Flurry of dissent as Bristol & West members sanction £600m takeover by Bank of Ireland

ONE year to the day after the takeover was announced, members of Bristol and West Building Society have approved the takeover of their society by Bank of Ireland in a deal worth £600 million sterling. Approval came after a three-and-a-half hour meeting during which some members criticised the deal, the board and abandoning mutual status. The takeover was approved by an overwhelming majority.

The agreement was approved despite an early call that the meeting be adjourned and that the directors be instructed to seek tender offers from other potential purchasers.

The percentage of investing members who voted was 84.5 - the highest ever in any building society vote. Of these, 96 per cent of these voting members approved the transfer. The percentage of borrowing members who voted was 62. Of these, 96 per cent of these members voted in favour.

There was disagreement on the rules of the society before chairman, Lord Armstrong, decided that a poll would be carried out on the adjournment motion. Society member, Mr Michael Hardern, had argued that an adjournment could be decided through a vote by the 350 members attending.

Arguing against the deal, Mr Hardern said it undervalued Bristol & West, which he maintained could be worth £1 billion sterling.

He also argued that the cash and share distribution to members was unfair, favoured larger account holders and compared unfavourably with payouts by other building societies.

Some 75 per cent of members will get £714 each, while a balance of £7,500 would be needed to get £1,000, he argued. The society say the average payout will be £1,100.

"Most of your figures are make-believe" Lord Armstrong told Mr Hardern. Only a minority of people would be worse off, he insisted. "You must be out of your mind if you are suggesting that the board would not look at an offer of £1 billion sterling" Lord Armstrong said. There were no such offers, he added.

When Lord Armstrong said that once the proposed deal was announced no-one had offered more for the building society, Mr Hardern retorted: "It would be like dragging an unwilling bride down the aisle."

Some 350 Bristol & West members met at the Royal Bath and West of England Society Showground at Shepton Mallet in Somerset yesterday to decide the future of their mutual building society. Some 85 per cent of the one million Bristol & West members entitled to vote had already voted through the proxy system.

The Shepton Mallet venue in the rich farming land of the Mendips, 30 miles from Bristol was chosen so that a large number of members could be accommodated. It has the capacity to hold 7,090 peopled in the towering pavilion - named after the inventor of Babycham, Francis Showering, who was born in Shepton Mallet.

Lord Armstrong said the Showground, normally home to Gary Glitter concerts, antique fairs and agricultural shows, was "the closest venue of sufficient size in the heartland of the building society".

There was criticism from some shareholders of the £600 million sterling valuation put on Bristol & West. A number of members suggested it would be worth more if it was floated on the Stock Market.

Lord Armstrong dismissed a proposed £1 billion valuation as "pie in the sky". Responding to criticism of the arrangements for distributing payments to members, he said no arrangement could ever satisfy everyone.

The board was restricted by law in what it could do but within these restrictions it decided that a fixed and variable pay-out was the most equitable. Bigger payments to members with larger accounts reflects the loyalty and commitment of those members to the society, he said. Mr Hardern argued that Bank of Ireland should be asked for £1 billion, or that members should each get a flat payment of £1,000.

The call to adjourn the meeting for three months to allow the board to get a better offer was proposed by Mr Denis Harrington and seconded by Mr Hardern, who wore a red sash at the meeting. That motion was defeated, 578,632 votes against to 190 in favour.

Mr Harrington said the society was selling itself for the equivalent of 10,000 semi-detached houses. "Surely the Bristol & West is worth more than that" he said. He described the preference shares offered as "rubbish". The shares are not quoted "so we don't know what they will be worth", he said.

Criticisms of the profit performance of the Bristol & West, and of payments and bonuses to executive directors was described as "verging on the libelous" by Lord Armstrong.

On abandoning its mutual status, an elderly member, Mrs Marjorie Brown, spoke movingly of her need to ensure that her savings were safe. A member of Bristol & West for 20 years, Mrs Brown said she wanted to be sure that when she had to pay nursing-home fees of about £1,000 per week, she could rely on the rules of mutuality to protect her money.

"I don't want my money thrown into the maelstrom of the market. I don't want Bristol & West to be taken over," she said.

Mrs Brown said she had never heard of Bank of Ireland before last year and had difficulty finding out where its headquarters was.

Mr Brian Bristow was critical of the costs of over £24 million of the deal. He said payments of £3 million each to advisers Rotshchild & Morgan Stanley, were "a bit rich".

Lord Armstrong insisted that there were more advantages to Bristol & West from agreeing to the deal. It would provide more opportunities for growth, better customer services and the opportunity to pursue existing policies.

Bank of Ireland shareholders will vote on the deal next week. It must then get final approval from the British Building Societies Commission. If all the stages are completed, the transfer is expected to take place on July 28th. Members will get their payments by August 25th.

Bristol & West is to retain its identity, brand name and management. Chairman Lord Armstrong and chief executive John Burke will join the board of Bank of Ireland while there will be two Bank of Ireland directors on the board of Bristol & West.

Yesterday's meeting extended Lord Armstrong's stay as chairman until the year end - having passed his 70th birthday he was due to retire yesterday. The "arranged marriage" of Bank of Ireland and Bristol & West started around January, 1996, using code names "Eagle" for Bank of Ireland and "Cider" for Bristol & West.

Completion will increase Bank of Ireland's total assets by about 40 per cent and analysts expect it to add 10 per cent to group annual earnings in 1998/99.