The UK’s vote to leave the EU was seen by some Brexiteers as a chance to reclaim the country’s borders, draw up a new fortress UK, as well as make a protest vote against the rise in inequality after the financial crisis.
But in the investment markets, the drawbridge has already been lowered. Thanks to sterling’s rapid fall, international billionaires and sophisticated companies have been given a rare opportunity to pick and choose which British assets to raid.
So far it is the Japanese, Chinese and South Africans that have proved the most opportunistic in a post-Brexit world, but American buyers could cross the moat too.
“I think there will be more opportunistic deals, particularly from overseas buyers. We are getting messages from US buyers that they are interested,” Karri Vuori, head of M&A at Panmure Gordon, told CNBC last week.
Japanese multinational SoftBank’s $32bn all-cash offer for Arm Holdings yesterday is the third offer for a big-name UK asset since the Brexit vote. Many would consider Arm a prized asset because of its unique technology. Its long lusted-after international property has become cheaper, with a 30 per cent fall in the pound to the yen in the past year.
China’s richest man, Wang Jianlin, also knows a bargain when he sees one and I’m not referring to his £80m purchase last year of a 10-bedroom mansion in Kensington Palace Gardens. The Chinese billionaire, well-versed on the UK landscape, was quick to set the mergers and acquisitions team to work at AMC Entertainment, owned by his Chinese conglomerate Dalian Wanda, which swooped on Odeon & UCI Cinema Group last week, forking out £921m. AMC’s chief executive, Adam Aron, admitted that it was the cheaper currency that gave the group a window in on the British market and described the purchase as a once-in-a-generation opportunity to acquire Europe’s leading cinema chain.
Strangely Brexit and the sale of Odeon and UCI Cinema Group has been a huge win for Justin King, the former boss of Sainsbury’s and a strong Remain supporter. King was charged with flogging the asset at Terra Firma in his first major gig since departing the supermarket giant. Despite warning about a catastrophic impact on the consumer under Brexit, the result has been positive for King’s personal fortunes and his reputation as a deal-maker.
Highlighting the shifting sands, South African retailer Steinhoff faced stiff competition for UK assets earlier this year when it lost out to Sainsbury’s for Home Retail and its prized asset Argos. But all good things come to those who wait. Steinhoff has been dealt better cards since 23 June, snapping up discounter Poundland. Uncertain times on the high street, predictions of a recession and continued strong competition on the high street, all while Poundland struggles after buying rival 99p Stores, made the board nervous enough to agree to an all cash offer of 222p a share, just 22p above its IPO price of 200p two years ago.
“I don’t think there is going to be a counter bid for this,” said Vuori.
He added that, even while Steinhoff is paying a 40 per cent premium, it has a significant cushion with sterling down about 15 per cent to the rand since Steinhoff first circled Poundland before the vote to leave the EU.
These opportunistic deals may signal the beginning of a raid by overseas buyers on UK assets. Boards and deal-makers, mindful of the chance of at least a technical downturn and an outflow of capital from the UK, may be much quicker to engage and settle in a world with fewer buyers.
New UK chancellor Philip Hammond is pleased assets here are still alluring. Perhaps another take on this is that the family silverware is now being sold on the cheap to wealthy overseas buyers. I don’t recall this being highlighted by the Brexiteers.