Investors betray the LSE

NO ONe should be in the least bit surprised if supine London Stock exchange shareholders give chairman Donald Brydon the kiss of life at today’s investor meeting.

in spite of a vocal campaign, the children’s investment Fund (tci) looks to be short of the requisite votes to oust Brydon if preliminary counts are to believed.

the main reason given for rejecting tci’s call for change is that to lose the chairman so soon after ousting the chief executive Xavier rolet would leave the LSe, the world’s third-largest exchange, rudderless. the truth is that in spite of the weak, and at times disingenuous, leadership over the last year or so, the LSe is still doing very nicely.

More than 100 businesses will have chosen to float on the LSe by the end of 2017. that is 51pc up on 2016 and higher than any other european exchange.

the very idea that the LSe board would find it hard to replace Brydon from among its own members or rapidly recruit a knowledgeable city figure – such as former HSBc boss Doug Flint – is simply preposterous.

We shouldn’t expect much in the way of activism from the LSe’s big battalion stockholders. these are the very same nodding dog investors who enthusiastically embraced Brydon’s vision of a takeover by Deutsche Boerse (DB) and went along with the plan to jettison rolet.

yet rolet is the person who delivered astonishing value for LSe investors and the proposal was to replace him with the struggling chief executive of DB carsten Kengeter, who appears to have had a weak grasp of rules governing share purchases during takeover talks.

even more naive was the assumption that by setting up a joint ‘Brexit committee’, the impact of Britain’s referendum vote could be somehow erased. All of this before one considers the wasted advisory costs involved in pursuing an unsuccessful merger and the big legal bills which came from the need to clear regulatory hurdles.

the biggest investor, the Qatar investment Authority, has been virtually silent. Perhaps the wealthy Gulf State feels it has enough on its hands with its bitter dispute with bigger neighbour Saudi Arabia and the ongoing legal entanglements over its sweetheart deal with Barclays in the aftermath of the financial crisis.

the reality is that QiA, Blackrock et al were far too quick to vote away the LSe’s independence at the time of the DB deal and are now declining to throw overboard the architect of a costly mistake.

Brydon recognises his reputation is on the line and understandably, after a lifetime in the financial community, doesn’t want to be bullied by activists into stepping down.

But by hanging onto his job until 2019 he remains a lightning rod for criticism when what the LSe needs most is a fresh start after making debilitating missteps.

Sky’s the limit

MiNOrity investors in Sky are getting restless. the December 2016 bid by 21st century Fox for the 61pc of Sky that it does not own has been caught up in an elongated regulatory battle over plurality in Britain’s media.

Disney, bidder for most 21st century Fox, has made it clear that it regards the Sky stake ‘as a real crown jewel’ and wants Fox to continue the pursuit.

But there have long been doubts as to whether the Murdoch family was seeking to win full control of Sky on the cheap.

it took the intervention of Sky’s independent acting chairman Martin Gilbert to force the original proposed premium to the quoted share price up to 40pc.

Now in light of what Disney is paying for Fox assets, not to mention the surge in equity values in the last year, big investors are questioning if the takeout price of £10.75 per share is too cheap.

High profile hedge fund chief crispin Odey thinks that the price that Disney is paying for Fox implies a much higher price of at least £12.30 for each Sky share.

Another hedge fund Polygon calculates that the price for the minority in Sky should be £13-a- share. Protests from minority investors are unlikely to subside.

Bob iger and rupert Murdoch may need to meet up for another cosy vineyard chat and revisit the Sky pricing.

if not they risk disrupters coming in and spilling the wine.