Analysis: Mergers and Acquisitions: Co-op ’dinosaur’ bites back at the predator

Andrew Regan’s bid to take over the Co-op hit the buffers amid court room drama this week. But it might have been a different story had press leaks not alerted the CWS to his plans.

Andrew Regan’s bid to take over the Co-op hit the buffers amid

court room drama this week. But it might have been a different story had

press leaks not alerted the CWS to his plans.



The collapse of Andrew Regan’s pounds 1.2 billion takeover bid for the

Co-operative Wholesale Society (CWS) last week marked the beginning of

the end of one of the City’s most engrossing soap operas.



Regan’s assault on the Co-op has been characterised by what one observer

called, ’some very dirty PR tactics indeed’. Along the way there have

been questions in Parliament, videos of Co-op employees giving secret

files to their rivals, multi-million pound payments to mysterious

off-shore companies, court injunctions and the condemnation of a judge

who branded Regan’s antics as ’iniquitous’.



From the start the whole campaign was dogged by leaks. Regan’s original

PR strategy was blown off-course when the Sunday Times ran a story

revealing Regan’s plans to bid for parts of the Co-operative Society’s

empire in early February. From then on, Regan and his team were fighting

a rearguard action.



Not that Regan lacked expert PR advice. On the consultancy side there

was David Bick a director of Financial Dynamics who worked virtually

full-time for Regan’s company Lanica Trust on the deal. Meanwhile former

Daily Telegraph City diarist Damien McCrystal took care of the PR for

Galileo, the vehicle created to make the bid for the CWS.



While the endless speculative newspaper stories appeared to be helpful

to Regan’s PR team, they prevented Regan from targeting the people he

really wanted to. Most important of these were the members: ’the

grannies living on council estates who didn’t even know they owned the

Co-op’, as one source put it, who were to be targeted with a massive

regional media campaign.



According to George Pitcher, chief executive of PR firm Luther

Pendragon, who worked informally, and uninvited, on the Co-op side, the

spin from the Lanica/Galileo camp was that the Co-op people were ’a

bunch of dinosaurs’.



But they could not have been more wrong.



The Co-op fought off this bid with a ferocity that few would have

thought possible. And they were helped, inadvertently, said one source,

by people within the Regan camp ’who didn’t understand the importance of

keeping their mouths shut’.



Lanica’s merchant bank, Hambros, apparently got the jitters after MPs

put down an Early Day Motion motion to the House of Commons regarding

Regan and possible financial scandals and called in Lowe Bell Financial

to act for Galileo. In a bid to clamp down on the now rampant press

speculation Lowe Bell - which was also advising Nomura International,

the main backer for the deal - took over as the main source of press

information.



Also on the team was lobbying firm GJW, which was advising both Galileo

and Allied Irish Bank, a potential buyer for the Co-op Bank.



Meanwhile the Co-op set up its own war cabinet led by director Alan

Prescott and Brian Keelan of merchant bank SBC Warburg. It was Keelan

who was behind the surveillance operation that caught CWS director Allan

Green handing documents to Regan in a pub car park (which, ironically,

contained details of the Co-op’s defence strategy).



The PR team was led by Bill Shannon head of corporate relations at the

CWS together with financial PR firm Keith McDowall Associates, whose job

was to counter the acres of largely favourable press coverage Regan was

receiving.



The Regan team finally threw in the towel last week after an injunction

taken out by the CWS banned Regan, his associate David Lyons and their

companies Lanica and Galileo from making use of the confidential

information they obtained from the CWS. It was at this stage that Lowe

Bell’s work for Galileo effectively ceased.



On Friday Mr Justice Lightman extended the injunction to include Hambros

and another 17 City firms to whom the information was circulated.



The successful defence of the CWS led one Regan sympathiser to say: ’I’m

really impressed. They defended the indefensible.’



The bid may be over but for those who were involved with Regan the

fall-out continues. The Co-op launched criminal proceedings against the

two Co-op directors accused of helping him, Allan Green and David

Chambers - both of whom were sacked last week. It also launched civil

proceedings against Regan, Lyons and their advisers.



On Monday Hambros and Regan’s law firm Travers Smith Braithwaite were

forced into a humiliating climbdown when both resigned from Lanica and

issued public apologies to the CWS.



Perhaps, as Pitcher says, Regan was naive to think that he could get

away with using moles within the Co-op. As for his advisers, Hambros

chief executive Chips Keswick himself admitted that the ’judgment

exercised’ in the case had fallen ’well below our standards’.



Keith McDowall also raises questions about the role of Regan’s PR

advisers, although the truth may be that for all the talk of PR people

sitting in the board room alongside the bankers and lawyers, in this

case they were out of the loop.



If the case illustrates one thing it is the danger of overkill. Many in

the industry believe that had the bid come as a surprise, the CWS may

well have been looking at a different scenario this week.



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