Business View: Life isn't a gas as Sir Roy feels the heat at Centrica

The Government has made it clear that a foreign purchase would trouble no one in high places
Click to follow
The Independent Online

The group, which trades under the British Gas name, has had an identity crisis for a while. It argues it is a customer service business - that is why it bought the AA and had its flirtation with financial services - yet it is still in the boring area of supplying gas and electricity.

With its legacy of millions of British Gas customers, inherited after privatisation, it has both a natural market and an albatross round its neck. How do you make the maximum out of these people without irritating them and persuading them go to a rival? How do you get over to them that it is high wholesale gas prices which are pushing up bills, when many consumers think you still drill for gas in the North Sea? Some might argue that - like BT to an extent - Centrica has yet to get the balance right.

E.ON's stalking of Scottish Power gives Centrica its biggest dilemma yet. Alistair Buchanan, the power regulator, has signalled he would be willing to let one of the big energy suppliers take over another, but that would probably be it. But should Centrica buy Scottish Power, this would give it such a huge market position, particularly in gas, that even if Mr Buchanan were happy, the Office of Fair Trading and the Competition Commission might object.

Seeing E.ON - or another rival, say Scottish & Southern or RWE - buy Scottish Power would increase the pressure on Centrica in the market, but might take some of the takeover heat off it in the City. Yet a failed attempt by Centrica to buy Scottish Power would up the heat to gas mark nine.

This becomes all the more interesting now that Malaysia's Petronas has built up a 4 per cent stake in Centrica.

The gas group's chief executive, Sir Roy Gardner, has had a bad time of takeovers recently. As chairman of Manchester United, he not only failed to prevent the purchase by the Glazer family, he made a fool of himself.

No one feels as emotionally about Centrica as they do about Man Utd. The Government has made it clear that a foreign purchase of such a national treasure would trouble no one in high places. Sir Roy has some tricky questions to answer.

Sir Gerry's brass neck

If you were paying for cheek, then maybe Sir Gerry Robinson is worth his £75m. Or £56m. Or £100m. Or whatever.

I mean, the proposition he put forward to Rentokil Initial is this: Sir Gerry will become chairman of the company for five years and in return, Rentokil will "compensate" Raphoe Management (which is essentially Sir Gerry, a secretary and a dog) with shares. Rentokil says these would be worth £75m; Sir Gerry's team claims a smaller value. Whichever, it would make him the best-paid British executive since Sir Martin Sorrell - and for what?

We have no information about the business plan. We have no information about the management team. We only have a scheme to return money to shareholders, so long as it doesn't increase the pension fund deficit (which it almost certainly would do).

Should Sir Gerry come up with a great business plan, and deliver the returns that would lead to recently appointed chief executive Doug Flynn getting his controversial £7m pay day, Sir Gerry would end up with £100m. Now is he worth £93m more than Doug Flynn?

Rentokil's largest shareholder thinks so. Franklin Templeton's Tucker Scott, is putting the firm's 14.75 per cent behind Sir Gerry. He may find support, but Franklin is not famous for getting its own way. In April it said that Pearson, where it has 12 per cent, should sell the Financial Times. Has it been sold? Is it going to be?

Franklin, my dear, who gives a damn for your plans.