Tesco in Booker struggle
ACHAIRMAN and chief executive are expected to be on the same page when a company launches a £3.7bn bid.
This ought to be especially true in the case of the Tesco offer for Booker, in that Britain’s dominant grocer has only just emerged from a corporate nightmare during which it discarded global investments.
We know Richard Cousins of Compass was a prominent dissident about the Booker bid on the Tesco board, quitting in January without stating the reason. Subsequently chief executive Dave Lewis revealed that Cousins ‘was in a different place about the deal’. Lewis hinted at differences on the board over the transaction when he indicated that the ‘overwhelming majority of the board were very happy with the proposal’ implying some were not.
Among those thought to have reservations was none other than Tesco chairman John Allan, a person with strong business credentials from previous roles at Deutsche Post and Dixons Retail. Allan was among those who felt the timing of the deal was infelicitous coming so soon after Tesco’s escape from the padded profits scandal and before the company had fully re-established its credentials and stabilised the balance sheet. When Cousins made it clear that he couldn’t go along with the Booker deal, there was an apparent effort to persuade him to explain his departure with meaningless waffle about personal reasons.
Cousins would have none of it, and so his January departure became a matter of mystery until it was explained by Lewis.
Cousins’s departure made it difficult for Allan, as non-executive chairman, to express his disquiet outside the confines of the boardroom without provoking a crisis.
To have done so could potentially have led Lewis, who has been leading the recovery drive, to head for the exit. Allan, apparently, swallowed his objections rather than provoke a crisis at the top. Disclosure of high level disagreement at Tesco looks unlikely to assist a deal which already faces substantial obstacles. Two of the grocer’s top investors, Schroders and Artisan Partners, have come out against the Booker bid, saying that the price is too high and will destroy value for existing investors.
But a survey by Bernstein suggests if a vote were taken now, some 70pc of investors would give their consent. A substantial minority of 30pc are against the deal or are demanding changes. Moreover, the Competition & Markets Authority has significant objections to sift through. Nick Read, the boss of Nisa, which supplies 3,466 smaller shops, has warned that Britain’s corner stores could be threatened because of Booker’s buying power, range and ability to lower prices.
Nisa has a point. One of the glories of the grocery market in recent times is the way disrupters like Lidl and Aldi have kept the bigger chains on their toes by being price competitive. Mergers are rarely good for consumers. They reduce choice. Giving Tesco, the biggest beast in the market, control over a wholesaler does not seem very sensible. It cannot be very healthy when the process of making a bid creates a rumpus at the very highest level of a FTSE100 company.
Investors are warned.
Co-op pensions
ONE group of stakeholders watching latest machinations at the Co-operative Group are the 80,000 members of the Pace pension scheme, which includes the bank and retail group. This week the Co-op retail, funeral services and insurance group revealed a £132m loss after absorbing a write-down of its 20pc holding in the bank to zero.
If the bank is sold, trustees of Pace will want to ensure that bank members of the pension scheme are fully protected by the ‘covenant’ or guarantee of new owners.
At present the buyout deficit in the scheme, the figure used by regulators to assess funding needs, is thought to be £1bn.
If the new owners of bank assets refuse to take on responsibility for the pensions, it would revert to the group which has a turnover of £9bn but struggles to make a profit.
Not much ethical about any of this.
Lloyds lessons
FRAUD and high jinks of staff at the HBOS branch in Reading has cost owner Lloyds Bank another £100m in compensation to victims. Lloyds is also commissioning a probe by a senior jurist to determine if there was a cover-up by senior executives, and a fresh investigation is being launched by the Financial Conduct Authority.
Pity that as Lloyds chief executive Antonio Horta-Osorio prepares to mark an end of the Government stake, attention has been diverted by louche behaviour.