Vernon puts Green in enviable position

Stephen Vernon, chartered surveyor, bubbles with confidence, when he talks about the prospects of Green Property. This renewed confidence follows the about-turn of the Manchester-based, Trafford Park Estates, which is now reluctantly recommending its shareholders to accept the £154 million bid from Green.

Green "could in the future be among the top 10 real estate companies" in Europe, he enthuses. We hope to "see ourselves as serious players in Europe", but there are no plans to move further afield.

When Mr Vernon (48) took over the helm of Green five years ago, the property company was just hobbling

along and his initial ambitious target was to turn it into a £100 million company. Green is now valued at more than £400 million and that will increase further when Trafford is absorbed.

The decision to go for Trafford was his riskiest move so far. Up to then all the takeovers were agreed and none included a publicly quoted company.

Green had targeted a number of potential takeovers, but Trafford was the "best for potential" so "we went for it".

With a hostile Trafford board, was this not a risky move? Mr Vernon's concedes that he was fobbed off by the Trafford board which would not even discuss proposals. "Hostile bids are very rare in property. It isn't a route you choose to go." However, Green was "left with no alternative" as the board replied with "two liners . . . so what do you do?". He believed he "had very strong institutional support", noting that he would not have put Green in a vulnerable position.

Now that the Trafford directors, including the chairman, Sir Neil Westbrook (81), have recommended its shareholders to accept the bid, and intend to accept in respect of their own 5.5 per cent interest, what percentage of acceptances does he expect to receive?

Green has already got a positive response from shareholders representing more than 50 per cent and Mr Vernon says the acceptances will be "very high". He is convinced that the final acceptances will be over 90 per cent, the level at which the outstanding shares can be compulsorily acquired.

Asked what percentage of shareholders would take new Green shares instead of cash, he says "that remains to be seen". He noted that initially the share alternative valued at 212p sterling was more attractive than the cash 190p. A subsequent decline in the market and an adverse currency translation swing, brought the value of the share down to 204p.

Green has already had an acceptance from one institutional shareholder who opted for the shares. Overall, he says, there will be "a good take-up of paper".

Trafford had been vigorously opposed to the Green offer as it contended that it did not adequately reflect the value of its assets. Its battle cry was "don't let Green reap the benefits at your expense".

Asked why he was not tempted to increase the offer, Mr Vernon is adamant; "there was never any point if it was not attractive for Green".

Green's cash offer of 190p sterling per share is less than Trafford's net asset backing of 201p. The deal should boost Green's net assets per share. Trafford has always contended that there was an additional potential development surplus of 20p per share, and a longer-term development potential of 27p. These, however, have never been accepted by Green as they are dependent on planning permission.

Although Green has grown strongly, it is "still a small property company", he contends. The plan is to expand Green further through the development of its core businesses and acquisitions. "We have a development programme of £280 million," he says. "We will now have three centres, Manchester, London and Dublin."

He is not worried about the recessionary pressures appearing in Britain, noting that the last inflation figures were down. Also, demand levels are still good and Trafford is "not very involved in retail".

He is very confident of major benefits coming from the Trafford portfolio stressing "our style of management will work". He reckons that between 15 and 20 per cent of Trafford's portfolio will be sold, possibly within one year, though he hastens to stress that there is "no reason to sell" on balance-sheet terms.

As the person responsible for Green's rapid expansion, Mr Vernon has a comparatively small shareholding. The last annual report showed a holding of 82,014 shares, but he has an option over about 1 million shares at a weighted average price of about 150p compared with the present price of over 500p. "I regret I didn't take a bigger stake" initially, he says.

With five years under his belt, does he intend to stay with Green? "Yes", is his quick response. "Basically I wanted to build a property company and enjoyed it". However, he has one regret. As he spends much of his time in London, he does not feel he is as much part of the Irish business scene "as I would like".