Will they stay or will they go? Unilever sets sights on Holland
Oh how they cheered when, in the financial chaos that followed the UK’S vote for Brexit, in came Softbank’s Masayoshi Son, a Far Eastern tech visionary, with a blockbuster £24.3bn (£18.6bn) bid for Arm, Britain’s premier technology company. It was a steal for Son, because the collapse in the pound had just knocked 20pc off the price, but it seemed none the less to be an unambiguous vote of confidence in post-brexit Britain. Despite her promise to subject foreign takeovers to greater scrutiny, Theresa May, the Prime Minister, welcomed the bid with open arms, pointing to legally binding commitments Mr Son had given to double the UK workforce and maintain the Cambridge headquarters.
He did not, on the other hand, give any such guarantees on the company’s crown jewels – its intellectual property. Without fanfare, these were quietly transferred over the summer to Arm’s Chinese offshoot, allowing, by the company’s own admission, “Arm-based semiconductor Intellectual Property (IP) to be tailored for the Chinese domestic ecosystem and making a broader portfolio of technology accessible to Chinese partners for China market needs”. Just to be clear, this is not China’s customary practice of intellectual property theft, but then why steal the technology when you can buy it instead? Particularly at the price Mr Son has agreed.
Subsequent to the transfer, Arm agreed to sell a majority stake in its Chinese offshoot to local investors for $775.2m, something of a low valuation, it might reasonably be thought.
We can only speculate on what is really going on here, but we know of China’s insatiable appetite for Western IP and we also know that as a major investor in Alibaba, China’s version of Amazon, Mr Son’s loyalties are somewhat more tilted to China than they are to the UK. And I am afraid that this is the way they do business over there. To gain proper access to the Chinese market, Mr Son may have had little option but to surrender control.
Both in the US and in Europe, there is growing concern over cutting-edge tech transfer of this sort. China has well-aired plans for technological leadership in artificial intelligence, autonomous cars, cloud computing, robotics and all other things cutting edge. It has set about pursuing it in characteristically determined fashion, buying up Western tech companies wherever it can, including just recently Britain’s Imagination Technologies.
The EU commissioner for trade, Cecilia Malmström, launched legal proceedings against China for failing to offer the same degree of protection on foreign-owned IP as it does for domestically owned technology. I suppose if we were being charitable, it might be argued that the Arm transfer is for the purpose of gaining the same privileges. Now fully Chinese, the IP can be protected more effectively.
But it is a crying shame, none the less, deserving of parliamentary inquiry. Notwithstanding the commitments given at the time of the takeover, Arm’s centre of gravity is quickly shifting from the UK to China. Clever Mr Son, silly little Britain, which again seems to be conforming to the adage of being very good at inventing and developing the technology, but useless at its commercial exploitation.
Kowtowing to China may be something we will have to get used to in the brave new world of “Global Britain”.
Thanks, Unilever, for the full-page ad urging shareholders to vote in favour of the company’s plans to up sticks and move to Holland. Much appreciated. But also revealing. Such spending is a sure sign that the company is seriously rattled. One after another, Unilever’s leading UK shareholders have been lining up to say they are unconvinced by the arguments. With 75pc of the shares needed to carry the day, it is a high hurdle that the consumer-products goliath has to surmount. It must now be touch and go whether Paul Polman’s two fingers up at the UK for daring to vote for Brexit can succeed. Certainly, it doesn’t deserve to. Failure to persuade FTSE Russell that the shares should be allowed to continue trading in the FTSE 100 after redomiciling, thereby threatening a forced sale by indexed funds, may have been the final blow.
A helping hand has nevertheless come from a rather unexpected quarter, that nice Mr John Mcdonnell, the Stalinist firebrand who passes for our shadow chancellor. Should he get the chance, he promises to, in effect, nationalise 10pc of the share capital of all listed companies with more than 250 employees. Sensible folk like us can of course see that the plan is completely impractical, never mind its consequences for investment, but unsurprisingly it has gone down rather well with the great unwashed, and if that’s the “will of the people”, then so be it.
Should it succeed in leaving, Unilever would – more by happy chance than farsighted design – remove itself from this threat. This is scarcely likely in itself to swing the vote, but it is small wonder that others are thinking that maybe the redomiciling malarkey is not such a bad idea after all.
Canada minus the Plus
Cabinet too – seem to be finally coalescing around the Institute of Economic Affairs’ idea of Canada Plus. Some have even attributed a kind of Machiavellian cunning to Theresa May’s negotiating strategy; having now demonstrated that efforts to reach a sensible, mutually beneficial deal with Brussels won’t fly, she’s now herded everyone into reluctantly accepting the option she favoured all along – Super Canada. Divine such purpose in the madness if you will.
Unfortunately, there is a major problem with Canada Plus involving the EU’S existing body of free-trade agreements – Canada, Japan and Korea and so on – which is not widely understood. Some of these contain what might be called “ratchet clauses”, which would essentially force the EU to give more favourable access to the single market to these nations should it agree something superior with anyone else.
Since there are presumably good reasons why the EU did not offer such favourable terms to these countries when the FTAS were negotiated, we can immediately take the “Plus” out of any Canadian-style deal the EU might be prepared to offer. It won’t be on the table; if it was, the EU would have to offer it to everyone else.
To ask to be treated like any other third country, but actually to be banking on something better, is just more wishful thinking. Business must prepare itself for a conventional FTA; forget fantasy notions of souped-up versions.
‘Kowtowing to China may be something we will have to get used to in the brave new world of Global Britain’
Masayoshi Son did not give any guarantees on Arm’s intellectual property, which was quietly transferred to the company’s Chinese offshoot over the summer