stirred up a veritable hornets' nest with his castigation earlier this week of the Manchester United board over its decision to reject Malcolm Glazer's takeover approach. So I return to the subject with some trepidation and also with a declaration of interest: as a Liverpool fan, I have more reason than most to wish Manchester United a slow and horrible death. Having said that, the stance adopted by the board strikes me as having been correct and not a little courageous. The idea that the only fiduciary duty owed by the directors of a public company is to extract the best price for shareholders is an American import. But it is also wrong. Directors have a common law duty to act in good faith in the best interests of their company and a statutory duty under the Companies Act to take into account the best interests of their employees. In simple terms, that means money does not always talk because the bidder offering the highest price might not be the most appropriate one for the company in its widest sense. Admittedly, in 99 per cent of cases what is in the best interests of shareholders will also be in the best interests of the company. But that is not always so. Consider a takeover bid which is so highly debt financed and so reliant on the continued success of the company being acquired that there is a real risk that it will collapse under the burden its new owners have taken on. Consider then what impact that would have, not just on the business and its direct employees, but on the surrounding community and all those businesses which act as suppliers. Consider, if you will, the present plight of Leeds United, which has fallen into just such a pit of debt. In those circumstances, would it really be sufficient for the former directors of the business to shrug their shoulders, move on and say at least they got a good price for the shareholders? To put it another way, would they have been derelict in their duties? But the dangers inherent in leveraged takeovers are not limited to sport: the debt-financed acquisition of the Somerfield supermarket chain a decade ago very nearly led to its demise and the more recent decision of the Marks & Spencers board to reject Philip Green's takeover bid probably had something to do with its highly-leveraged nature. Even where a board of directors can be shown to have achieved the maximum value for present shareholders by selling out, it is not clear that this is a good argument for taking the money and running. For one thing, those self-same shareholders may very well own shares in the company doing the acquiring and it a well-established fact that the majority of takeovers destroy value rather than create it. In the case of Manchester United, there were also several categories of shareholders to take into account - not only those City institutions who would have bitten Malcolm Glazer's hand off for 300p a share, but also the shareholder fan base who would probably have been left as disaffected minority shareholders had the offer been recommended and gone through. Most of United's directors would have been surplus to requirements had they invited the Glazers through the door. All of them will certainly lose their jobs now should he successfully mount a hostile bid. It is rather to their credit therefore that they told the Florida billionaire where to stick his debt-financed bid. As to my esteemed colleague's other contention - that the destruction of Manchester United might actually be good for English soccer - well, I leave that in the hands of the one true football team. It can be found 30 miles away down the East Lancs Road. ------------------------ Yahoo! Groups Sponsor --------------------~--> Make a clean sweep of pop-up ads. Yahoo! Companion Toolbar. Now with Pop-Up Blocker. Get it for free! http://us.click.yahoo.com/L5YrjA/eSIIAA/yQLSAA/GtUolB/TM --------------------------------------------------------------------~-> Please use [EMAIL PROTECTED] for general discussion. To unsubscribe send a blank message (from the email account in question) to: [EMAIL PROTECTED] Join as a full member of IMUSA today: http://www.imusa.org/join.htm Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/imusa/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
