Outlook: Mathewson plays his Royal flush brilliantly
Wednesday 03 June 1998
For all that, Mr Mathewson is in the end chief executive only of a comparatively small player in retail and commercial banking and while everyone knows that it is return on capital, not size, which counts these days, he'd still like to be known as the man who put Royal on the map. To do this, he needs a big deal. Birmingham Midshires at the price he originally negotiated would have been a steal, but it would not have been the quantum leap that Mr Mathewson needs.
So what to make of persistent speculation of a merger with Halifax, a sort of reverse takeover which would see the whole shebang run out of Edinburgh by Mr Mathewson as chief executive? As it transpires, there was a dinner at which the subject was broached, but nothing that could be termed merger negotiations. Certainly there was no letter from Halifax's Mike Blackburn formally proposing a deal. Even so, the City remains convinced there was more to it than a casual pass across the second brandy. Further, the story that Viscount Younger, Royal's chairman, was somehow slighted in the process refuses to go away.
Mr Mathewson is notoriously scathing about Halifax and its prospects in private. Like many of us, he finds it hard to understand how a company whose core asset - its mortgage book - is mature and gently declining can command a stock market rating superior to his own. But, like most businessmen who criticise their competitors, the suspicion is of a hidden agenda behind the strictures. If the truth be known, he'd quite like to run their show too. Certainly there seems to be more than a hint of vindictiveness in Royal's insistence that Halifax be forced to pay pounds 10m more than anyone else for Birmingham Midshires.
Royal is charging Birmingham Midshires pounds 5m for early release from its takeover agreement with Royal but if the alternative suitor is Halifax, the price goes up another pounds 10m. Whether it was Royal or Birmingham Midshires that insisted on this Halifax specific poison pill is now the subject of open recriminations, but it would seem that Royal has more to gain than Birmingham Midshires from the caper.
Whatever the truth, this looks like more than just friendly jostling for position between competitors. There's a power game going on here; Mr Mathewson seems to want Halifax to be seen to overpay. More importantly, he's determined that he'll be negotiating from a position of strength if and when the consolidation of second-tier British banking that everyone expects finally gets under way. So far it's hard to fault the way he's played his hand.
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