Those of us who have followed takeovers for some time know foreign buyers always claim to be long-term investors. They always promise to keep key operations in the UK and none of them – how very dare you – are ever going to slash jobs.
Once the deal is safely past the politicians and regulators, it can be a different story.
American squidgy cheese maker Kraft was full of reassuring pledges when it took over Cadbury, but once it had got its prey, it shut down a factory it had pledged to keep open.
American squidgy cheese maker Kraft was full of reassuring pledges when it took over Cadbury, but once it had got its prey, it shut down a factory
So when Andrea Leadsom, the Business Secretary, says she thinks the Turkish pension fund buying British Steel is a long-term investor, we would be foolish to take this at face value.
Not least because the military retirement scheme – which is closely linked to the authoritarian government of President Erdogan – will almost certainly receive hefty subsidies from the UK taxpayer.
Leadsom has been briefing MPs in steel constituencies that the fund for old Turkish soldiers will be a superior owner to private equity barons Greybull. I’m prepared to believe her on that, if only because ‘better than Greybull’ is a very low benchmark.
But even if it is a paragon of a buyer, and unlike all its predecessors does not fail and bail, the industry deserves more. In particular, the Government could set about securing tariff-free access to EU markets and competitive energy prices for British steel makers. Our producers pay vastly more for electricity than French and German ones.
It could reform business rates for steel sites, which pay five to ten times more than their counterparts on the Continent. And it could set a priority on buying UK steel wherever possible for public projects.
The unspoken narrative for Leadsom is that it is in the Government’s interest to have a buyer in place. The alternative would have meant being blamed for thousands of redundancies at a very tricky juncture for Brexit and for Boris Johnson.
A reprieve on those jobs is most welcome but it should not silence the very pertinent questions around a rather rum deal.
Coupe de grace
Ouch. Mike Coupe, the chief executive of Sainsbury’s, is a seasoned operator used to taking knocks, but it must have hurt when the supermarket group’s share price rose on a rumour he is about to be replaced.
Insiders poured cold water on the speculation. He has, however, looked like a marked man since his planned mega-merger with Asda was torpedoed by the competition authorities earlier this year.
Sainsbury’s has a new chairman, Martin Scicluna. New chairmen have a tendency to slough off chief executives even without provocations such as a failed deal and a 50 per cent fall in the share price over the past year.
There is a depressed feel about the company. The most recent trading update showed like-for-like sales falling across the business and as a shopper, I can report irritations including empty shelves and lack of availability. All of that suggests a change at the top till.
Sainsbury’s has a new chairman, Martin Scicluna, and new chairmen tend to slough off chief executives even without provocations such as a failed deal, says Ruth Sunderland
But will Scicluna want the upheaval of installing a new man or woman in the midst of a possible No Deal Brexit that might wreak havoc with the nation’s food supply? Sainsbury’s is not the only one with challenges. The sector faces cut-throat competition from online retailers and the German discount chains. Shares have also fallen in the past year at Morrisons and Tesco.
The Asda merger was a brave if ultimately misguided move to try and secure Sainsbury’s future. There is no obvious Plan B. The group might itself become a takeover target for private equity, or with sterling weak, a foreign buyer. Whether it is Coupe at the helm or a successor, the boss will have his or her work cut out.
The German economy may already be in recession, according to the Bundesbank, which yesterday warned that industrial production has been dropping over the summer. Some Brexiteers will see this as a vindication of their views and as ‘evidence’ we are right to get out of the EU.
But one of the major reasons Germany is suffering is that it is an export-oriented economy in a world where the principles of free trade and globalisation are under threat. President Trump’s trade war with China and Brexit, both of which are taking a toll on the German economic engine, are part of that.
A recession in Germany will be felt across the world and will increase the chances of a painful Brexit.
The last thing we should do is gloat.