Roddick loses stomach for perils of the public
Wednesday 01 November 1995
The Body Shop has been a fabulous investment for those who bought at the time of the float 11 years ago, but of late both the company and its share price have lost their lustre. For a company that prides itself on such a neat, freshly scrubbed image, it is looking a bit of a mess. It is as if a bottle of brightly coloured jojoba cream has suddenly exploded in its face.
Although the company is stubbornly denying that Anita and Gordon Roddick have made any formal offer to buy the company back, it is clear that such a proposal did get at least some way down the line and may be revived. Bankers had been hired and a potential buyback price arrived at. That the couple should consider such a proposal is not surprising. Body Shop's 11 years as a quoted company have not been entirely harmonious. Price- earnings ratios and saving the rainforest have never been easy bedfellows. Nor has Ms Roddick's quintessentially feminine style of business gone down well in some quarters of the male-dominated City. Perhaps the only surprising thing is that it hasn't happened sooner.
There is a recurring theme here. Once they reach a certain size, many privately owned companies in Britain are tempted on to the stock market only to find the harsh glare of the City an uncomfortable experience. Flotation provides access to capital markets as well as status and personal wealth for the founders. But it also brings with it a requirement for greater disclosure.
Those quirky hobby businesses are frowned upon, as is paying yourself in oil paintings or unduly mixing your own and the public company's affairs. It also puts previously unknown demands on the organisation. The fiefdom becomes subject not just to the rule of the boss, but to those of outside investors too.
For the highly ambitious entrepreneur, keen to grow by acquisition, a public quote is essential. For those who want nothing more than to watch their business grow organically, it may be inappropriate. One of the primary reasons for the Virgin float was to allow Richard Branson to realise his dream of taking over EMI. In the heady days of the 80s a reverse takeover of this sort seemed more than possible. When it eventually became apparent that it was not, Mr Branson rapidly ended what he admitted was a far from happy relationship with the City. The stock market is no prerequisite to success in business. Ms Roddick would prefer to be without it.
Returning businesses to private ownership is fraught with difficulties, however, not least because of the problems of agreeing a fair price. Anything offered by a director is bound to be treated with suspicion. By definition it must be less than he or she thinks the company is worth. Anita Roddick's tentative price of 200p per share for Body Shop is seen by the City as about 20p per share too low. It is certainly a far cry from the 368p the shares reached in early 1992. Like Alan Sugar before her, Ms Roddick may find she is forced to carry on working for outside shareholders, much as she might dislike it.
Thames stays away from the madhouse
Investors in Thames Water can breathe a sigh of relief. The company has ruled out chasing North West Water into the commercial madhouse by mounting a takeover bid for its local electricity company - in this case London Electricity.
Indeed, the uncompromising terms in which it scotched stock market rumours of such a bid - "there is no way of justifying the premium... nothing would be gained in terms of shareholder value" - only reinforces the view that North West's bid for Norweb is an empire-building exercise of no commercial merit whatsoever. To the extent that the bid does have good points, Thames is extracting the choicest and applying them to its business without the expense and trauma of a takeover. The idea of joint facilities management with London Electricity in billing, IT and repairs clearly has much to commend it. But neither side sees any reason why this should imply a full scale merger.
While it is true that there are tax and additional cost-cutting benefits that can be derived by merging water and electricity utilities, these hardly compensate for the potential downside, as Thames has correctly surmised.
With political, regulatory and competitive pressures growing ever more intense, about the last thing a water company should be doing is increasing its risk to the regulated sector by merging with an electricity company.
Prospects for profit at Express titles
That hardy perennial - that the Express newspapers are up for sale - made its umpteenth appearance on City pages this week. Was there ever a time in the last year when the titles weren't for sale at the right price? Lord Stevens would not part with the newspapers for a song It wouldn't be worth the blow to his ego. But virtually every publisher in "Fleet Street" - like many others from elsewhere - has received the distinct impression that the Express titles could be theirs if the offer was sweet enough.
The company denies the talk, but clearly something is up at United News and Media. If nothing else, there is plainly another big cost-cutting drive being planned. This could be a precursor to a sale but it is equally possible that Lord Stevens is determined to make a go of the Express.
The only conceivable way to cut costs dramatically, once staffing levels have been reduced to the bone (as United did earlier this year), is to seek savings in production. Printing, distribution, wire services, photo libraries and administration all cost a lot of money. Printing is already shared with the Telegraph, and much more could be accomplished by other, similar arrangements. It might stretch credulity to expect United to team up with Associated (surely co-operation between the publishers of the Express and the Mail is out of the question). But there are plenty of other possible alliances.
By going down this route, the 60 per cent of the national press that is not owned by Rupert Murdoch might begin to be able to match his undoubted advantages of scale without going through a process of further consolidation. If such is Lord Stevens' intention, then it may be that the Express newspapers can return to profitability without changing hands.
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