Snouts in the ARM trough
AdVISERS to SoftBank and ARM are taking no prisoners. The speed with which the Japanese company plans to bring Britain’s technology champion and holder of hundreds of brilliant patents under its full control is impressive. Moreover, doing it over the summer, when the politicians are focused on bronzing and families, is even cleverer.
Of course it should not be allowed to happen and the Government and the Commons need to be shaken off the sunbeds.
Investment bankers, advisers and ARM’s top brass, all about to become fabulously rich, need to be slowed down. The £350m in adviser fees and share options vested early at a full price should never be the reason for doing a deal which is bad for the UK’s home-grown science future, and for the opportunity to really build Silicon Fen into Silicon Valley.
SoftBank and the advisers have been very careful to try to politically proof the £24.3bn deal with a raft of guarantees around jobs and headquarters. But a responsible Government, of the kind Theresa May is promising to lead, would sensibly send it to the Competition & Markets Authority for an examination of the economic, manufacturing and financial implications for the UK.
Similarly, the business select committee of the Commons, which is doing such a fine job with BHS and Sports direct and promises hearings on a new industrial strategy, ought to hold an emergency summer session at which all the protagonists, including the Takeover Panel City referee, give evidence. This deal is simply too important to be rushed through without public scrutiny.
It is hard, at present, to believe in the integrity of a deal which has Goldman Sachs stamped all over the offer document. This is the same firm that has just been beaten up over its work for Sir Philip Green on the BHS sale, is under investigation for an allegedly corrupt fundraising for a Malaysian wealth fund and is entangled in a battle with enforcers over its overly intimate relationship with officials at the New York Fed.
Still, we shouldn’t be despairing. The kindly SoftBank boss Masayoshi Son has made unprecedented pledges about future jobs at ARM, the location of its headquarters and the mix of technical and non-technical staff. All of these, in the case of infringements, can be tested in the High Court.
And the monitors? None other than accountants Grant Thornton – who gave serial bankrupt dominic Chappell a clean bill of health and helped themselves, along with lawyers Olswang, to a fat £8m fee out of BHS funds.
Reward for failure triumphs again.
Pacific horizons
STANdARd Chartered has been through its management revolution under the guidance of chief executive Bill Winters and come out the other side looking leaner and more profitable.
HSBC is going through its own transformation, removing itself from Latin America and other markets, but chief executive Stuart Gulliver and chairman douglas Flint remain in the saddle. despite all the conduct issues, change at the top moves in a stately fashion.
There is a recognition at HSBC that appointment of a ‘comply and explain’ internal chairman is no longer a credible option. But choices for replacements are limited for a bank of HSBC’s size. The current trend, with Jose Vinals’ arrival at StanChart from the IMF, Lord Blackwell at Lloyds and Sir Howard davies at Royal Bank of Scotland, is to settle for people who have served in the public sector.
Tax profits at HSBC fell almost a third in the first half and Gulliver and the board have suspended the ‘progressive’ dividend policy – no great sacrifice given shares yield almost 8pc. To cheer investors up, there is a nice little earner – a £1.9bn share buyback.
Life has become more difficult for HSBC and StanChart. The slump in natural resource prices and the slowdown in China and across Asia have made profits more scarce.
The Brics (Brazil, Russia, India, China and South Africa) are not what they were when Jim O’Neill invented the term. Nevertheless, the post-Brexit UK is fortunate to have two banks that have strong Pacific franchises.
There are huge opportunities, as was demonstrated this week when India’s HdFC chose to launch a £340m ‘masala bond’ in London. It was from such modest beginnings that the Eurodollar markets were born a generation ago.
HSBC, which also has the substantial former Midland bank UK franchise, also sees the British cup as half full. Mortgages are fine, smaller firms are borrowing as they get over the Brexit shock and little has changed for big corporates.
Some of HSBC’s European employees at Canary Wharf and elsewhere have become a little anxious about the future.
So it would be sensible if the Government were to sprinkle some stardust over foreign finance professionals and their families.
Changing places
RESULTS from the London Stock Exchange are due today. It would be a good opportunity to ask chief executive Xavier Rolet and his team if deutsche Boerse might be prepared to offer SoftBank-style, ironclad guarantees that operational HQ and euro-clearing remain in the City.
Perhaps Rolet should ring Masayoshi Son for advice.