No one can accuse reclusive activist investor Edward Bramson of lacking what the Americans politely call cojones.
He is grabbing a 5.2 per cent voting stake in Barclays, one of Britain’s big four banks, in a deal more than 30 times larger than anything done before.
There is recognition that even after a 70 per cent recovery in Barclays’ share price since 2016, chief executive Jes Staley is still struggling to make its investment arm pay its way. Yet as the only fully functional UK investment bank, splitting from the retail bank should not be an option.
Tough task: Jes Staley is still struggling to make Barclays’ investment arm pay its way
In past attacks on rusty British investment groups Foreign & Colonial and Electra, the raider unseated the board with his own slate of nominees, cut costs, raised charges and delivered for shareholders. Only at 3i did Bramson take an early profit and go away.
A hostile boarding party at Barclays is unthinkable, with the Bank of England and other regulators keeping banks on an incredibly short leash since the financial crisis.
Bramson’s Sherborne Investors might see Staley as weakened after his whistle-blower misstep, but if this had been regarded by the authorities as a sacking offence it is hard to think he would maintain his fit and proper status. There have been emails back and forth among the parties and Staley has been designated chief negotiator should Bramson show his hand.
But however wonderful past returns, it is hard to believe that Sherborne backers, that include Aviva Investors and Threadneedle, can be entirely at peace with such an audacious target.
Melrose has hit the panic button. The fabulously wealthy Melrose three, Chris Miller, Simon Peckham and David Roper, have behaved like the England rugby team by thinking a reputation for invulnerability would carry them across the line in the £8.1bn battle for GKN. But reality dawned and the Mayfair-based financial engineers upped their game.
Failure to engage properly with pension-fund trustees and the Commons opened up a great hole in the defence, so Melrose is promising to put up £1bn. Estimates of the shortfall are as high as £2bn and, as short-term owners, the Melrose covenant may be overwhelmed by events. So the pledge may not be decisive.
The Melrose bosses are also fighting back over fat-cattery. Under GKN’s self-help plan, its bosses stand to collect £70m.
The spoils, if they are ever paid, will be shared among 400 people and take three years to materialise. The average £175,000 (or £58,333 per head for each year) is small change compared to the potential £285m pay cheque for the Melrose top brass. This is in addition to the accumulated wealth of Melrose bosses, which, including pay, bonuses and share purchases is worth £457m. All told they stand to benefit by up to £742m from their experiment in private equity financing in a quoted company setting.
Melrose bosses are declining to make themselves available to BBC Radio 4’s morning business slot. Instead we heard from former ‘non-executive’ Miles Templeman who did nothing to constrain share and bonus payments in his period at Melrose and obsequiously praised the buyout group. GKN has sought to fight back against the Melrose charm offensive with a sweetener of its own. It promises investors in GKN will be able to maintain an interest in its driveline technology through a London-quote for Dana, the US automotive group that has agreed to buy the division.
That may not be ideal for tracker funds. But it will allow committed investors to maintain an interest as they can in P&O cruising through Carnival and fintech through Worldpay (now part of Vantiv).
There was a big gain for GKN when top ten investor Columbia Threadneedle revealed it would be sticking with the incumbents. Other long investors, with a genuine belief in good governance, would be wise to do the same.
French-controlled city centre shopping champions Klépierre has been told to get lost by Hammerson, which is intent on doing its underwhelming sweetheart deal with Trafford Centre owner Intu.
Big investors in Hammerson, which include Blackrock and Dutch pensions investor APG, may find it hard to resist a premium of 40 per cent (which could go higher) from an overseas buyer which says it is placing faith in Brexit Britain.
Klépierre with retail centres in Paris, Rome and Madrid is determined to press ahead.
A promising bout is on the cards.