Bumi’s advisers have had their wrists slapped, but the fees will keep rolling in

Outlook

This year more than half of UK companies will have to go to investors for a binding vote on their remuneration packages, according to BlackRock (Getty)

Bad things don’t happen in the City without the help of a small army of bankers, lawyers and PR people who are paid millions for their advice. These people typically walk away while disavowing any responsibility when things go wrong. They either didn’t see, or they didn’t know, or they couldn’t have anticipated the problem.

But in the case of Bumi, a natural resources company, the Takeover Panel has finally said “enough”. Bumi’s long and unlovely saga dates back to 2010 when Nat Rothschild, scion of a banking dynasty, hedge fund magnate and adviser to oligarchs, created a company called Vallar and raised more than £700m on the stock market with the stated purpose of acquiring a natural resources company or two.

It amounted to a blank cheque, but such was his status that investors large and small queued up to contribute. It wasn’t long before Vallar was presented with a potential deal of the century by a man called Ian Hannam, styled the king of mining M&A, who was then with JPMorgan Cazenove. The result was that Vallar acquired interests in two Indonesian coal mining companies, changing its name en route to Bumi, while handing a large tranche of shares to the miners’ owners by way of payment.

Those owners – the Bakrie Group and Bukit Mutiara – were later found to be “acting in concert”. Between them they had acquired a majority stake in the company, which breached the 30 per cent threshold after which a concert party (or an individual entity) must either table a bid for the whole thing or obtain special dispensation from the Takeover Panel so as not to disadvantage minority investors.

This didn’t happen and the panel accused the advisers on the deal of “serious breaches” of the City Code, censuring Credit Suisse and the law firms Holman Fenwick Willan and Freshfields Bruckhaus Deringer. JPMorgan escaped sanction but was criticised in the panel’s report.

Its action represents an extremely rare instance of the City eating its own. The Takeover Panel, which oversees mergers and acquisitions, is something of an anomaly. It is not an independent statutory regulator, like the Financial Conduct Authority. Its members are instead drawn from the investment banking community, working on secondment.

Those members tend of be chary of making a fuss over the activities of their colleagues because they are only too well aware that they may find themselves on the other side of the table from them when they return to their day jobs. So imposing a censure is a big deal by City standards.

Unfortunately, Bumi quickly collapsed into acrimony, becoming a byword for all that is bad in corporate governance, as Mr Rothschild, the City grandees on Bumi’s board and the Indonesians engaged in a bitter battle for control as the share price fell through the floor.

The panel’s action will therefore come as slim comfort to Bumi’s investors – including a legion of small shareholders attracted by the star power of Mr Rothschild and pals. It won’t bring back any of their money, after all. That’s been sucked into a coal-powered black hole.

The advisers, who served as enablers in this affair, might have now had their wrists slapped. But that won’t affect the fees, which were booked long ago. Oh, they might blush a bit. But they’ll soon get over it, before moving on to the next deal and the next fee, and the next case of expensive wine at bonus time.