Cameron should back BP openly and name companies that need protecting

The prime minister’s informal strategy of reportedly telling the oil company any takeover deal would be resisted is a cop-out

David Cameron doesn’t want BP to be sold. Indeed, as the FT reports, Downing Street has told the oil company privately that any takeover deal would be resisted. Since the government lacks powers to intervene, it’s unclear what it would actually do if ExxonMobil, say, had a pop at a price that made BP shareholders salivate. At a push, the government could try to erect a few obstacles in a hurry, as it did when Pfizer bid for AstraZeneca in 2014, and hope the bidder goes away. But that’s about it.

Such an informal, muddy-the-waters, strategy is a cop-out. There are only two coherent positions to hold on major takeovers, especially takeovers from overseas. The first is an open-doors approach, in which shareholders are left to decide when there are no competition objections. Such a laissez-faire view is supposed to be the UK’s current policy, with the exceptions of defence (on grounds of security) and media (plurality). The second position is the opposite: adopt a public interest test for major bids and describe, roughly, how it would be applied.

As it happens, this column is in the second camp. Any hesitation disappeared with the Pfizer/AstraZeneca offer, which thankfully failed. The US bidder had a record of making deep cuts in research and development budgets at every company it had bought for a decade and its pledges to invest in AZ were short-term and non-binding.

Shareholders’ rights of ownership matter, of course, but they shouldn’t be the sole consideration when bigger factors, like the quality of the UK’s long-term science base, are at stake. It would have been better if the government, instead of bargaining with Pfizer over investment and employment, had been able to say no.

With its behind the scenes lobbying of BP, the government seems to agree. It appears to want a power of veto – but it isn’t prepared to say so, or argue for the right.

That’s just feeble. If Cameron & co think it is vitally important that the UK has two big oil companies (actually, one and a half, since Shell is Anglo-Dutch), they should let everybody know where they stand.

Equally, if they think certain companies need protection, let’s hear the names. The government still has a golden share in BAE Systems and Rolls-Royce. But one could name other major UK companies whose investments are as crucial to the UK as BP’s. Try: AZ itself, BT, Centrica, GlaxoSmithKline and National Grid. Would Downing Street, under its new line of thinking, try to protect any of that collection? It’s anybody’s guess.

Ten days ahead of a general election, the prime minister seems to have adopted a new industrial policy on takeovers. It’s just that he hasn’t announced it – nor described how he might deliver it.

Gone flat?

Talk to Diageo’s top brass these days and they tend to be very bullish about India. United Spirits, where a 55% stake was acquired laboriously over many years at a cost of £1.8bn, is reckoned to be fizzing with potential. It’s a big business in its own right and can be stuffed with Diageo’s established tipples, thereby opening up years of growth.

Over the long term, the plot may turn out so happily. In the short term, a fine old mess has developed. The board of United Spirits has called on Vijay Mallya, its chairman, founder and former controlling shareholder, to quit. It says an internal inquiry has found improper financial transactions with other parts of his business empire between 2010 and 2012.

Mallya is protesting his innocence and refusing to go quietly. So what, you might assume. Surely Diageo, as majority owner, can vote him off the board. It’s not so straightforward. During the initial purchase of 25% of United Spirits in 2012, Diageo agreed to “certain contractual obligations,” including Mallya continuing as chairman.

That clause, one assumes, was part of the price of getting the deal done. So Diageo went in with its eyes open. It may also have alternative legal cards to play. But Mallya, taking to Twitter to bemoan “speculation, sensationalisation, and character bashing,” is not going to go quietly. Diageo will want this resolved quickly. It’s not the way to bet.

Popular move

The Hong Kong crowd love the idea of HSBC returning. After yesterday’s bump, the share price is up 6.5% since the bank said last Friday it might leave London. The applause feels highly premature. The odds on a move are 50-50, at most. It would also be hellishly expensive, and take years to happen.

Πηγή: theguardian.com

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