Bids should come home
WHEN a Thatcherite purist such as Nigel Vinson, stalwart of the free market Institute of Economic Affairs, loudly opposes a private equity takeover of Bradford-based supermarket chain Morrisons, you wonder why the Iron Lady’s disciples are not of the same mind.
Not a peep has so far been heard from Chancellor Rishi Sunak, a laissez-faire thinker who represents a Yorkshire constituency in Morrisons territory.
As for Business Secretary Kwasi Kwarteng, author of the volume Thatcher’s Trial, he purred with support for the £6.7bn takeover offer from Fortress after reassurances from the supermarket group’s chairman Andy Higginson. One cannot imagine Margaret Thatcher falling for the soft-soap without asking forensic questions and making sure commitments made in the heat of a merger battle are legally enforceable.
Among the puzzles about the bidding shoot-out for Morrisons is that it is between two overseas-controlled entities, Softbank-backed Fortress and Clayton, Dubilier & Rice (CD&R). No one has come up with a home-based solution. One City veteran suggested that a good combination for Morrisons would be with Sainsbury’s, bringing together its strengths in the South with Morrisons’ northern footprint.
But it would be a case of once bitten, twice shy for Sainsbury’s after its previous merger proposal with Asda was blocked by the Competition and Markets Authority.
If that wouldn’t work then a different type of high street deal might. A merger between M&S and Morrisons might be good sense. Both pride themselves on food quality. Morrisons’ fresh produce, from its own fishing fleet to its cheese production, is outstanding. It does some of its online deliveries on the jointly owned M&S-Ocado channel.
Even more radical would be for the UK’s most successful clothing and home products retailer, Next, run by the shrewd Simon Wolfson, to acquire or merge with Morrisons, giving it a quality stake in food.
It shows a lack of imagination and ambition, by all these entities, that they are happy to stand by and watch private equity plunder Morrisons rather than take a once-in-a-lifetime opportunity to reshape their enterprises.
One cannot imagine some of the retail giants of the past such as Geoff Mulcahy, creator of Kingfisher, or James ‘retail is detail’ Gulliver, boss of Fine Fare and Safeway, standing on the sidelines.
Sinking funds
THIS ought to be a golden era for UK fund managers. As occupants of one of the world’s great financial hubs, they ought to be attracting vast inflows while equity markets boom around the globe.
But Abrdn (the old Aberdeen Standard Life) and M&G are stuck between a rock and a hard place. Giants such as Blackrock, Fidelity and Vanguard have been attracting vast inflows. Managers with big reputations, such as Schroders and Goldman Sachs, prosper along with platforms catering for private investors.
There are signs in the latest financial results that both firms are regaining their mojo. Abrdn was a pioneer in investing in Asia and chief executive Stephen Bird is seeking to regain that territory through a distribution agreement with Citi.
It wants to soup up its private investor offering by acquiring AI digital innovator Exo and is making a big play for ESG. The numbers are starting to improve, with outflows down to £8.3bn, against £26.8bn in the first half of last year. And it is displacing lower income older assets with newer mandates with higher performance fees.
John Foley, at M&G, has been swimming against the tide too but has managed to harvest European institutional clients, and netted a modest £2.2bn net inflow. The rate of net retail outflows has slowed and there is hope its PruFund Planet, addressing green and social issues, will be a crowd-pleaser.
Both firms have a chance for a big say in the outcome of the current private equity crapshoot. They should fly the flag for UK defence, grocery and health products rather than take the cash and run.
Winner takes all
FOR investors willing to back UK-quoted gambling giants the returns can be spectacular. A headstart online pushed up revenue at Paddy Power-owner Flutter by 59pc. Shares of Ladbrokes owner Entain have soared 150pc in the last month on optimism of the return of an all-out bid from MGM.
As Euro 2020 bettors learned to their cost: the bookie always wins.