The O'Brien Column: Sir Ronald's missive indicates Inchcape problems

Friday 23rd February 2001

The Stock Exchange daily memo, which runs to more than 12,000 pages a year, often contains gems of unconscious and unintended humour or understated criticism of companies, the latter usually in the course of takeover offers. There are also instances of administration foul-ups to be confessed.

Contents of the memo are not the responsibility of the exchange, apart from ensuring company statements comply with listing requirements and are not misleading.

The exchange has responsibility for statements it issues, including the tortuous "explanations" of the Montana affair.

Perusal of last week's daily memo disclosed examples of such items in between the usual flow of company interim and final profits' announcements and general information about corporate activity.

They probably had little to do with equity investment in the broad sense but were still worth noting.

They included one of the best examples in recent years of an understated, expertly worded, attack on a company. It was not surprising to see the announcement was headed, "Text of a letter from Sir Ron Brierley to Sir John Egan, chairman of Inchcape plc," because the missive was vintage Sir Ronald. He is a master of the barbed comment, the depth of which has often been lost on the recipient.

The letter was written in the context of Guinness Peat Group's 16% shareholding in Inchcape, a UK-based automotive group, and its takeover offer. Sir Ronald said Guinness Peat was "reasonably familiar" with Inchcape operations and financials and thanked Sir John for his assistance in clarifying various aspects.

It was noted Inchcape had repatriated £100 million in cash from the Netherlands to the UK. Sir Ronald said it was Guiness Peat's strong submission that "these funds should be immediately returned to shareholders in the form of a capital distribution of £1 a share" (the quoted words were in bold type).

Again in bold type, "Inchcape's loss of Toyota in the UK must have major significance for the future."

Sir Ronald said the remaining UK business lacked sufficient substance and cohesion and any new acquisition would have credibility problems after the company's long-standing and high-profile identification with Toyota. A double sardonic hit there, although couched in apparent innocent language.

Heavier hits followed: short, rapid and pointed, with an apparent sweetener tossed in at the end, but again with a barb.

"Mazda France (once highly profitable) has now disappeared, the 40% interest in Mazda GB looks increasingly tenuous and the UK dealership are well represented in number but not in location." (too many and not in the right places?)

"Customer marketing areas ("CMA's) are steadily becoming more important than individual dealerships, but to the best of our knowledge, Inchcape has not yet established its first CMA in any marque. Many of Inchcape's locations would complement other retail motor groups and would be more valuable to them than in the present ownership."

"Maranello Concessions is a quality niche business but, once again, would be of greater value if sold to an aggressive entrepreneurial owner." (Was Sir Ronald suggesting Sir John and colleagues lacked aggression and entrepreneurial skills?)

Kiwi Sir Ronald then thrust his rapier to the heart of the traditional UK Establishment: "The overseas subsidiaries are largely a legacy of a bygone colonial era and in reality there is no added value in UK ownership of diverse geographic locations.

"It is difficult to see that motor vehicle dealerships in Singapore in particular, and in Hong Kong and Australia, are enhanced by the remote control and added cost burden of a London head office."

"As an overall view, we believe Inchcape has an excellent opportunity to obtain the full value of its individual components by a controlled program (sic) of realisation rather than prolonging the existence of an outdated model for the sake of doing so." Guinness Peat estimated there was an ultimate realisation of much more than £5 a share to shareholders "in direct contrast to what we anticipate will be a disappointing Year 2000 result to be announced next month."

"Last but not least, we would fully support fair and proper retirement packages for board and management in recognition of a difficult but responsible decision to pursue a realisation programme in the best interests of all shareholders of Inchcape plc." (Bye, bye, Sir John?)

Another of Sir Ronald's interests, Brierley Investments, managed a twist on its founder's reference to "diverse geographic locations," when it said a special meeting to consider redenomination of the capital into $US, share consolidation and other matters would be held in Hong Kong on March 5.

BIL is incorporated in Bermuda, operates from Singapore, held its 2000 annual meeting in Bermuda and will now meet in Hong Kong. Most shareholders, in number rather than by size of holdings, reside in New Zealand.

The sop to their participation in corporate democracy will be the chance to send a proxy for the special meeting.

An obviously serious company announcement came from Software of Excellence International, which said it had "successfully won" (can you "unsuccessfully win"?) a tender to provide "dental software" to New Zealand's combined defence services.

OK, the term related to computer programs but surely it could find a better description, given the opening for the irreverent to play on "dental" and "soft."

Insurer Axa Asia Pacific (formerly National Mutual) was probably embarrassed and kicked backside when it found an offer to shareholders with 300 or fewer shares to sell their shares in a cost-effective manner went to many shareholders with more than 300 shares, although none were in New Zealand.

"Unfortunately, there was a computer programming error by the external mail house which had been contracted to perform the mail-out operation."

Oh dear. Another letter had to be sent.

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