Morrisons was late to the convenience store game, then paid too much for shops in poor locations after Tesco and Sainsbury’s had spent a decade grabbing the prime pitches. That, roughly speaking, is how Morrisons’ 140 local M stores recorded an operating loss of £36m last year.
In the circumstances, you can understand why the new-broom chief executive, David Potts, has ordered an exit. Even so, the price looks poor – just £25m. Morrisons hasn’t even been able to wave a clean goodbye to the leases, which will revert should the business fail under its new owners.
One wishes the buyers – Greybull Capital, backing the “retail entrepreneur” Mike Greene – success, naturally. But they would do everybody a favour if they explained why they think they can prosper without Morrisons’ buying clout.
It would also be polite to explain how the deal is funded. Is Greybull putting up capital that is at risk? Or is this another example from retail-land of rescuers making themselves secured creditors of the business they are buying?
It’s an important question after Comet’s rapid passage from buyout to administration a couple of years ago. Greybull, incidentally, was a junior backer of that Comet deal, which was led by private investment firm OpCapita.
Morrisons, as a grown-up FTSE 100 company, should have ensured the financing question was answered plainly at the outset. It’s one thing for Potts to thank staff for their “hard work and dedication to M local”. But he could have expressed his gratitude by insisting that those staff who choose to transfer were told how their new employer is funding the deal.
Bank code cracking
It rather looks like it, after Habgood told the Treasury select committee yesterday that the Bank’s governing body would review the codes of conduct for policy makers in light of the controversy around Gertjan Vlieghe, an incoming member of the monetary policy committee. Carney, by contrast, told the committee this month that the codes are right in their present form.
Vlieghe, arriving from Brevan Howard, had intended to keep his financial interest in the hedge fund, prompting questions about conflicts of interest. In the event, Brevan Howard quickly defused the row by buying out Vlieghe’s rights – a sensible response. But the process looked clumsy and unscripted, which is not how appointments to the Bank should work.
Carney has worries about the Bank’s ability to recruit talent, but Habgood is right to order a review. Perceptions matter, and the Bank was caught on the hop by the Vlieghe episode.
Anglo sale credit
Anglo American’s share price has plunged in the past year and half the City expects the dividend to be cut, but the chief executive, Mark Cutifani, deserves credit for agreeing a deal that many thought would prove beyond him – a sale of the loss-making platinum mines in Rustenburg in South Africa.
This disposal is tiny in the context of Anglo American’s $12bn (£8bn) of debt. The group will receive just 1.5bn rand (£72m) up front by selling to local oufit Sibanye Gold, with at least R3bn to follow over several years, all being well.
But the small pricetag doesn’t reflect the effort to get the mines to a position where a credible buyer might appear. About a third of the workforce has been shed since 2012, no easy task in the politically heated and strike-prone South African mining industry. Nor could Anglo simply have avoided a restructuring, and dodged platinum’s current horrible economics, by giving the mines away: the company still has too many assets in South Africa, including in platinum, to play fast and loose.
Several political hurdles have to be cleared but Sibanye, spun out of Gold Fields in 2013 and listed in Johannesburg, clearly qualifies as a respectable purchaser. Anglo’s shares, despite rising 5% yesterday, are still close to their lowest levels for 13 years, but management credibility gets a boost from this deal.
Sports Direct hold-outs
A near-30% rebellion by independent shareholders against the reappointment of Keith Hellawell as chairman of Sports Direct counts as chunky but it’s a safe bet that nothing will come of it. A majority is a majority, Hellawell and Mike Ashley, Sports Direct’s founder and majority-owner, can fairly reflect.
But who are these two out of three independent shareholders who think the standard of boardroom governance at Sports Direct is just fine? For all the reasons described here yesterday (the company’s punt on Tesco shares; the 18 months without a finance director; the change in bonus targets, etc), the company’s lineup of non-executives is surely crying out for an overhaul.
Legal & General announced that it had joined Royal London in voting against Hellawell. Well done. Now would those mainstream pension fund managers in the other camp – but presumably signed up to the same codes promoting good stewardship – please explain their thinking?
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