Britain should support its own country: companies simply sold to the highest bidder as a humble pair of bronzes on BBC TV’s Flog It!, says ALEX BRUMMER
- The UK has become the bargain basement of the world
- Building world-class technology companies for the rest of the century is next to impossible
- None of this makes sense in the long run at a time of rising economic nationalism
Stock markets are organic and companies come and go all the time. Companies moving to the UK include WE Soda, fintech payments group CAB and AI specialist Palantir, which has opted to move its European headquarters to the UK.
Amid this turmoil, it might seem curious to question the sale of Middle East credit card processor Network International to Canadian buyout firm Brookfield Asset Management in a £2.8bn (£2.2bn) deal ).
It is the second public-to-private buyout on the London Stock Exchange in just over a week, following the £4.5bn sale of veterinary pharmaceutical group Dechra to EQT.
Network International’s departure may not seem like a major loss, as most of its customers are merchants in Africa and the Middle East. These are two of the fastest growing neighborhoods in the world and are exactly the kind of venture investors in London should be supporting.
It could be argued that it brings the magic of fintech to areas where the UK, through Standard Chartered and Barclays DCO, has brought western banking.
Sold Out: The UK has become the bargain basement of the world
Paradoxically, the power behind the throne at Network International is Ron Kalifa, who sits on the Bank of England’s Administrative Court and also produced a post-Brexit report for the Tories aimed at building on the city’s expertise to bringing financial innovation to public markets .
No one could be more qualified than Kalifa, given his role in founding Worldpay, which has long now been lost in the bowels of US finance, which was arguably the “Arm Holdings” of fintech payments. In addition, Brookfield is not just another takeover company, but is chaired by former Governor of the Bank of England, Mark Carney.
Money always speaks loudly when it comes to deals, but there is a touch of hypocrisy when great figures, with the Bank of England imprimatur, work against the national interest. The argument is that the pre-acquisition share price of 64 percent made the deal irresistible. But is it really that generous?
New York stocks trade at a 40 percent premium to the London All-Share index of about 600 stocks, so the actual upside in the underlying asset is 24 percent, which is far from a must-accept offer. UK defined benefit pension funds have neglected London stocks since Gordon Brown abolished the dividend tax exemption in 1997, effectively sounding the death knell for equity investing.
It is a mammoth task to convince defined contribution plans, local government pension funds and others to pick up the slack.
The UK has become the bargain basement of the world. Building world-class technology companies for the rest of this century, as has been done in the past, is virtually impossible.
Arm, Worldpay, Dechra and the like are shown on BBC TV’s Flog It! None of this makes sense in the long run in an era of rising economic nationalism.
Profiles in courage
Every time a dastardly board decides to take the money and run, I think of AstraZeneca.
When Franco-Australian CEO Pascal Soriot turned down a £70bn bid from Pfizer in 2014, who would have thought it would be worth £184bn nine years later – and the most valuable company on the FTSE 100?
Astra may have gained national attention for the Oxford Covid-19 vaccine, but its subsequent successes with cancer care are priceless. In the past, the big goal of pharma was the discovery of blockbusters, defined as compounds with sales of $1 billion per year.
Astra’s treatment with tagrisso is transforming cancer care and has reduced the death rate from lung disease by 50 percent.
Not surprisingly, sales are soaring and the forecast is $5.4bn (£4.4bn) this year.
That’s good for humanity – and shows what happens when boards show courage and investors stand firm.
Penalties payday
Mervyn Davies took it upon himself to single-handedly save Russian private equity firm Letter One – owner of natural health chain Holland & Barrett – from collapse when the government imposed sanctions. As a non-executive chairman, it seemed like an act of altruism.
The truth turns out to be otherwise, following the revelation that he has been paid £32.2 million in wages and bonuses over the past two years.
The right course of action?
Donate it to Ukrainian citizens suffering terrible hardship caused by indiscriminate Russian aggression.