Smith & Nephew exit plan
When Britain’s leading health care equipment group Smith & nephew recruited namal nawana as chief executive a year ago it was seen as a major coup.
nawana had led a turnaround at US medical diagnostics firm Alere and played a key role when it was taken over by Abbott in 2017. S&n shares (which I hold) have been serial underperformers in recent years but have picked up momentum since the new boss arrived.
now it seems that nawana may be exploring the possibility of moving the venerable British firm, which was founded in hull in 1856, to the United States.
Since he took the helm at Smith & nephew the share register has been changing and there are indications that as much as 50pc of the stock is now held by US funds and institutions. The US is also Smith & nephew’s largest market, with 49pc of sales there against just 6pc in Britain.
Any attempt to move the domicile of S&n to America would be hugely controversial. When the Anglo-Dutch group Unilever sought to shift its home and share quote to Rotterdam last year it provoked a shareholder revolt partly orchestrated by The Investment Association and the company was forced into a humiliating U-turn. The group’s respected chief executive Paul Polman stepped down soon afterwards.
The last time a major British company, Lucas Varity, sought to shift domicile from London to Buffalo, it provoked serious concern among British investors. It was sold shortly afterwards to the US group TRW after a contested takeover with FederalMogul which dropped out of the bidding.
In choosing to work in Britain last year namal nawana took a drop in pay from the £6.5m in salary and stock options he earned at his former employer Alere in 2016.
At Smith & nephew his basic pay is £1.2m and even this has been queried by the pay advisory group Glass Lewis. As a UK-based manufacturer of orthopaedic devices, wound care materials, knee replacements and hip implants, Smith & nephew is a vital player in Britain’s healthcare market.
It sits alongside big pharma companies such as Astrazeneca and Glaxosmithkline as a centre of excellence vital to the UK’s post-Brexit future.
Any effort to switch domicile overseas would be viewed as undermining the nation’s industrial strategy.
TV reality
ITV shares perked up a little in latest trading but are still perilously close to the 100p mark not seen for several years.
The slump largely is seen as a response to the uncertainty over consumer advertising as the politicians squabble over Brexit.
ITV has been punished by the fallout from the suicide of a contestant on the Jeremy Kyle show even though chief executive Carolyn McCall wisely axed the programme.
The longer-term shadow over ITV, and for that matter other UK terrestrial broadcasters, is the challenge from the American streaming companies netflix and Amazon as well as Disney and Comcast, which also are moving online.
not surprisingly there is concern that ITV’s response to the challenge in the shape of Britbox, a joint ITV-BBC streaming service, might be coming off the rails.
ITV’s projected budget for Britbox of £65m is seen as being dwarfed by the £11.5bn global spend by netflix over the next year.
The scale of the challenge should not be underestimated. nevertheless, despite complications in the negotiations with the BBC it is now hoped that the Britbox deal will be completed by July and fully operational by the end of the year.
The new service will carry thousands of hours of existing programming from the archives of the two broadcasters.
But they are also proposing to upload up to £3bn a year of new shows from their existing studios, giving British creative values a fighting chance.
Bad offer
One can understand why neil Woodford is continuing to support the non-Standard Finance bid for Provident given the huge value he has locked up in the target company.
But, as Provvy has pointed out, the execution of this offer has been ‘dreadful’ and since declaring the deal unconditional a flow of investors, including M&G, has come out against.
With so many minority investors holding out, nSF boss John van Kuffeler’s confidence of complete victory looks wildly overdone. Maybe it’s time to go back to the drawing board.