The work of Britain’s Takeover Panel is admired for its clarity. It sets the rules for bids and deals and avoids the legal quagmire often seen in the US.
Nevertheless, a strict timetable for making an offer and completing a deal too often favours the acquirer and has contributed to the ease with which overseas predators have acquired emblematic companies.
It also makes UK firms vulnerable to hedge funds, which crowd on to the share register in expectation of a bid – or after one – in anticipation of quick profits.
One might have expected Nationwide, as a mutual owned by members, to obtain maximum consent for a big strategic move.
Its intentions in spending £2.9billion of members’ funds on buying Virgin Money are ambitious.
Takeover plan: Nationwide is planning to spend £2.9bn of its members’ funds on buying Virgin Money
It increases the range of personal services such as credit cards and provides a foothold in business banking.
The rush to take control, without fully consulting members, has not been edifying. Throughout the process, Nationwide has claimed that the strict takeover timetable did not provide enough time to poll or consult some 16m members.
There also has been concern that the purchase price, at well below the book value of Virgin, might have tempted in another buyer. So it was critical to prosecute the deal.
As the transaction has progressed, there has been a steady build-up of petitioners among members wanting more say and asking what is in the deal for them.
In his latest letter to members (including this writer), chairman Kevin Parry seeks to allay disquiet with a pledge.
He notes that in 2023 the Nationwide had sufficient surpluses to offer a Fairer Share Payment, in effect a bonus, to eligible members. Last year was healthy for financial groups because of the widening gap between loan rates and those paid to savers.
Parry argues that a stronger group would make such payments more likely for Nationwide members in future.
Maybe. However, this incentive is not guaranteed. Chief executive Debbie Crosbie has a proven record of doing deals and giving value.
The knockback by the Advertising Standards Authority over TV commercial claims that, unlike big banks, Nationwide is not closing branches has been labelled misleading.
Not great for credibility. Yet members are asked to take a lot on trust, including the thoroughness of the due diligence on the takeover target.
In pressing the deal aggressively and citing merger rules as the reason, Nationwide has erected an undesirable protective shield.
Magic masterclass
Bringing members and/or individual shareholders along can be a real plus for public companies in a tight spot.
Two decades ago, the late Paul Myners and Stuart Rose used the army of M&S private investors to repel an unwanted bid from Philip Green.
Walt Disney’s veteran boss, Bob Iger, used similar tactics to see corporate raider Nelson Peltz off the theme park amid complaints of underperformance and woke.
Iger has directly engaged with Disney’s private shareholder base, reportedly as high as 40 per cent, with a barrage of letters, brochures, social media messages and goodies.
These have included a 50 per cent dividend increase, a $3billion (£2.4billion) share buyback and an investment in North Carolina-based Epic Games.
Iger also collected celebrity endorsements including the Disney family, Star Wars creator George Lucas and JP Morgan boss Jamie Dimon.
His is a victory for popular capitalism.
Flying lesson
Virgin Atlantic came close to collapse in the pandemic after the Government rebuffed a bailout request.
The carrier eventually managed a self-help package, with Richard Branson piling in £200million after selling off shares in space outfit Virgin Galactic and persuading 49 per cent holder Delta of the US to pony up.
Now chief executive Shai Weiss is promising a return to profits in 2024 after the carrier ran a loss of £139million last year.
Britain needs a competitive carrier to the US, Caribbean, India et al to ensure service standards at BA don’t slip further.
