Nationalisation is off the cards for the Port Talbot steelworks but part-nationalisation is a formal possibility. That, at least, seems to be the government’s position after another day in which the business secretary, Sajid Javid, used the term “co-investment” imprecisely but deliberately.
“The key point is that any co-investment would have to be on commercial terms,” Javid told the Commons. “Investment can take a variety of forms; for example, it could be debt. It’s a demonstration of all the options the government is looking at.”
The natural way to interpret that statement is that investment could be in the form of equity or debt, or both. Javid’s specific mention of debt probably indicates his preference, but he plainly did not rule out the government taking a minority stake as an equity owner. As for the “commercial terms” condition, that is loose: any turnaround plan has to be coherent but viability, in part, is in the eye of the beholder.
Part-nationalisation would represent a huge ideological leap for the government but, once the idea has been floated, it is hard to make it disappear. Imagine you are an interested would-be purchaser on the other side of the negotiating table. Would you rather buy Port Talbot outright and be relatively free of government meddling in day-to-day affairs? Or would you prefer to have a co-investor that has substantial powers to tilt the commercial playing field in your favour on energy subsidies, emissions regulations and business rates?
Some would-be owners, it is true, might not want politicians in their hair. But the overwhelming majority, one suspects, would opt for a co-owner with law-making clout and a need to show taxpayers’ money is being deployed profitably. That feature would be a fundamental appeal of any deal.
That is why part-nationalisation or government “co-investment” – call it what you will – suddenly seems the most likely solution for Port Talbot, whatever officials mutter about it being a last resort. If so, best to get on with it: if ever there is a moment for Brussels to be flexible on state-aid rules, it is when the outcome of the UK referendum looks tight.
‘Enough froth, I’m off’
Christopher Rogers had been passed over twice for the chief executive’s job at Whitbread, so you can’t blame the boss of the Costa Coffee subsidiary for hopping off after 11 years. He is 56, is seen to have had a good innings – first as Whitbread’s finance director, then as managing director of Costa – so can expect to receive an offer or two to be a big boss elsewhere.
The other moral to draw is that Alison Brittain, new-ish Whitbread chief, has heard the City’s lobbying for Costa to be spun off as an independent company and decided to ignore it. If it were otherwise, Rogers would presumably hang around to lead the liberation.
If demerger is off the agenda, Brittain has done the right thing. The investment bankers’ theory that Costa is somehow an under-valued or hidden jewel within Whitbread has always seemed half-baked. The idea rests on little more than the observation that Starbucks is a highly valued stock. But Starbucks has already done its international expansion, whereas Costa’s earnings are still dominated by the UK and its Chinese adventure is only just approaching break-even level. They are very different businesses.
Nor is Whitbread a complicated conglomerate. It has only two major moving parts – Costa and the Premier Inn hotel chain – so it shouldn’t be too hard to value. Keep the coffee and only think about demerger in about a decade’s time.
Boardroom pay anomaly
Take your pick: pay for chief executives of FTSE 100 companies is flatlining in an admirable display of boardroom restraint; or else the 20-year trend of rewards outstripping inflation continues unabated.
The first view comes from consultants PwC, which reckons that total pay – salary, bonus, long-term incentives and pension payments – for chief executives rose 1% last year. The latter analysis comes from the High Pay Centre, which has added up the numbers to reach a figure of 6%.
Why the discrepancy? It may be a simple case of different sample sizes. PwC says it looked at the first 47 remuneration reports of this year from FTSE 100 firms, but the High Pay Centre is further advanced and has studied the first 62 annual reports. On that basis, the 6% figure looks more solid. We should not be surprised.
Of more concern is PwC’s claim that “executive pay is now harder to earn than in the past.” Really? That’s not the way it looks at, say, BP, where even some timorous fund managers are aghast that chief executive Bob Dudley could collect $19.6m (£13.8m) in a loss-making year when thousands lost their jobs . A few fund managers may even vote against BP’s pay report on Thursday – but, note, the poll is purely advisory. Come on, PwC, life hasn’t changed terribly much.
source: http://www.theguardian.com