Business View: Shyness is nice but why so coy about Sainsbury's, Philip?

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The Independent Online

In the past three months, more than 625 articles in national newspapers have mentioned Philip Green. At least half-a-dozen of these have been substantial interviews. Another couple of dozen have involved his opening stores, receiving awards, buying trinkets at charity auctions and the like. He has been on TV. He has been at symposiums on business ethics. He has been in helicopters. He has been shopping in stores at midnight. He has taken over from Sir Richard Branson as Britain's most visible and garrulous businessman. Yet on one subject, he is astonishingly reticent: J Sainsbury.

In the past three months, more than 625 articles in national newspapers have mentioned Philip Green. At least half-a-dozen of these have been substantial interviews. Another couple of dozen have involved his opening stores, receiving awards, buying trinkets at charity auctions and the like. He has been on TV. He has been at symposiums on business ethics. He has been in helicopters. He has been shopping in stores at midnight. He has taken over from Sir Richard Branson as Britain's most visible and garrulous businessman. Yet on one subject, he is astonishingly reticent: J Sainsbury.

A few days ago, at lunch with a well-connected investor who has been close to Mr Green for years, the issue of the troubled supermarket group came up. "Is Philip going to bid?" I queried. "Ask him," came the reply. "He won't deny it."

So I called him. Now, I've had a curious relationship with Mr Green over the years. He's sued me, sworn at me, accused me of all sorts. But he's always called me back.

This time, when I mention the word Sainsbury's, I am told by his secretary: "Mr Green has no comment to make."

And it's not only the Bhs and Arcadia boss who suddenly comes over all Greta Garbo at the mention of Sainsbury's. Allan Leighton, the Royal Mail chairman, Bhs director and former boss of Asda, who is always keen to help when we call him up, takes fright when a certain supermarket chain is mentioned. He has also been linked to a bid, perhaps working with Archie Norman, another ex-Asda boss and the soon-retiring MP for Tunbridge Wells. Or perhaps with Mr Green. Or perhaps with Mr Green and Mr Norman, who has also been keeping his counsel on Sainsbury's.

There could be a charitable reason for this reticence. Justin King, the new head of Sainsbury's, is a protégé of Mr Leighton, and is considered by Mr Green to be "a good lad". These sharks of the business world may be trying not to put further heat on Mr King ... Or maybe they're trying to avoid letting their intentions slip out.

Plenty of scope for failure

Mr Green's reputation is based on three brilliantly executed takeovers: Sears, Bhs and Arcadia. He knew the sector. He knew his quarry. He knows how to extract the most from them. But not all takeovers go as well.

Two senior consultants from Bain & Co have analysed deals, successful or not, in a book, Mastering the Merger. I met one, David Harding, last week.

He said that most good deal makers start small and build up to the bigger takeovers. Large deals can be split into "scale" and "scope", the former being the sector you are in, the latter being in something new. Scope deals often fail, partially because you are admitting that you have hit a ceiling with your current business model, partially because you are leaping into the unknown. Some deals that look like scale are actually scope because you are entering a different territory. Santander's purchase of Abbey National may fall into this category.

The final piece of advice is listen to the market if it does not like a deal. If a company's shares fall after a deal is announced, 79 per cent of the time they underperform the market over a year, and 74 per cent will underperform over two years. Funnily enough, if the shares go up, they are still more likely to underperform over a two-year horizon. Takeovers, it seems, can seriously damage your wealth.

Read all about it ...

Hurrah. The Evening Standard has recorded three whole months of profit for Daily Mail & General Trust. Ignoring the fact that if you own the monopoly evening newspaper in the richest city in Europe, it takes some skill to lose money, I am at a loss as to whom I should praise for this turnaround.

DMGT talks about improved advertising sales and the effect of a cost-reduction programme. But didn't Richard Desmond appeal to the Office of Fair Trading about DMGT's stranglehold on the distribution of evening newspapers in London, citing DMGT cross-subsidy of the Standard? Hardly had the ink dried on the complaint than the Standard sorts itself out, despite a 6.6 per cent drop in sales.

Maybe it is the accountants, who allocate costs within DMGT, who are the heroes.

j.nisse@independent.co.uk

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