David Prosser's Outlook: A sad end to 250 years of Equitable Life

Sports Direct cashes in on Nike; Emap's U-turn for shareholders

Had things turned out differently, staff at Equitable Life might just now be beginning to think about how best to celebrate the insurance company's 250th anniversary in 2012. Founded in 1762, Equitable is one of the UK's oldest companies and until the scandal that brought it to the verge of collapse in 2000, it was also one of the most widely respected. Since then, however, it has faced exceptionally difficult times and chairman Vanni Treves' announcement yesterday that Equitable will be auctioned off next year means the company will close its doors once and for all just four years short of its 250th birthday.

This may be a sad ending for Equitable, but the final chapter in its history has actually been much happier than it might have been largely thanks to the efforts of Mr Treves, who was parachuted in as the company hit rock bottom in early 2001. His biggest achievement was to get backing from policyholders for a compromise deal that curtailed many of the payouts they received, but saved the insurer from outright insolvency.

Since then, Equitable has slowly managed to move towards more stable ground. Last year's sale of the non-profit pension annuity book to Canada Life was only possible after several years of careful financial management. The same applies to the deal Equitable is now close to completing with Prudential, which is to take over its with-profits annuity business.

Still, a sale of Equitable's final sizeable asset, its with-profits investment fund, is the best hope that ongoing policyholders have of any significant uplift to their future benefits. As an independent insurer running a closed fund, Equitable does not have the fin-ancial muscle to invest in assets likely to produce improved returns. A rival manager, such as one of the specialists in closed-end funds, might do better.

The auction of Equitable will, however, be a timely reminder of just how badly the insurance company's policyholders have been let down by financial watchdogs, which failed to spot the black hole lurking in the insurer's accounts, failed to protect policyholders when the scandal broke, and then failed to bring to book the executives responsible for the scandal.

There's certainly an interesting comparison to make with Northern Rock. Equitable's problems were in one sense very similar to the crisis that hit the mortgage bank this year. It was suddenly confronted by vast numbers of customers who wanted to withdraw their cash at the worst possible time for the insurer. Unlike at Northern Rock, however, the Government was not prepared to get involved, let alone consider a bail-out.

There may yet be a fascinating and controversial footnote to the Equitable affair. Ann Abraham, the Parliamentary Ombudsman, has spent much of the past three years investigating whether those hit by Equitable's collapse were victims of government maladministration. When Ms Abraham eventually publishes her findings a verdict is not expected before next April she may rule that policyholders were failed by regulators to such an extent that the Government should compensate them.

Such a verdict would be sure to meet with a hostile reception from ministers, who fear a compensation bill that could run into billions of pounds. For Equitable policyholders, on the other hand, Ms Abraham is their last hope for a victory in their seven-year fight for justice.

Sports Direct cashes in on Nike

Sports Direct owner Mike Ashley may have some well-documented rough edges, but he's nobody's fool. Having amassed a stake of almost 30 per cent in the England kit maker Umbro in October, Sports Direct was in a strong position to block Nike's agreed bid for the company if it had been so minded.

Yesterday, however, Mr Ashley backed the bid and said he had already sold Nike two-thirds of Sports Direct's Umbro shares, at the agreed offer price of a little over 193p, booking a handsome profit.

In fact, it would have been daft to do anything else. Sports Direct may be struggling to get shoppers through the doors of its stores right now, but the gains made on its Umbro stake will swell the coffers of the retailer (or at least help reduce its debt).

Mr Ashley's purchase of Umbro shares was part investment, but the stake was also meant to give him some additional negotiating power with the kit maker, from which Sports Direct is contractually obliged to buy a certain number of replica shirts. Right now, Sports Direct isn't particularly keen on that contract, given the lack of demand for England kit, but the retailer is retaining a 10 per cent stake in Umbro, enough to maintain its bargaining power.

As for the future, Nike has offered Umbro customers some basic assurances about the way they will be treated once it wins control of the company. In any case, Sports Direct can keep its 10 per cent stake for as long as it sees fit, as an additional lever.

The bigger question about this takeover story is why Nike launched its bid for Umbro when it did before the England team had secured qualification for next year's European Championships. The subsequent failure to qualify has hit Umbro hard, as it confirmed again yesterday with a profits waring. There must, therefore, be a major suspicion that Nike is over-paying for the company.

Given that Umbro stock was trading below 110p in late September, even before it became apparent that Steve McClaren's maestros were going to come up short, the company's shareholders have had something of a result. Mr Ashley, for one, is sitting very pretty.

Emap's U-turn for shareholders

What lies behind Emap's swift change of heart over whether or not to sell its business-to-business publishing unit? Two weeks ago, chairman Alun Cathcart, who has spent all year conducting a strategic review of the media company, said that while he was happy to sell Emap's consumer units for what bidders had offered, no one had proposed a sufficiently high price for the b2b operation. He therefore promised to keep it.

Yesterday, however, it emerged that Emap has, after all, decided to offload the b2b unit, to a consortium consisting of Guardian Media Group and Apax, the private equity group, one of the original bidders. The price is understood to be higher than the offer Emap said no to a fortnight ago, but still short of the 1.3bn that Mr Cathcart had originally hoped to secure.

