On July 11, 1989, Sir James Goldsmith’s bidding vehicle Hoylake Investments Ltd.

launched an offer of 850 pence per share for BAT Industries, the UK-based tobacco conglomerate.

39 The initial bid was to be financed through a variety of securities including bank debt, junk bonds, and equity in Anglo Group, the entity that would subsequently control BAT through its 75% interest in Hoylake Investments. For each 1,000 shares of existing BAT Industries’ 1.53 billion common stock, investors would receive £4,250 of Hoylake senior secured notes, due 1992, $4,182 of Hoylake subordinated (junk) notes due 1993, and the equivalent of 387 Anglo Group common shares. Just prior to launching its bid, the consortium purchased 18.89 million shares of BAT at the average price of 590 pence a share.40 The reason for Hoylake’s initial non-cash offer laid in British takeover panel regulation.

In the United Kingdom, any cash portion of a takeover bid must be fully underwritten, which would imply fees of up to 3% with no guarantee of success. Investors expected that the offer would eventually contain a cash component. Goldsmith’s plan was to unbundle