Here we go again, get ready for another episode of Barclays’ adventures in the heart-stopping world of investment banking.
This show has been running for a quarter of a century, mostly to negative reviews, and John McFarlane is the latest chairman to believe he can learn from his predecessors’ mistakes.
On the face of it, Jes Staley, a 30-year veteran of JP Morgan, sounds a plausible pick as chief executive. Not all American investment bankers are alike and Staley’s style sounds the opposite of Bob Diamond’s brash approach (though one assumes the new man will want to be paid the traditional megabucks).
But McFarlane would do his shareholders a service if he set out a few principles at the outset. If you hire an investment banker as boss, you clearly want to do some investment banking. How big does Barclays want to be in the field?
Back in July, at the interim figures, McFarlane said “it’s not our obligation” to build a European champion to compete with the big Wall Street firms, but lately he’s been suggesting it would be a fine thing if somebody accepted the challenge. European regulators and politicians, runs this argument, should take another look at the capital and bonus restrictions that have created a playing field which favours the Americans.
But what if regulators won’t cooperate? Would Barclays sell its investment bank (the US bank Wells Fargo is the perennial name suggested) or would it carry on regardless in the hope that favourable winds will appear one day?
The strategy is unclear, just as it was under the deposed chief executive Antony Jenkins. The intended appointment of a successor with no experience in retail banking adds to the confusion.
AB InBev deal is bitter for beer fans
In the end, Jan du Plessis folded in the limp manner of most big company chairmen. The board he leads at SABMiller has accepted Anheuser-Busch InBev’s £44-a-share offer, a price about £2 short of an honourable surrender.
So much for the idea that last week’s offer of £42.15 was a “very substantial undervaluation.” Du Plessis’s words were tactical bluster. A bump of a mere 4.4% will pave the way for the monopolistic Megabrew to come into being, enough to make self-respecting drinkers gulp something stronger than a bottle of the bidder’s bland Budweiser.
It is possible, of course, to sympathise with the position du Plessis found himself in. His 27% shareholder, the Marlboro cigarette firm Altria, was lobbying for the deal from the off and liked AB InBev’s tax-friendly share alternative. The San Domingo family from Colombia stayed loyal but its 14% stake was an inadequate counterweight.
Many of the floating voters in the middle – unsentimental City fund managers eyeing their end-of-year performance statistics – didn’t want the deal to collapse. They, like everyone else, can see that currencies, especially the South African rand, have moved against SAB. Sadly, they will regard £44, plus a dividend that could be worth 80p a share, as a tidy outcome. And a $3bn (£2bn) break-fee, to be paid if AB InBev walks away before completion, is undoubtedly chunky.
Here, though, we take an old-fashioned view of a chairman’s responsibilities. Big shareholders’ views have to be respected, but a chairman is not there to be an echo. Du Plessis could have offered his own view of the wisdom of a deal that offers nothing for SAB’s employees, customers and suppliers. He could have forced AB InBev to come clean on the extent of its cost-cutting ambitions. And even if Altria was a lost cause, he could have appealed for greater loyalty from other long-term shareholders who have done superbly over the years by owning SAB stock.
Instead, du Plessis and co have bowed before a takeover premium that is not as pretty as its 50% headline suggests (it is more like 33% if you take the three-month average of SAB’s share price before AB InBev made its first move). The board has done what the City expected, in other words. No wonder the announcement from SAB didn’t even try to argue that a takeover is good for staff or beer drinkers. The short answer is that it’s not.
Post-haste over Royal Mail shares
Farewell, then, to the state’s last shares in Royal Mail. We got 455p a pop for the last 13% parcel, which looks good against the 330p privatisation price from 2013, but not so clever when you remember that 600p was seen briefly in early 2014. Perfect timing is impossible, of course, but remember the explanation the previous government gave for declining to exploit the initial “froth” in the share price: it was because the state intended to be a supportive long-term minority investor. That was an expensive statement.
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