Smith New Court puts case to de Rothschild

Michael Marks, the chairman of Smith New Court, is hoping to present a detailed case for the sale of the leading British broking house to Sir Evelyn de Rothschild at a meeting today. Alarm is growing among the handful of top Smith directors who are heading the negotiations that Sir Evelyn, whose 26 per cent stake holds the key to any deal, may hold out for a public bidding war. "In a highly sensitive people-business like investment banking, past experience shows that this is a risky strategy that could do untold damage to Smith," said an individual close to the takeover talks.

Merrill Lynch, the US securities giant, and Commerzbank, the German bank, are vying to clinch the deal, valued at more than pounds 500m. But there are several foreign finance houses circling the talks.

"We cannot believe that any serious American or European organisation is not looking at Smith at the moment. What is the hurry in cooking a deal right now?" said a source close to Sir Evelyn.

The executive committee leading Smith's negotiations, including Mr Marks, Paul Roy, the chief executive, and Gordon Young, yesterday met Commerzbank and its advisers, Lazards, to find out what the German bank's equity strategy is. Commerzbank is a relative newcomer to the investment banking business, and would use Smith as the vehicle to build up an international equities capability. Merrill Lynch, by contrast, is one of the world's global investment banking behemoths, and has a much clearer strategy on enhancing its European equities business. Smith is also seeking clearer indications from those other banks that have intimated an interest but have not joined the talks. They include Bear Sterns of the US, Bayerische Vereinsbank and Westdeutsche Landesbank of Germany and Paribas and Credit Agricole of France.

The key stumbling block to be addressed at today's meeting, if it occurs - relations between Mr Marks and Sir Evelyn are now strained - is the insistence by the two main bidding parties on a clear commitment by Rothschild to sell its stake before a formal offer is made.

"No bidder is going to take over a business with a substantial minority stakeholder. It will only build a lot of antagonism into what is not a cheap acquisition," said a source close to one of the suitors.