IT IS always refreshing to hear an institutional investor speak up. Too often they remain silent (in public) and, as a result, can be perceived as a faceless group of investors entirely motivated by self interest.

They can argue, with some conviction, that their sole responsibility is to their policy holders and eschew anything outside this remit. Indeed, there can be situations when it is in their monetary interests to accept a low bid for their shares. But that is a position which is certainly not in the interests of the outside shareholders who normally hold a small number of shares.

The furore over DCC's first bid for Flogas clearly highlights the problems which arose because institutions have shares in both companies. They had a clear dilemma: do they accept a low bid for their Flogas shares, so that the value of their holding in DCC is disproportionally enhanced, or do they push for the highest possible price for Flogas shares which might cause a dilution in DCC's earnings?

The problems were only crystallised when John Lawrie, chief investment manager of Scottish Provident, spoke out against DCC's initial offer of 275p per share, describing it as "opportunistic" and noting that "Mr Jim Flavin [DCC chief executive] likes buying assets cheaply for DCC". The initial offer, he charged, was greeted by an "unedifying rush to sell" by some shareholders, who were tracked down well after normal office hours. . .

He was joined in his opposition by Pramit Ghose, chief fund manager of Friends Provident, who described the offer as "very low" and said he would not be accepting 275p per share. It was, of course, in DCC's interests to buy the outstanding 40 per cent stake in Flogas that it did not already own, at as cheap a price as possible. It could have refused to increase the offer and the Flogas shares would have fallen well below the 275p level. But it bowed to the pressure from the two institutions and offered an extra dividend of 25p per share at a total cost of £28.5 million for the 40 per cent, or an extra £2.5 million. Both Scottish Provident and Friends Provident reluctantly accepted this enhanced offer.

Scottish Provident owns between 3 per cent and 5 per cent of DCC but has 8.3 per cent of Flogas, so it was clearly in its policy holders' interests to push for as high a price as possible. Nevertheless, John Lawrie insists that he rejected the first offer because it should not be in an institution's interest to accept an undervalued price.

Friends Provident has a 4.1 per cent interest in DCC and a mere 0.5 per cent stake in Flogas. It would have been in its immediate interest to ensure that DCC got Flogas for as little as possible, so why did it push for a higher offer? Friends Provident is understood to have rejected the initial offer because it has stakes in many other medium sized Irish companies. A low price for Flogas, the argument goes, could have diluted the potential value of its Irish portfolio.

Indeed, following the enhanced bid for Flogas, the second line shares (helped by buoyant market conditions), subsequently rose sharply in value. Also, DCC has not been wounded as its shares have risen by more than 10 per cent since the furore. And the outside shareholders in Flogas should note that they can take one third of the consideration in DCC shares which, at Friday's closing price would give them an extra 9p per share (this, of course, would fall if DCC's shares drop, and that may occur if, as expected, the market follows Friday's meltdown in Wall Street).

It is healthy that three institutions (Standard Life, Scottish Provident and Friends Provident), in the recent past, have been prepared to make their views known publicly. It makes for greater transparency, helps outside shareholders and provides independent directors with more fodder to reject bids.

The other institutions should take note.