Last of the summer spine
Normally high summer madness breaks out on the trading desks of the big investment banks when the bosses are cruising on their yachts in the med. This year, there is a new twist, with financially driven takeover activity at a peak, driven by the trillions of dollars of cash sloshing around the system as a result of central bank largesse.
The idea of the City referee, the Takeover Panel, having to intervene in two multi-billion takeovers – the bids for morrisons and healthcare manufacturer Vectura – on the same day, is surprising.
add to that the swoop by vampire-kangaroo macquarie on utility Southern Water, and the purchase of a 5pc stake in Deliveroo by German rival Delivery Hero, and the quantity of deal-making looks extraordinary. a common thread through all these transactions is that the potential ownership changes are divorced from the broader interests of stakeholders. The supposedly independent stooges on the morrisons board have agreed to accept a higher offer of £6.7bn from Softbank-backed Fortress without exploring other possibilities.
These might have included finding a white knight, dumping chief executive David Potts or sensibly waiting to hear what counter bidder Clayton, Dubilier & rice (CD&R) has up its sleeve.
The directors have interpreted company law in the most narrow way. Take the money on behalf of shareholders and bolt. Promises of continuity of leadership quickly fall apart once the deal is done. asda CEO roger Burnley already is out of the way, only six months after the Issa Brothers and TDR Capital completed their takeover.
It would be good if advisers on takeovers took time to go back to company law and instructed directors accordingly. money may speak all languages but it clearly states that directors have a responsibility to all stakeholders, with employees, suppliers and consumers close to top of the list. The idea that a promise to keep morrisons’ HQ in Bradford, and to pay workers at least £10-an-hour when the national living wage is £8.91-anhour and above £10.85 in london, is hardly generous. moreover, as one senior City figure told me yesterday, the fiscal consequences of these transactions could be serious by blowing a big hole in tax receipts.
The expectation is that CD&R, which has former Tesco boss Terry leahy as the figurehead of its bid team, will come back with a better offer next week and improve on the governance promises of Fortress. That shouldn’t be hard given their flimsiness.
This whole private equity bidding saga is straight out of the ‘swinging dick’ culture described by author michael lewis three decades ago.
Plus ça change, plus c’est la meme chose.
Smoking gun
AS a former top executive at astrazeneca, one might think that chairman Bruno angelici would have recognised the medical stupidity of selling Vectura, an innovative maker of inhalers and anti-smoking treatments, to marlboro rollers Phillip morris.
That’s what it did in July, offering an opportunity for private equity group Carlyle to present itself as a saviour.
From this risible start has emerged a titfor-tat bidding war causing so much angst at the Takeover Panel that it has decided on a controlled auction, a device last used to decide the fate of G4S. a vacillating board means that the process has been handed over to outside forces, and all that matters is price. Not a word about other stakeholders, including medical opinion leaders, who have expressed alarm.
angelici should have had no truck with any of this knowing how important his company is to asthma sufferers, among others. To put too much faith in Simon Dingemans, a former GSK executive representing Carlyle, is an error. Dingemans bailed out of the Financial reporting Council just at the moment he was needed most to steer though fundamental reforms.
If Vectura needs funding, why not look to one its major customers such as GSK, for co-investment. only asking.
Soft Shu shuffle
FOUNDER Will Shu’s justification for dual class shares when food dispatch outfit Deliveroo floated in may was to keep predators at bay. German rival Delivery Hero is testing Shu’s staying power by acquiring a 5pc stake for £300m. The £28bn German rival will need a bear hug if it is to overcome Shu’s 50pc voting rights. Deliveroo investors, who took a bath in first-day trading, have cause to feel better about their wager.