Simon English: City to celebrate with cheap champagne as 'worst deal ever' dies

Outlook The City fund manager – head honcho at one of our biggest institutional investors no less – broke into a huge grin.

Lunch was just being served when I offered the news that the BAE/EADS deal was off.

"That's the best news I've had in months," she said (there's a clue there, if you care). "It was the worst deal ever."

As an investor in both companies on behalf of our pension funds, this entire merger never made sense.

We pour wine, and she explains one of the reasons why.

Investors in EADS were looking for growth, thinking that a forward-looking business could throw off the shackles of its history as a government entity and be innovative; invent new gadgets, explore new markets, move away from its European base.

Investors in BAE were aware that its growth prospects might be limited given the hack-back on UK and US defence spending, but reassured by the chunky dividend it pays and will keep paying.

With bonds yielding nothing or less than nothing after inflation, a high yield stock is a valuable thing; a prize not to be tossed aside lightly. In other words, the owners of the two businesses had entirely different aims.

One was looking for a rising share price, the other for income.

Our equities friend won't be alone in holding shares in both – in different funds, with specifically different approaches, bought by different customers – but the fear was that the combined entity wouldn't deliver on either front. No growth. No innovation. And a tumbling divi while a now colossal, and colossally bureaucratic entity, nudged its way towards failure.

The official line here is that "political deadlock" was the reason for the collapse of the talks. That looks like half the story at best.

Earlier this week Invesco Perpetual, a 13 per cent investor, said it couldn't see the sense in the deal.

That was a rather shocking thing for a major player to say at such a late stage and rather suggests the banking advisers hadn't bothered to persuade Perpetual's Neil Woodford of the merits of the case (that's somewhere between foolish and negligent).

Ian King, boss of BAE, says he is "obviously disappointed" an agreement couldn't be reached with "our various government stakeholders". It seems fairly clear that the private stakeholders thought the whole plan stunk too.

This is the sort of failure over which heads should clearly roll.

The banking advisers in particular might be thinking of preparing their excuses and surrendering any fees that might be payable.

For the record, they are: Perella Weinberg, BNP Paribas, Evercore Partners and Lazard for EADS, and Gleacher Shacklock, Morgan Stanley and Goldman Sachs for BAE.

The City normally cheers big merger deals for predictable reasons (money). This time even the Square Mile looked at the proposal and went: come again?

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Telesales Executive - OTE £32,000+

£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat