James Moore: Grudging respect for the abrasive Mr Hohn, Royal Mail’s biggest shareholder
Outlook. Also: Arm can stand up to this undeserved snub
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Wednesday 23 October 2013
If you’re like me and you kept your allocation of Royal Mail stock from the recent privatisation, say hello to TCI. The hedge fund has been gobbling up the shares of those who sold and is now the biggest private holder on the register. Fireworks could follow. TCI stands for The Children’s Investment Fund Management, so named because the fund, run by Christopher Hohn, kicks a substantial annual donation over to his wife’s Children’s Investment Fund Foundation.
If that makes it sound cuddly, it shouldn’t. Mr Hohn is not well-loved in the corporate world thanks to the aggressive assaults he has made on a host of underperforming companies.
He is not well loved in certain chancelleries either, given his willingness to launch salvos against state-run, state-backed, or state-linked companies in countries where that’s just not the done thing. While his tactics haven’t always proved successful, he has nonetheless notched some notable victories.
No surprise, then, that his activities and abrasive style haven’t won him friends. One executive described him as “poison” and he has even received death threats.
The outcomes of Mr Hohn’s activities haven’t always proved beneficial either. Take his attack on ABN Amro, which ultimately led to the takeover of the Dutch bank by Royal Bank of Scotland, and the latter’s near collapse.
The responsibility for that debacle lies with Fred Goodwin, his pals and the regulators who were asleep at the wheel. But Mr Hohn’s role in the drama shouldn’t be forgotten.
Despite all this, I have a certain amount of respect for someone willing to stand up to vested corporate interests and shout “yah boo sucks to you”. Mr Hohn’s habit of attending annual meetings is also laudable when far too many institutional investors can’t even be bothered to vote on annual reports.
He has recently taken a softer approach, and even had the Wall Street Journal gushing about how the Prius-driving yogi (he does yoga) has become “a changed man”. Don’t believe the hype. Mr Hohn didn’t buy in for fun and if Royal Mail doesn’t run fast, he may run it over. Life for its directors just got a whole lot more interesting.
Arm can stand up to this undeserved snub
Buy on the rumour, sell on the news, is an old City saying. The Cambridge-based chip designer Arm Holdings, whose products power smart phones, tablets and a host of other gadgets, was the victim of it yesterday.
Its shares initially fell 7 per cent even though it announced revenues were up by more than a quarter, and profits by more than a third – better than the City’s consensus forecasts. But the market wanted an excuse to dump the shares, which have been run up strongly in recent weeks, and it found it in the royalties, the fee the company takes from every chip sold. They grew by “only” 14 per cent.
Cue a bout of profit-taking despite the company arguing that the comparable industrywide number was 2 per cent. In the meantime, it sold a truckload of new licences to make Arm chips, many to new customers, and there appears to have been precious little impact on the numbers from Intel’s aggressive move into the smartphone chip market. Actually, there’s ample room for two, given the expansion of the market for smartphones and tablets globally as more and more people move into income brackets where they become affordable.
The only real disappointment with Arm is that there aren’t more like it on these shores. But is there a risk of it falling into the arms of an overseas predator? The experience of Dell with Autonomy, another one-time UK tech champion, may make the Americans more cautious than they were. Not that Arm needs to worry too much. The shares still enjoy a sky-high rating, even after yesterday’s slippage, providing it with some formidable armour.
Unsavoury Co-op game may have a winning end
Peter Marks gave his side of the (horror) story that is the Co-op bank before MPs yesterday, and it wasn’t a pretty sight. He sought to blame successive chief executives of the lender for its troubles. Even though, as chief executive of Co-op Group, he sat on the bank’s board.
Neville Richardson, who was one of those former chief executives, tells a different story, blaming the board of the Co-op for heaping too many different initiatives on the bank, and the group.
Do you have children? If so, you’ll be well aware of what’s going on here and it’s not a pretty sight. It’s a playground game of “he said, she said”.
Len Wardle, the chairman of the Co-operative Group for the last six years, yesterday said he was stepping down. He talked of being “immensely proud to have led the group” but it’s where he’s led it that is the problem. Mr Wardle should have taken these children in hand.
Now he wants to persuade members of the Co-op of the need to appoint a strong independent chairman.
It won’t make up for the mess he has left that person with but if the Co-op gets that, at least the postscript to Mr Wardle’s term may prove worthwhile.
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