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Government Prepared to Drop Jaguar Takeover Veto Power; Stock Soars

October 31, 1989

LONDON (AP) _ The British government said Tuesday it would drop its ″golden share″ power to veto any takeover of Jaguar PLC if the luxury car maker’s shareholders approved such a move, possibly clearing the way for a bidding war.

The decision, which surprised Jaguar, would allow for General Motors Corp., Ford Motor Co. or other potential suitors to make proposals to Jaguar shareholders.

Trade Secretary Nicholas Ridley said in the House of Commons that the government would relinquish its veto power if Jaguar shareholders voted by a 75 percent majority to lift a restriction limiting individual Jaguar holdings to 15 percent of the company.

″This statement paves the way for shareholders, with the advice of the board, to reach their own view on the options which may be available,″ Ridley said.

The ″golden share″ veto power and the 15 percent limit are due to expire at the end of 1990.

However, Jaguar’s articles of association still prevent anyone from owning more than 15 percent of Jaguar without approval by shareholders at an extraordinary meeting, the company noted.

Jaguar’s shares soared, finishing up the equivalent of $1.93 at $13.73 a share on London’s Stock Exchange.

Jaguar, which has suffered from slumping U.S. sales, is looking for a partner to give it financial and technological support, but wants to remain independent.

Analysts estimate the luxury car maker could fetch up to $15.80 a share, or $2.8 billion, if GM and Ford engage in a bidding war for Jaguar.

General Motors and Jaguar have been holding friendly talks for months in an effort to reach a cooperation agreement, which is expected to be announced by mid-November.

General Motors is expected to take a minority stake in Jaguar and run several joint ventures, including the manufacture of a new, cheaper Jaguar model.

″We will now consider all our options and explore matters further in light of these important new developments,″ said GM spokesman Jack Harned in Detroit.

Ford has acquired a 13.2 percent stake in Jaguar and said it is prepared to mount a buyout bid once the takeover restrictions are dropped. Ford spokesman Rex Greenslade in Dearborn, Mich., said the company had no comment Tuesday on Jaguar.

Jaguar said it was surprised by the announcement and had not been consulted in advance about Ridley’s move.

″It was, of course, always the Jaguar board’s intention that any proposals concerning the future of the company would be submitted for shareholder approval,″ the statement read.

Either the Jaguar board or a shareholder owning at least 10 percent of the company may call an extraordinary meeting, said Jaguar spokesman Arnold Bolton.

During his speech in Commons, Ridley said the government’s remaining role would be to assess the impact a takeover of Jaguar might have on competition in the British auto industry.

″I am clear that it is in the best interests of Jaguar’s management, shareholders and work force for the company’s future to be assured and the present climate of uncertainty resolved as quickly as possible,″ he said.

The restrictions were established in 1984 when the government sold the car maker. They were intended to protect Jaguar’s independence during its formative years, Ridley said.

Now, the restrictions are ″clearly causing uncertainties about the company’s future by prompting speculation over how my powers may be exercised, so distorting the basis on which all parties involved have to reach their decisions,″ Ridley said.

Prime Minister Margaret Thatcher’s Conservative government champions free- market policies and generally has not exercised its golden shares.

For example, British Petroleum Co. PLC acquired Britoil PLC last year after the government said it wouldn’t use its takeover veto.