Trafalgar battle stopped

Press, 5 July 1983, Page 30

Trafalgar battle stopped

By

NEVIN TOPP

The decision to refer the SNZ7OOM bid by Trafalgar House for the Peninsula and Oriental Steam Ship ComK(P. and 0.) to the ipolies and Mergers Commission, does not guarantee the end of the “war” between the two companies.

In his first decision as the British Secretary of State for Trade and Industry, Mr Cecil Parkinson, referred the bid by Trafalgar House for control of Britain’s biggest shipping line to the commission, after a battle between the two companies that had more in common with a naval engagement than commerce.

A bid by Trafalgar House, the large diversified British property development company, which includes the prestigious Cunard Line among its divisons, for P. and 0. was first mooted on May 17, when the shipping company’s shares began to rise on the London Stock Exchange. Trafalgar quickly built up a 5 per cent stake in P. and O. as a lever for the bid, but efforts to obtain a 14.9 per cent interest were stymied by buyers friendly to

P. and O. The bid for P. and O. was declared on May 25, worth 207.5 p for each of the shipping company’s deferred stocks, and from that point the battle became literally a war of words with the guns being mainly fired by big advertising agencies. The take-over battle had all the hallmarks of a naval battle. There was talk of clearing the decks, broadsides, repelling boarders, and also the naval history that is associated with the name of one of the protagonists, Trafalgar. Two advertising agencies, Saatchi and Saatchi, for Trafalgar, and J. Henry Schroder Wagg and Co., Ltd, for P. and 0., took out full display pages in Britain’s main newspapers to explain the positions of their clients. “Stand By To Repel Boarders,” said P. and 0. when asking its shareholders to reject the bid, the advertisement featuring a large flag with a skull and crossbones. The implication being clear enough — Trafalgar House were “pirates.” “P&Owe.” replied Trafalgar in a full page display in

big letters, which also used a bar graph showing the shipping company’s 1982 borrowings at £347M to its profit of £791,000.

P. and O. also tried a number of manouevres to avoid Trafalgar’s attack. After a request by P. and 0. to intervene the General Council of British Shipping decided it could not take sides with one member against another in its organisation. Also the attempt to get the British Office of Fair Trade to stop the bid because it could be detrimental to the national defence, particularly in view of the Falklands War, if the combined fleets of the Cunard and P. and 0., were rationalised or put under foreign flag, was rejected. One of the main arguments put forward by P. and 0., in its defence was that the asset backing from its ships, banking, and property interests was 381 p compared with 207.5 p offer for each of its deferred stock. Trafalgar had emphasised the poor profit returns to P. and 0. in recent years, but the directors of the shipping company

argued that stockholders were about to reap the benefits after many years of rationalisation of its interests to get the company to where it was today. P. and 0. had a shipping fleet of 450 in the 19605, but the world recession and changes in cargo handling have cut this number to 74, including selling 22 ships in 1982. But, at a time when P. and 0. has been reducing its dependence on shipping Trafalgar has been seeking to increase its interest in this area because its property interests in London are not providing the returns it expected. The war of words might never have happend had Britain’s Government not been placed in limbo because of the election campaign. Now the Monopolies and Megers Commission will decide whether the Trafalgar bid is in the public interest, and has six months to make a report.

The present bid has lapsed, and Trafalgar is under no obligation to revive it if the report clears the way.