Leyland board behind state control

By Our Financial Editor

British Leyland's board is recommending shareholders to vote for the Scheme of Arrangement which would allow the Government to take control of the company. There is growing opposition to the Scheme, and the price of 10p a share which is being offered to those shareholders who decide to sell, from some small shareholder groups. Nevertheless, Lord Stokes, British Leyland's chairman, says that if the Scheme is rejected the likelihood would be liquidation moves.

Both the board of the company and its auditors, Coopers & Lybrand, consider that "shareholders in a liquidation could not expect with confidence to receive any payment in respect of their shares", says Lord Stokes.

All the directors will be voting in favour of the Scheme. However, five, Mr Alex Park, the new chief-executive-elect, Mr W. H. Davis, Mr J. P. Lowry, Mr R. J. Lucas and Mr R. A. Stormonth-Darling who together own 16,805 shares, intend taking up their rights and maintaining their stake in the new company.

Apart from Mr Stormonth-Darling, a London stockbroker who has been a member of the British Leyland board since the company was formed in 1968, these directors are retaining positions. Mr Stormonth-Darling said last night that he was retaining his investment for both financial and sentimental reasons.

Lord Stokes, Mr John Barber (who has been dismissed as chief executive), Sir David Barran and Lord Greenhill, who own a total of 94,000 shares, are going to accept the cash alternative of 10p a share. The trustees of Mr Jim Slater's family interests, who hold 275,000 shares, also intend accepting the cash offer. Lord Stokes, who holds 81,500 shares and will thus get £8,150 for his stake, will be suffering considerable financial loss. He took up the rights issue in 1972 at a price of 45p a share.

At one time Mr Slater's interests held 1 million shares in the company, which at their peak were worth about £850,000. However, the alternative for executive directors and others who have participated in the share incentive scheme is worse. If the company went into liquidation, they would be asked to pay the difference between the amount paid so far and the nominal value of 25p. So far nearly 11 million incentive shales have been issued at subscription prices ranging from 30p to 51p a share, of which most holders have paid 5 per cent. In liquidation a minimum of £2.2m would be called. Lord Stokes holds just over 485,000 incentive shares.

Explaining the board's recommendations to shareholders, Lord Stokes says various alternative plans were examined. These included dividing the companiy into smaller units; selling the mass car business to the Government-although the government was not interested in this, and talking about collaboration or merging with foreign interests.