Caution and patience rewarded at NatWest

'NatWest has paid a fair price for a deal with lots of potential for combining Gartmore's brand name and fund management expertise with NatWest's extensive retail distribution network'
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The Independent Online
Ooof! NatWest has finally done a deal. If all the bid rumours concerning NatWest over the past year had been true, Derek Wanless, the group's chief executive, would have been so busy haggling and signing cheques he would have scarcely had time to eat, let alone run a business. But not all the speculation was idle. NatWest did make a few serious attempts, notably with Barings and SG Warburg, that failed to come to anything. It did also show a close interest in Gartmore when the French parent, Indosuez, put the fund management group on the market last September. But the rich prices then on the table cut Wanless's appetite.

In the end, NatWest's caution and patience have been rewarded. When the talks stalled, and Indosuez in effect had to re-advertise, the UK clearer returned to the table and clinched the deal at pounds 475, instead of the pounds 600m the market had been talking about at the outset. Fund managers do not come cheaply. NatWest has paid a fair price for a deal with lots of potential for combining Gartmore's brand name and fund management expertise with NatWest's extensive retail distribution network.

Gartmore went for 20 times 1995 earnings, but this figure is based on an atypical year. Stripping out the anomolies gives a more modest factor of lower than 16 times historic earnings. Using another yardstick - percentage of funds under management - the price also looks undemanding at 1.9 per cent.

Indeed, NatWest may have established a new yardstick by paying so modestly. Mercury Asset Management's shares dipped 7p yesterday on disappointment that a strong suitor is now paired off, and market judgement that Gartmore's price was well below sky-high expectations. Mercury is valued at 2.5 per cent of funds under management.

But comparisons are risky. There was an element of the distress sale in Gartmore. Indosuez needed the cash. It even went so far as to pay Nationsbank to wave its right of first refusal on the company. Anyone acquiring MAM, currently trading at around 16.5 times historic earnings, is still going to have to pay a full price. It also has scarcity value on its side. Invesco is about the only other fund manager of size that it is still possible to buy.

To all intents and purposes yesterday's deal amounts to a reverse takeover of NatWest's investment management outfit by Paul Myners and his team, who fill all the top posts. The last few years have been difficult for Gartmore but that should not belittle a remarkable and entrepreneurial record. Continuing that in the very different climate of a large clearer will require all the lightness of touch Wanless can manage.

A family affair for Mr Murdoch

Who really runs BSkyB? Rupert Murdoch of course, notwithstanding the fact that he now owns only 40 per cent of the company and the two other media companies that sit alongside him on the share register. All doubt about it must surely be set aside now that the media mogul has parachuted his admittedly talented and experienced daughter into a senior position at Britain's most profitable TV company.

What other shareholders - Granada, Chargeurs and the big City institutions - will make of it is anyone's guess. They might have some difficulty with the idea of using a publicly quoted UK company as training ground for a Murdoch offspring - and a young one at that. So too might Sam Chisholm, credited with turning BSkyB into a relentless profits machine. As his contract makes all too plain, he works as much for Mr Murdoch as BSkyB but even so he won't like sharing the limelight with Elisabeth Murdoch.

Mr Murdoch has been adept at controlling his sprawling empire from a comparitively limited capital base, preferring in the past to take on mountains of debt rather than dilute his equity further. That way, he gets to pass on a functioning, prospering empire to the child of his choice. Where Forte, Hanson and others have failed, Mr Murdoch will probably succeed.

In at least one way he is following the fashion for this sort of dynasty play. He is expecting his daughter to help identify opportunities in European television, concentrating on strategy, rather than on operations. Here, then, is a handy executive job for a member of the family; "chief strategist," perhaps, or maybe executive in charge of "strategic development."

A few eyebrows were raised when Mr Murdoch's first son Lachlan was given the exalted title of deputy chief executive at the tender age of 24. Ms Murdoch's TV experience, by contrast, is far from risible. She actually ran two small TV stations in the US (bought with her husband thanks to loan guarantees from the old man) for a year, and managed to sell them on at a profit. Does that make her a candidate for a senior position at BSkyB? Time will tell, but we shall all be watching her progress.

And so, one assumes, will Mr Chisholm. What is she there for? To keep an eye on him? Or just to learn the tricks of the trade? Given what an astonishing job Mr Chisholm has done for Mr Murdoch at BSkyB, it could be read either way. In a spirit of support, let us hope the relationship blossoms - or at least that there is no rerun of the stand-up rows between Mr Chisholm and the last man Mr Murdoch parachuted in, former Sun editor Kelvin MacKenzie.

Discovering the blindingly obvious

As the last election showed, opinion polls are rarely much of a guide to anything but when conducted among "business managers" they take on an almost surreal quality of worthlessness. Thus the latest one among members of the Institute of Management tells us that 76 per cent of managers believe tax will rise under a Labour government and an astonishing 63 per cent are of the opinion that trade union power will enjoy a revival if Tony Blair is elected.

Other sensational findings are that four in ten managers believe unemployment is less likely to rise under Labour than Conservative and - amazing this one - that two-thirds of managers think Labour will win the next election.

As a voyage of discovery into the blindingly obvious, this is a survey that takes some beating. There are, however, some reasonably interesting nuggets to be extracted from the chaff. Perhaps most telling for those who should be highly exercised by issues of education and training, respondents seem to believe there is little to chose between the parties on educational matters - both are equally bad.

The central finding of the survey is that even among managers, things are drifting in Labour's favour. Support for the Conservatives has plummeted from 64 per cent in 1992 to 43 per cent now. Labour has meanwhile doubled its level of support from 12 per cent to 25 per cent.

Mr Blair seems to be making some headway even in the heartlands of Tory support. He has a way to go, however, in setting out a framework of policies towards business that managers can feel comfortable with.

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