What's happened here is a good old-fashioned shareholder revolt. Mr Cathcart may well have been quite right to take the view that it would be short-sighted to flog off Emap's b2b operations for less than they were really worth. And it is a tough time to sell any sizeable business the global credit crisis has squeezed the funds that bidders have available to them. Holding on for a while might produce a better price in the future.

Emap shareholders, however, including some major institutions, were expecting a sale of the business and have let Mr Cathcart and his colleagues know how unimpressed they were with the decision to keep the unit. Emap shares dived more than 10 per cent in the immediate aftermath of the announcement earlier this month and have remained stuck there ever since.

Fortunately for all concerned, however, it turns out GMG and Apax were prepared to come back to the negotiating table with a better offer a proposal Emap was quick to seize on, despite its misgivings about the real value of its b2b assets. Investors got what they wanted and the announcement of a deal sent Emap shares soaring back yesterday.

Mr Cathcart and his colleagues clearly felt that they could not say no a second time. Accepting the offer may prove to have been the wrong move, but it's what the market wanted.

d.prosser@independent.co.uk

Arts and Entertainment
TV Review: Sabotage, a meltdown and, of course, plenty of sauce
News
newsVideo for No campaign was meant to get women voting
News
A photo of Charles Belk being detained by police on Friday 22 August
news
News
i100'Geography can be tough'
PROMOTED VIDEO
Sport
Louis van Gaal looks dejected after Manchester United's 4-0 defeat by MK Dons on Tuesday night
sport
News
Actor, model and now record breaker: Jiff the Pomeranian
Video
News
REX/Eye Candy
science
News
i100
News
Down time: an employee of Google uses the slide to get to the canteen
scienceBosses are inventing surprising ways of making us work harder
Sport
Alexis Sanchez celebrates after scoring his first goal for Arsenal in the Champions League qualifier against Besiktas
sportChilean's first goal for the club secures place in draw for Champions League group stages
Arts and Entertainment
Amis: 'The racial situation in the US is as bad as it’s been since the Civil War'
booksAuthor says he might come back across Atlantic after all
Extras
indybest
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Life and Style
Google Doodle celebrates the 200th birthday of Irish writer Sheridan Le Fanu
tech
Arts and Entertainment
Vinyl demand: a factory making the old-style discs
musicManufacturers are struggling to keep up with the resurgence in vinyl
News
i100
News
In Eternal Sunshine of the Spotless Mind Jim Carrey and Kate Winslett medically erase each other from their memories
scienceTechnique successfully used to ‘reverse’ bad memories in rodents could be used on trauma victims
Arts and Entertainment
Singer Pixie Lott will take part in Strictly Come Dancing 2014, the BBC has confirmed
tv
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

C# Developer (C#, ASP.NET Developer, SQL, MVC, WPF, Real-Time F

£40000 - £48000 per annum + benefits+bonus+package: Harrington Starr: C# Devel...

C# Swift Payment Developer (C#, ASP.NET, .NET, MVC, Authorize.N

£45000 - £60000 per annum + benefits+bonus+package: Harrington Starr: C# Swift...

DevOps Engineer - Linux, Shell, Bash, Solaris, UNIX, Salt-Stack

Negotiable: Harrington Starr: A fast growing Financial Services organisation b...

Trade Desk FIX Analyst - (FIX, SQL, Equities, Support)

£50000 - £60000 per annum + excellent benefits: Harrington Starr: An award-win...

Day In a Page

Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff
Manufacturers are struggling to keep up with the resurgence in vinyl records

Hard pressed: Resurgence in vinyl records

As the resurgence in vinyl records continues, manufacturers and their outdated machinery are struggling to keep up with the demand
Tony Jordan: 'I turned down the chance to research Charles Dickens for a TV series nine times ... then I found a kindred spirit'

A tale of two writers

Offered the chance to research Charles Dickens for a TV series, Tony Jordan turned it down. Nine times. The man behind EastEnders and Life on Mars didn’t feel right for the job. Finally, he gave in - and found an unexpected kindred spirit
Could a later start to the school day be the most useful educational reform of all?

Should pupils get a lie in?

Doctors want a later start to the school day so that pupils can sleep later. Not because teenagers are lazy, explains Simon Usborne - it's all down to their circadian rhythms
Prepare for Jewish jokes – as Jewish comedians get their own festival

Prepare for Jewish jokes...

... as Jewish comedians get their own festival
SJ Watson: 'I still can't quite believe that Before I Go to Sleep started in my head'

A dream come true for SJ Watson

Watson was working part time in the NHS when his debut novel, Before I Go to Sleep, became a bestseller. Now it's a Hollywood movie, too. Here he recalls the whirlwind journey from children’s ward to A-list film set
10 best cycling bags for commuters

10 best cycling bags for commuters

Gear up for next week’s National Cycle to Work day with one of these practical backpacks and messenger bags
Paul Scholes: Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United

Paul Scholes column

Three at the back isn’t working yet but given time I’m hopeful Louis van Gaal can rebuild Manchester United
Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?