ALEX BRUMMER: Tomkins’ flaccid response to raiders
The vast majority of shareholders in Tomkins have followed the example of the company’s board and rolled over in the face of overseas bidders carrying bundles of cash.
It is understandable in these uncertain times that investors highly exposed to engineering, in the shape of the car-parts and housing sectors, decided to take the money and run.
But the conduct of the Tomkins board, headed by David Newlands, has not been that impressive.
First, it allowed the buyers – the Canada Pension Plan Investment Board and private equity firm Onex – free run of the Tomkins books.
Secondly, it tamely accepted the offer on the table without anything like a public fight.
Then, to cap it all, as part of the deal the executive team effectively became huge beneficiaries by signing up to private equity style rewards – which will make them very rich – if they stay in place.
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No wonder the ethical investment managers at Standard Life, M&G et al have not liked the price (too low) or the governance practices.
The best thing to come out of this was the requirement that the ‘fat cat’ deals for managers were at least spelt out in the offer document. This did not happen in the past.
Does the ownership of Tomkins matter? Sure it can be argued that this was an obscure Welsh maker of buttons and fasteners, which through the flawed genius of Greg Hutchings became a mini-Hanson, best known for its strange guns-to-buns collection of enterprises.
However, in recent times – under Newlands’ guidance – it was slimmed down to a pure British-based engineer, even if 56pc of its business is in North America.
Every time a UK business is sold overseas, zma supplement amazon Britain loses.
The headquarters is run-down, the UK firms which service its needs – from IT to accounting and consulting – lose out and quite often R&D and investment suffer.
Moreover, the repatriation of profits to the balance of payments vanishes, as does the corporate tax take.
It would be nice to think that an event like this – a company with big North American operations going home – might incentivise UK companies and investors to do something similar.
It would be helpful, for instance, if someone decided it was time to rescue BAA from the debt-ridden Ferrovial ownership horror show.
Yet it never happens.
What it unfortunately demonstrates is that post-Cadbury there has been no change in attitudes to Britain’s liberal views on foreign ownership. This at a time when mercantilism in most of our main competitors is alive and well.
The £2.9bn Tomkins deal is in effect an open invite to overseas enterprises, funded by tax-advantaged borrowed cash, to chase and close down the nation’s engineering sector. So much for a re-balanced economy.
It is jolly good news for the hard pressed Exchequer that the casino economy is still alive and well in London.
The latest BIS survey shows that over the last three years – financial panic notwithstanding – foreign exchange market turnover in London climbed by 25pc.
Of this, the volume of over-the-counter interest rate derivatives increased by a resounding 29pc.
This suggests that despite all the moaning and groaning from the hedge fund managers and private equity princelings about the UK’s surging taxes and the threats to disappear to Zug, the City retains its competitive advantage.
The bigger question, and one for George Osborne’s Banking Commission to answer, is: is this good quality business to have?
The BIS makes clear that the bubble economy in financial markets is alive and well, with much of the growth in forex and derivative deals coming from the financial sector.
As was the case during the sub-prime and credit explosion, the froth has become more important that the underlying trade.
It makes one think that a global Tobin-style tax, which slows speculative activity, would be a really good idea.
Blue-blooded City lawyer Herbert Smith tends to regard itself as a cut above its counterparts elsewhere in the City and wider business community, as anyone who has had any dealings with the firm could testify.
So, it is not surprising that when BAE Systems was looking for an ‘independent corporate monitor’ to keep tabs on its ethical behaviour for the US Justice Department that it chose Smith partner David Gold.
Herbert Smith says that in his new part-time role Gold will be acting in a ‘personal capacity’.
That is just as well, given that BAE remains an important Herbert Smith client.
Perhaps the legal firm should appoint its own monitor to ensure that the ‘Chinese Walls’ are not breached.