Private Investor: Why is the DTI being so quiet over BAA?
Saturday 15 April 2006
Er, so where's the bid? For Alliance & Leicester, I mean. For the second week now there's nothing doing. I suppose that it just goes to show you oughtn't believe everything that you read in the papers. For weeks now the financial press has been full of detailed and apparently well sourced speculation about various continental European bidders for our little mortgage bank.
It looks an ideal morsel, and figures of £12 to £15 a share have been bandied around. And yet not a single solitary euro has been put on the table. So I'm sitting on a small paper loss in Alliance & Leicester instead of a fast buck. Even if a bid does emerge for A&L I suspect it might turn out to be a bit of a joke, like Ferrovial's current offer for BAA, another of my investments. BAA is a long-term core holding of mine.
Why is it a long-term core holding? First, because of the long-term trend towards more air travel, occasionally interrupted but never extinguished by terrorist acts. Second, because it is a monopoly. Sure, it's a regulated one. More than most companies BAA is also peculiarly susceptible to the sort of political games governments and opposition parties alike play with legitimate concerns about noise and pollution around airports. But it's not just that BAA is a mere monopoly that makes it such a special company. It's also that it is one of the very few publicly quoted airport groups in the world, and certainly the one with the most mouth watering array of assets. Which is presumably why Ferrovial wants to get their hands on them.
Even though the Ferrovial offer does not look like it has got much chance of success, I do wonder why the public interest has not been very well represented in this debate. Even private shareholders - especially private shareholders - ought to recognise that their companies have to face up to their public and moral obligations. BAA provides the public with a service.
If BAA went bust then the reverberations would be felt across the economy, and far beyond the environs of Heathrow, Stansted and Gatwick. The odd thing in this case is that it ought to be the Government that is standing up for our interests. As a shareholder I'd rather have a functioning airport at Heathrow than a few quid profit from a BAA takeover. So why won't the regulators or the Department of Trade and Industry take more notice? I hope it is just because they do not think the bid will work.
Sooner or later, however, there will be a well-placed realistic tilt at BAA, and I would like to know who is going to look after the interests of investors and the flying public alike when such a move does transpire.
When it comes to long- term growth stories I concur with the opinion voiced elsewhere that you can't beat emerging markets. I mean to say you can beat them over really quite long periods - 10 years maybe - but that, as you should know, is far too short a horizon to consider when investing for your future.
Over a couple of decades all the ups and downs in Mexico, China, India, Brazil, Turkey and all the rest won't stand in the way of a strong upward trajectory in their economies as they relentlessly globalise and modernise.
Of all of these my favourite has long been India, because of the natural advantages of the English language, the rule of law and democracy. This is where it scores on China, despite all the attention paid to that particular tiger.
In any case I'm very pleased that Foreign & Colonial Emerging Markets Investment Trust does at last seem ready to merge with JP Morgan Emerging Markets Trust. As a shareholder in both I'm also happy to see JP Morgan taking the lead, as it has enjoyed better performance. If the merger helps retail investors focus on the advantages of investing some of their money in what are risky but potentially very rewarding markets and we have a single fund that really has the muscle in marketing and advertising to make its presence known, so much the better.
If you're wary, then think of it as doing your bit to help those less well off to enjoy your prosperity, if you like. That's capitalism.
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