National security review into French billionaire’s raid on BT

Get ready for a wave of takeovers as American private equity companies pounce on the FTSE 100’s cheap businesses

KWASI KWARTENG has ordered an investigation into the national security implications of a potential takeover of BT by the French billionaire Patrick Drahi.

The Business Secretary has demanded tighter scrutiny of the 18pc stake held by Mr Drahi’s French telecoms group, Altice, that could provide the stepping stone towards the nation’s biggest broadband provider falling into foreign hands. Mr Kwarteng is taking action now as restrictions designed to prevent a potential takeover approach are poised to run out next month.

In a statement, the Department for Business said the French raider’s swoop on BT’S shares will be subjected to a full national security assessment that will take 30 days to complete.

It is a sign of the growing alarm among Westminster of the threat posed by a takeover of the telecoms operator, which is critical to the nation’s digital infrastructure and carries out classified work for the Government.

Such a takeover would also come at a sensitive time as Britain upgrades its network to next-generation technology. BT is spearheading the rollout of faster full-fibre broadband and 5G mobile signals deemed 100 times faster than 4G.

Officials have been bracing for Mr Drahi’s next move after the owner of Sotheby’s auction house rocked the markets in June by becoming BT’S biggest shareholder with a 12pc stake. He went on to increase his position to 18pc in December.

The latest raid has prevented him from bidding until the middle of June, unless an approach wins the backing of the board, or he is responding to a takeover tilt from a rival suitor.

Mr Drahi, 58, has the power to increase his stake to nearly 30pc without being forced to mount a full-blown bid, prompting concerns he is pursuing a strategy of “creeping control”.

Responding to the Government’s decision yesterday, BT said it would “fully co-operate” with Mr Kwarteng’s review. Shares in the company fell as much as 6pc to 179p following the announcement.

Altice declined to comment on the Government’s decision. In December, Mr Drahi said it held the BT board in high regard and was supportive of their strategy.

Meanwhile, BT is facing a growing threat of its first national walkout for 35 years as the Communications Workers Union prepared a ballot to strike over pay. The move comes after the union rejected BT’S offer of a £1,500 pay rise to frontline staff in April, claiming it was a “bruising real-terms pay cut”.

N‘There is a depressing tendency for company bosses to cave in too easily’

othing sums up the sombre mood at Davos this year more than George Soros’s warning that Russia’s invasion of Ukraine could spark a third world war. If that wasn’t enough to put guests at his annual dinner-cum-speech in the Swiss mountains off their food, the 91-year-old billionaire philanthropist also questioned whether civilisation would actually survive such an event.

At least his despair was mixed with defiance – the West’s only hope was to “defeat Putin as soon as possible”, Soros said – unlike that other well known nonagenarian Henry Kissinger, whose statesmanly “advice” to the assembled elite was for Ukraine to effectively surrender by handing over some of its territory.

For a man who recently declared in an interview with the Financial Times that “we are now living in a totally new era”, it is ironic that the former US secretary of state sounds like he is stuck in the distant past.

Still, amid all the doom and gloom, it was possible to detect a quiet, almost embarrassed buzz about the prospect of another crisis producing a deal boom as the slump in the pound leaves British companies vulnerable to opportunistic overseas rivals.

It was bad enough that the emergency stimulus of the pandemic fuelled the largest takeover frenzy on record, but now, with Vladimir Putin’s criminal army laying waste to Ukrainian cities and towns, and millions of people struggling to contend with spiralling energy and food prices? If the City’s investment bankers and dealmakers are licking their lips, they had better make sure they do it behind closed doors.

It’s tempting to ignore most of what comes out of the Davos jamboree, not least when many of the high profile attendees arrive in their private jets and helicopters to lecture the world about climate change and carbon emissions.

The masters of the universe have a risible track record when it comes to Nostradamus-like big predictions about world events. In January 2020 when hundreds of people had already died in China from Covid, the greatest concern was that it might spread from rural villages to major towns, eventually upending the world’s second largest economy.

It certainly didn’t stop delegates from bumping and grinding in sweaty nightclubs along the Promenade. By the end of March, however, well over 100 countries were in some form of lockdown.

Yet the prospect of a fresh wave of overseas interest in UK plc cannot easily be dismissed. The decline of sterling should be of particular concern. Traders are increasingly shorting the pound as the cost of living crisis bites. Though there has been a modest rally in recent days, it has tumbled from more than $1.40 against the dollar a year ago to as low as $1.22 in early May, pouring fuel on Britain’s inflationary woes.

Number crunchers at Goldmans have stared into their foreign exchange crystal ball and foreseen that the global currency most likely to fall in the coming months is the pound.

Its currency strategists believe sterling is set to sink as low as $1.19 in the coming months, meaning it could soon be open season on the FTSE for foreign raiders again after mergers and acquisitions hit an all-time high during the pandemic.

The weakness of the pound is being exacerbated by the simultaneous gains of the US dollar, which has jumped to a two-decade high.

It strengthens the hand of America’s biggest companies, giving them added ammunition to go hunting for prey. True FTSE 100 giants such as HSBC, Astrazeneca, BP and Shell are probably safe by virtue of size and political opposition from the threat of any hostile approach.

But the rest of the index should be considered potential targets, particularly those that are wrestling with big strategic questions such as GSK, Unilever and Vodafone, or under pressure from activist investors to accelerate major change such as Glencore or SSE.

There is a wall of private equity money waiting to be deployed even after the rampant deal activity of 2021. Buyout firms were sitting on an estimated $1.8trillion (£1.4trillion) of so-called “dry powder” as of February with around a quarter of that capital sitting in the hands of the 25 biggest firms.

This means mega-deals and club deals where investors team up together to go after even bigger targets are very much on the table, reviving memories of the go-go debt-fuelled years that preceded the financial crisis.

Chief executives possessed of real ambition will resist the urge to sell out and instead stay the course. Yet there is a depressing tendency for company bosses to cave in too easily when presented with the opportunity to feather their own nest.

This Government is desperate for some good news so expect a deal wave to prompt the usual spin. Its re-election chances could be wrecked by a combination of Partygate and the deterioration in people’s living standards, while flagship policies such as levelling up and Brexit have gone absolutely nowhere.

Scrutiny of Patrick Drahi’s stake-building in BT is a sign that it is more alive to the risks of allowing key assets to fall into foreign hands but largely ministers still like to pretend that overseas takeovers are an example of “global Britain” in action.

The public is unlikely to fall for that. Selling your biggest and best companies to the highest bidder isn’t clever industrial policy, nor can it be passed off as genuine foreign investment. It’s little more than self-harm.