Will they stay or will they go? Unilever sets sights on Hol­land

The Sunday Telegraph - Money & Business - - Front page - Jeremy Warner,

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”.

Unilever rat­tled

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

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