Takeover rumours force out Talwar

The shock resignation yesterday of Standard Chartered's chief executive, Rana Talwar, has come just weeks after the revival of heated speculation that the colonial bank is about to succumb to a takeover. The stock market pushed the company's share price up once again, but does Mr Talwar's departure really mean that the days of this stubbornly independent institution are numbered?

A leak earlier this month that Mr Talwar had received takeover approaches became the catalyst that brought a simmering boardroom discontent to the boil. Mr Talwar, 53, joined the bank in October 1998 from the US financial services giant Citigroup, which has a very different culture to Standard Chartered's. As the only Asian chief executive of a FTSE 100 company, he seemed ideally suited to a business whose main markets are in the former colonies. It now seems that the rest of the board would have felt more comfortable with someone more Old School, and Mr Talwar is receiving some £3m for leaving.

Mr Talwar had been appointed largely in the hope that his hard-nosed North Atlantic management style would invigorate the sluggish Standard Chartered. But insiders indicated that for some time there has been concern about the suitability of his "strategic" and "hands-off" approach.

In the City, investors and analysts were divided as to his abilities. "He ought to have been given a bit more time to prove that recent acquisitions will pay off," one analyst said. "He had a very mixed following. He had some vision, which is certainly lacking in the sector. But some investors made disparaging comments about him."

The bank has strenuously denied suggestions of any rift between Mr Talwar and the company's long-standing chairman, the 67-year-old Sir Patrick Gillam. It is nevertheless hard to avoid the impression that Sir Patrick might have been infuriated at a willingness on his chief executive's part to consider tying-up with another bank if a deal could be struck at the right price. Indeed, earlier this week Standard Chartered issued a terse Stock Exchange statement saying it was not in merger talks and was under no pressure from its major shareholders to find a partner. Mr Talwar's predecessor, Malcolm Williamson, came to blows with Sir Patrick over the same issue.

Sir Patrick said yesterday: "On the question of independence, we have always said to shareholders that we are an emerging markets bank and we can generate higher returns by staying an emerging markets bank. We have never said that there is no price at which we can be bought. As long as I can convince the shareholders that we can deliver value, we will stay independent."

In a statement, Mr Talwar said: "I remain confident that the group has the right strategy and direction and will continue to flourish. I recognise now that it is the appropriate time to move on."

However, the stock market's reaction in pushing the shares higher implies that investors do not see Mr Talwar's departure as a victory for Sir Patrick's belief in keeping the bank independent. Rather, they are betting that major shareholders will use the apparent boardroom turmoil to push the company into considering entering talks.

"All the main investors will be putting on more pressure to do a deal. There is a real concern about the influence of the chairman at Standard," a banking analyst said. "He appears to have a problem with doing a deal, but it's hard to believe the non-executive directors would allow that."

Simon Willis, an analyst at ING Barings, said: "In the minds of the big investors, there'll be the nagging question about whether the apparent turmoil casts a cloud over the bank's long-term future. But it would be unusual for investors to club together to look for a bidder. If I were a betting man, I'd say Standard will probably still be independent in a year's time."

Bear Stearns' Michael Trippitt said: "Certainly a friendly deal is off in the short term."

Standard Chartered's board has a fiduciary duty to consider reasonable takeover offers if they appear to be the best route to delivering shareholder value. Still, Mervyn Davies, 49, the head of the bank's Hong Kong operations who is stepping into the chief executive's role, said: "Myself and the board are 100 per cent committed to staying independent. It's the best way to maximise shareholder value."

One boardroom insider said: "If somebody comes along with a formal approach, we'd have to consider it against the value we can deliver independently. We don't think an auction is the best way of getting a full and fair price." Tan Sri Khoo Teck Puat, the Malaysian financier who holds 15 per cent of the company, is said to back the board's line.

So long as the board believes shareholders are best served by remaining independent, it is hard to see what suitors can do. Mr Talwar apparently thought that the shares are worth at least £12, even though they had sunk to a three-year low of 566p before the leaking of the recent takeover approaches. Meanwhile, economists have been reining back forecasts for economic growth in Standard's main Asian markets. Then there are concerns over its exposure to Pakistan, and surrounding whether the company needs to raise capital.

At the sort of prices required to get a deal moving, any suitor ­ the names in the frame are Lloyds TSB, Barclays and Citigroup ­ would risk diluting their earnings. Lloyds has already been rebuffed on many occasions, and in any case its own shareholders would surely balk at a move into Standard's exotic markets where it has no expertise whatsoever. Barclays would have more to gain, but it too has been rebuffed. Going hostile would probably only force Standard Chartered into the hands of Citigroup.

"If anyone went hostile, the bank could put up a good defence," an analyst said. "That's why everyone has tried to sweet-talk Standard into a deal. Investors will want management to do something, but the company is sure to resist."