Bidders hunt for Abbey road

SHARE prices often tell the real story during takeover tussles. The M&S price never remotely approached Philip Green's 400p, so to many investors the deal looked doomed.

At Abbey, providing this summer's latest excitement, the shares have crept above the Banco Santander bid value, offering a ray of hope that a second or third bidder might emerge.

Where this party will come from is hard to fathom given the onerous competition constraints on British players. If the Americans wanted a British bank they would be more likely to look at Lloyds TSB or Barclays - and buy the real thing - rather than nibble around the fractured Abbey franchise.

There are still some unsettled issues surrounding the Santander bid. Abbey and its would-be new owners are making it clear that the pension fund hole of £632m will be dealt with. Given that early retirements and redundancies are likely to follow any takeover, this will be critical. The trustees might also want assurances that any holes are not filled with South American bonds.

It is also said that the Santander bid has opened the door to the famed trans-European deals which were promised post-euroland. This presupposes, as Santander has done, that its IT and banking model can be transposed.

Here again the jury is out. The experience from insurance, where Aviva has established a strong pan-European presence, is that each market is culturally different and there is no magic, allconquering design.

Board games

ONLY when a company board is placed under real pressure, as in the case of takeover offers, is its mettle really tested. We saw this at M&S where the old guard was seen as wanting and ditched to make way for new heavyweights.

Now the focus has shifted to Abbey where the non-executives, who include a couple of relics from the National Provincial Building Society, retreated at the first smell of cordite.

Was it really necessary for Abbey to offer Don Emilio Botin and Santander an £81.7m break fee were another buyer to come along? Someone, perhaps one of the new younger generation of independent directors that include former Lifestore guru Vittorio Radice and Gerry Murphy of Kingfisher should have stamped their feet.

What is increasingly apparent, despite all the talk of greater boardroom diversity following the Derek Higgs report on governance, is that when push comes to shove, it is battle-hardened experience that is needed in the boardrooms. Companies need directors who can challenge the fancy calculations of fee-hungry investment banks and a determination to obtain the best deal for shareholders.

Political correctness in the boardroom is a luxury. A study, partly funded by the Department of Trade & Industry, has established that UK boardrooms are not sufficiently diverse.

The DTI already has discovered that there is a shortage of women. But tokenism damages everyone. The reality is that adding ethnic minorities and women to the boards of our biggest companies can only be justified if they are able to respond to crisis.

Sure, we all believe in representation from every community on company boards. But we should never forget that the first loyalty of directors must always be to investors.

Tooth-and-claw capitalism demands warriors.

Glaxo glee

THE City's response to Glaxo-SmithKline's second- quarter results looks bizarre. Britain's top drugs firm unveils a 17% dip in earnings and the shares rise.

The last couple of years have been nothing short of disastrous for GSK. The board has had to sort out the dispute with investors over the size of chief executive Jean-Pierre Garnier's pay.

It has been embroiled in a row over the cost of AIDS treatments in Africa and most recently has been targeted by New York state attorney Eliot Spitzer over the safety record of its antidepressant Paxil, sold as Seroxat in Britain.

All of these have cast a long shadow over the shares, which have consistently underperformed the European drugs sector.

But pharmaceuticals are a longrange business and the market is starting to focus on the future. A pick-up in the asthma drug Advair is on the cards as the year progresses. There is a single AIDS pill on the way, which may resolve some of the difficulties of dispensing in developing nations.

The much-trumpeted future pipeline could soon start to deliver with important hay fever and cancer compounds at Phase III testing and on their way to market. It may be too early to be optimistic. But hopefully all the governance issues which dogged GSK are now known about and the firm can move forward.