SIR Tom Hunter's West Coast Capital (WCC) and Sir Terry Leahy's Tesco will be unable to work together again after the legal wrangle over the disputed £150 million Dobbies share issue, a court heard yesterday.
The lawyer for Dobbies, in which Tesco has a majority holding, told the Court of Session in Edinburgh yesterday that the legal differences between the two companies would make future co-operation "unthinkable".
David Sellar, QC, acting for Dobb
ies in opposing a move by Hunter's investment vehicle to win an interim interdict to prevent the "open offer" shares issue, told the court that the extra capital would allow Dobbies to continue its expansion plans.
Sellar told Lord Glennie that the issue was the best way to finance expansion plans, adding that Dobbies had considered a number of other means of financing an expansion, such as private equity, but had ruled them out after taking advice from investment management professionals Brewin Dolphin.
The case put by Dobbies was part of a day-long legal argument over Hunter's request that the court stop Dobbies majority shareholder Tesco from launching the share issue.
If the issue went ahead Hunter would be forced to pay £44 million for extra shares to retain his stake in the firm – or dilute his existing 29 per cent holding, allowing Tesco to increase its share to 84 per cent.
Tesco's bid last summer to buy a large enough stake in Dobbies to delist it from Aim was blocked when Hunter said he would retain his own stake.
Acting for WCC, Richard Keen, QC, claimed that Tesco wanted to force Hunter into a sale, which would allow Tesco to take full control of Dobbies, ultimately taking it private. He said that directors had to adhere to the Companies' Act and questioned the board's motivation behind the "open offer".
Keen, who said that WCC had been approached by a number of other minority shareholders over the issue, argued that Tesco had no existing plans for the expansion of Dobbies.
He said that the £150m share issue had come "out of the blue", suggesting that the Tesco-appointed directors on Dobbies' board may want to use it to force minority shareholders, including Hunter, to sell up.
Sellar countered that, if Tesco's offer to underwrite the share issue fell through, Dobbies would be unable to expand as planned, leaving a number of smaller garden centres open to other suitors.
WCC owns rival garden centre chain Wyevale.
He said: "There are other companies waiting in the wings for acquisition opportunities. I have a number in mind – particularly one: Wyevale."
He added: "The idea that WCC and Tesco can continue working together in this company is unthinkable."
The court was also told that WCC had been offered an improved price of £15 a share rather than the £12 per share suggested in the prospectus for the "open offer", if it made a deal to sell Tesco 31 of its Wyevale outlets.
Dobbies also claimed yesterday that, if the interdict is granted and the share issue is not allowed to be put to shareholders at next week's AGM, Tesco may pull out of underwriting the issue at any future date due to internal competition for funding.
Lord Glennie is expected to decide on whether to grant the interdict later this week.
The full article contains 557 words and appears in The Scotsman newspaper.
