Messy business at Northern

The latter denies vehemently it has broken any rules, but it may well come down to the panel having to make a subjective interpretation of an agreement.

The panel's rules allow a defending adviser to purchase the shares of his client subject to conditions, notably that the client company must not be aware its adviser is intending to purchase shares and that in particular he should not receive any incentive for doing so. In other words the share purchases have to be entirely at his own risk.

However, it is simply asking too much for a Chinese wall to be erected as there is too much scope for nods and winks in the highly charged atmosphere of a close takeover situation, though this is not to suggest that anything of the sort happened in the Northern, or any other individual example.

In any case, even if the rules are scrupulously obeyed, the adviser who has saved a management's bacon can expect to continue pulling in advisory fees for several years to come in gratitude.

Advisers buying the client's shares is not that rare an event as Devenish and Goldborough Healthcare were helped to remain independent by this method. Ultimately it means that bids which appear to be heading just for success can be thwarted by judicious market purchases by the defending side.

The opposite is not necessarily true because a bidder can only buy in the market up to his bidding price.

The panel indicated in its last annual report in July that it was looking at this whole area. It really is time it acted to outlaw defending advisers' purchases of clients' shares so possible distortion of shareholder wishes can be avoided.

Glitter gone

IN the past two years the price of gold has been a virtual straight line and also the most boring of commodities and investments. Indeed as an investment, one would have lost appreciable money in real terms through interest foregone and also the depreciation of the dollar in which currency it has fluctuated from a low of $372 and a peak of $415 in February 1996, when there was the usual seasonal upswing.

Today, it is trading at $369.

These are very different days from two decades ago when anyone with any spare funds may have sensed that that a tiger was about to be unleased with global inflation beginning to gather speed with a distrust of the dollar endemic and sentiment strong enough to overcome massive sales by the International Monetary Fund to help third world countries.

The difference between 1975 when the price dipped as low as $101 to peak at $858 four years later and today is that inflation could well have been pushed out of the world economy with interest rates in the major countries so low that even a quarter-point rise frightens the markets.

And as a haven during times of political unrest, gold appears to have lost its allure. That seems to have reversed the thinking of the past 2000 years that the metal was the most secure passport and instead has seen its role replaced by the dollar.

A poll by Reuters of analysts' predictions brings little encouragement to the gold bulls.

They range from as low as $340 for December 1997 from Andy Smith at UBS and an average of $365 and Rhona O'Connell at T Hoare & Co who postulates a year end price of $400.

There is general agreement that if there were to be a major stock exchange collapse then the metal would benefit. But that would almost certainly be short lived as both mines and central banks, particularly those trying to fudge their way into EMU, took advantage by selling into the rise.

Open door

TIMES are tough in the UK offshore sector, despite the present burst of activity to develop deep water fields west of Shetland.

Costs have been cut and those North Sea fields that are still being opened up tend to be small in-fill developments. The oil and gas there has been known about for some time, but it is only now that new technology, rising oil prices and cheaper costs have made production commercially viable.

Those service companies that prospered in the North Sea during the boom years of the 1980's but failed to develop new sources of income by the time it reached maturity in the early 1990s are starting to feel the pinch.

Last January, OIS International Inspection was snapped up by Abbot Group after it failed to get its act together.

Now OGC, the underperforming offshore engineering company controlled by Norway's Olsen group, is feeling the pinch.

A profits warning earlier this year sent its share price through the floor prompting a bid approach from the US Halliburton group, which operates in the UK as Brown & Root.

OIS and OGC both belatedly realised that the North Sea bonanza would not go on forever and began to look for new business overseas and onshore in the UK, but neither were very successful.

OIS found itself paying for a huge international staff which failed to generate new revenue and profits.

OGC has controlled costs better, but has also had limited success in building up new business in Norway and Australia. And, until recently at any rate, it was making a loss in Brunei.

Perhaps OGC would not have found itself looking down the barrel of a bidder's gun if it had succeeded in its own bid to acquire OIS. That might have led to a thorough restructuring of both companies and a quantum leap forward.

There is little to indicate that the company's weak trading performance has improved dramatically since the profit warning in July, which was duly followed up by a dreadful set of interim results.

If predators are now knocking on OGC's own door, it must surely be because the Olsen's have left it conspicuously open.