Bob Ayling, the chairman of embattled music group Sanctuary, has been forced to sideline Evolution Securities from the discussions on its ongoing auction process.

Sanctuary, which manages artists ranging from Sir Elton John to Iron Maiden, is in takeover talks with a consortium of Asian investors. The group indicated to the market earlier this month that it had received a "number of take-over approaches".

Although Evolution is Sanctuary's broker, it has been barred from advising the board on the takeover approaches due to its involvement in an emergency rights issue last year, which rescued the company from the brink of collapse. Evolution raised £110m for Sanctuary at 50p per share in February 2006.

The company's shares have since collapsed and are now trading at 16.5p. The takeover proposals outlined in the auction are expected to come in at about 25p a share.

According to sources close to the situation, the huge discrepancy between the fund-raising price and the price at which the company looks likely to be taken over means that Evolution's involvement in the talks has to be restricted. The restriction is dictated by an obscure set of Financial Services Authority rules.

Although Evolution continues to act as broker to Sanctuary, Ayling and the Sanctuary board have appointed Deloitte to provide independent advice on the offers tabled. Sanctuary has been in and out of takeover talks on numerous occasions over recent years.

Ayling was drafted in as chairman of Sanctuary last year after the acrimonious departure of the group's two founders, Andy Taylor and Rod Smallwood.

Related News