Margareta Pagano: Invensys investors should be thanking Rudd
Margareta Pagano is a former business editor of the Independent on Sunday who now writes columns and business interviews for a range of publications, including the Independent, Independent on Sunday and London Evening Standard.
Sunday 21 July 2013
Shares in Invensys were still hovering around the 505p price on Friday as investors wait impatiently for France's Schneider Electric to come up with a firm bid offer by the "put-up-or-shut-up" deadline on 8 August.
While there's speculation that rivals such as Emerson Electric or Honeywell may step up to spark a bidding war, it's unlikely they will do so until just before or after Schneider makes its formal cash and share offer worth 505p, valuing Invensys at £3.3bn.
So it's no surprise that Invensys hasn't had any other approaches and explains why some of the more active funds, such as Value Active, were heavy sellers of the stock last week when the price was above Schneider's informal offer. Even so, the M&A experts reckon the shares can go to 550p a share if there is a bidding war.
Indeed, Ben Rolfe of Tavira, says the shares are still a buy as rivals could be prepared to pay more for such a niche player: and it doesn't look bad as a standalone player either.
What a turnaround. Four years ago this summer when Sir Nigel Rudd became chairman, the shares were rock bottom at 215p. Created out of an ill-conceived merger between BTR and Seibe, Invensys was close to collapse, burdened with a huge pension deficit and 100,000 pensioners depending on it for their future.
As Sir Nigel confided in me at the time, finding a way to pay pensioners was what kept him awake at night. They were his first priority; his second was to keep the 16,500 employees in jobs, and then, came his duty to shareholders.
More crucially, he had to get Invensys back on track before being gobbled up on the cheap. That's why selling off the rail division to Siemens last year for £1.74bn was such a masterstroke; on the eve of the sale the whole of Invensys was worth £1.7bn. This allowed Invensys to sort out the pension deficit, return 77p per share to shareholders and get the market to finally revalue the business.
By far the biggest chunk is the industrial automation side, the Foxboro division based in Dallas, which supplies control systems and safety systems to some of the world's most complex industrial plants such as oil refineries and power.
Smaller, but growing fast, are the energy controls and the software operations.
In truth, Invensys is now a US business that just happens to have its HQ in the UK; less than 5 per cent of turnover and profits and less than 10 per cent of the 16,500 staff, are based here and nearly all the R&D work is in the US. If it weren't for the US tax regime, Invensys would have upped sticks to the US ages ago.
So the idea that Sir Nigel is selling Britain's family silver to foreigners is poppycock.
Bid or no bid, Sir Nigel should be getting plaudits not brickbats for having saved pensions, jobs and put money back into our pensions: Schroders and the Pru are big investors. Quite a hat-trick by any standards.
Vodafone must go out of its way to get in punters' good books
When the going gets tough, the tough go shopping. If Vodafone's first-quarter figures are anything to go by, shoppers are also getting bolshy and refusing to spend more than they can afford.
The mobile phone giant saw a sharp drop in sales, down 3.5 per cent to £10.1bn, in the three months to June. As expected, southern Europe was the bleakest. Perhaps the bigger surprise was the sales downturn in the UK, down 4.5 per cent, and in Germany, down 5.1 per cent.
The Brits are proving particularly careful and sticking to their fixed-price plans, spending less on extra calls and texts while many are switching operators – Vodafone lost 100,000 pay-as-you-go customers. Boss Vittorio Colao blames fierce price-cutting from competitors for the falls. In some countries, like Italy, he's matching price cuts but not here.
Perhaps he should reconsider. With the challenge from EE and others and the growth of services such as Skype, customers are proving fickle as well as bargain hunters. Colao should tread carefully if he wants to keep customers loyal.
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