One of the more bizarre aspects of the deal that Czech billionaire Daniel Kretinsky struck with the government and Royal Mail is the use of a ‘golden share’.
Such stocks protect strategic assets from foreign plunderers. Of the FTSE 100 companies, Rolls-Royce and BAE both enjoyed this protection.
Gold stocks are said to depress the market value of assets because they make companies bid-proof and complacent.
Anyone who has joined the leadership of ‘Turbo’ Tufan Erginbilgic at Rolls-Royce knows that this is not the case.
Its transformation has seen its shares double in the past year.
Business Secretary Jonathan Reynolds’ commitment to Royal Mail amounts to a gimmick designed to sell out a bad deal for Britain, citizens and shareholders.
Golden boy: Czech billionaire Daniel Kretinsky given green light to buy Royal Mail in £5.3 billion deal
Instead of the gold share being used to protect a vital strategic asset from overseas plunder, it is being used to catapult Kretinsky into the driver’s seat.
A new gold share will be created, meaning the Czech tycoon will have to keep Royal Mail’s headquarters in Britain and pay his taxes here. Head offices are the first thing that happens during takeovers.
There are questions about how robust such a requirement turns out to be.
The headquarters of British technology champion Arm will remain in Cambridge. But command and control rested with its largest shareholder Softbank in Tokyo.
A British revenue system, which favors debt over equity, will allow Kretinsky and his team to offset a large interest liability, based on a highly leveraged deal, against taxes.
Even more discouraging is that the taxpayer could be exposed if the Royal Mail sale goes horribly wrong. The gold share must be returned to the sender.
Housing minus
Restoring the foundations required Labor to clear up the unfinished business of previous governments.
The latest settlement to emerge from the ruins of the past is military housing. In 1996 it was decided that it would be a good idea to sell the squaddies’ estate, which includes 55,000 houses, to a private equity consortium Annington Property, led by Guy Hands.
The maintenance contract went to another party. As with so many public-private deals, it is not a marriage from heaven.
A series of disputes arose over the deteriorating quality of the ‘Annington’ portfolio, with Britain’s reduced armed forces often living in substandard housing.
The Ministry of Defense tried to take back control of the estate and the whole case ended up in court.
Under a ceasefire just reached, the Ministry of Defense must pay Annington and his investors as much as £6 billion to buy out his 999-year leases on 36,000 housing units and end all legal action.
Money that could have been better spent on troops and weapons. The lesson? Don’t tangle with private equity barons.
Last orders
Diageo hasn’t had the best of times since Texan Debra Crew took over. A sales and inventory blunder in Latin America was a major blow.
But Crew will never be forgiven if pubs in the British Isles run out of Guinness at Christmas. The demand for the stout is increasing enormously. Wetherspoons boss Tim Martin threatens Diageo with a ‘stern word’.
I suspect that Crew, a former platoon leader in the American campaign in Bosnia, will not be shaking in her combat boots.