OUTLOOK : Old wounds can take a long time to heal in the City
Thursday 19 January 1995
Swiss Bank employed top lawyers to vet the controversial options for fees package being used in Trafalgar House's £1.2bn bid for Northern Electric, so it was only to be expected that the Stock Exchange would have to clear it. Swiss Bank must have anticipated, however, that its methods would create a stink. The Stock Exchange will now have to change its rules, though this is not going to be easy. Nor will it be entirely to the liking even of Swiss Bank's detractors. Warburg is as likely to balk at removal of the market-maker's exemption as anyone.
Swiss Bank's fawning apart, the episode serves to highlight a worrying trend in contested takeovers; these days, the cut and thrust of the argument seems to have more to do with paying off old scores in the City than the takeover itself. The battle is fought as much with regulators as with shareholders.
Trafalgar House and Northern Electric must be beginning to wonder what on earth is going on. The case for and against the takeover has so far barely got a look-in, lost behind the hundreds of largely hostile column inches devoted to Swiss Bank's share dealing antics in Northern and other electricity stocks. All jolly interesting and no doubt important stuff involving vital issues of integrity and City etiquette, but of little if any relevance to the future of Northern Electric. Not that this has stopped Northern, advised by SG Warburg, from milking the case against Trafalgar's advisers, Swiss Bank, for all it is worth.
If the row can be said to have any significance for the takeover at all it is this: the more the waters can be muddied by calling into question Swiss Bank's methods and by association those of its client Trafalgar House, the more chance the bid has of being referred to the Monopolies and Mergers Commission on public interest grounds. The underlying case for reference seems about as flimsy as they come, so this may not be altogether a bad ruse. Except that relying on reference as a defence strategy is rarely a good idea.
The case against Swiss Bank may or may not be a good one but Warburg certainly has a powerful interest in peddling it. Swiss Bank is an irritating rival which has met with some success in its attempt to break into the London corporate finance market. Norhas Swiss Bank ever been shy in attempting to enlist the support of regulators in the quest. It pursued a complaint against Warburg over the Enterprise bid long after everyone else had fallen by the wayside. In the end it drew blood. The woun d is plainly going to take a while yet to heal.
Woolworths has an identity crisis Seven years after Sir Geoff Mulcahy rescued Woolies from the ashes it seemed a bright and witty idea to rename the group after a bird with brilliant plumage, instantly recognisable, expert at what it does and very popular, to quote the group's own justif ication for the change of tag.
Five years on again, Kingfisher's plumage looks more and more drab. Trading figures for the second six months of last year suggest that last year's worst-performing Footsie share is neither brilliant nor expert.
Only Darty, the widely questioned French acquisition, came to the rescue of worryingly poor sales figures. A 1.8 per cent like-for-like improvement at both B&Q and Woolworths compares with 3.8 per cent at Tesco over the same period and 17 per cent at recovering Next. Superdrug struggled to match last year's sales and Comet, the biggest problem area, fell more than a tenth.
The performance of Kingfisher's peers suggests that the flat high street is only partly to blame. There are deep structural problems and little evidence that they are being seriously tackled.
Woolworths' struggle to find a niche is easier to observe than solve - it is simply not a shop that springs to mind for any of its product lines. You want toys? Toys R Us and Argos have wider ranges. Children's clothes? Mothercare is getting its act together at last. Music and videos? WH Smith, Our Price, Tower Records, but Woolies?
The problems at Comet are equally entrenched. The regional electricity companies now control about 16 per cent of the electrical retail market and Dixons and Currys have followed Comet out of town, at a stroke removing its one unique selling point.
So what to do? Introducing electronic point of sale systems into Woolworths will help it keep track of what is and is not selling and so avoid the overstocking that bedevilled 1993's Christmas. But everyone else started installing these vital systems years ago and it will take Woolies as long to catch up.
But that is tinkering around the edges. When Archie Norman came into Asda three years ago, the supermarket chain was suffering a similar identity crisis. Institutions are not yet baying for a change at the top, but perhaps Sir Geoff should accept that sometimes it takes an outsider to see the wood for the trees.
One in the eye for Daimler Confirmation that British Aerospace is about to agree on merging its regional aircraft business with the Franco-Italian alliance ATR marks a dramatic shift in the European balance of power in this difficult sector. Not only hasBAe taken an important step towards securing its future as an important regional plane manufacturer, but it has also put a big one over on an arch-rival, Daimler-Benz Aerospace.
A link-up between BAe and ATR, probably also bringing in another key regional player, Saab of Sweden, would leave a key element of Daimler-Benz Aerospace's strategy to become the Boeing of Europe in tatters. Instead of being the predominant force in a club all European regional aircraft makers would be begging to join, it suddenly looks as if Daimler is the one out in the cold, wondering how to get in.
The Germans are paying the price of arrogance, a cause for not a little quiet celebration at BAe. Ever since it bought up Fokker of the Netherlands a couple of years back, Daimler believed all it had to do was wait until BAe, which was having all sorts of problems finding a partner to share its regional aircraft troubles, came crawling to Munich on its knees. Daimler was also intent on buying BAe's Airbus stake - which would have left it the overwhelming force in European aircraft manufacturing. That grand plan now appears to be in urgent needof a rethink.
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