Mark Kleinman: Monzo deal needn’t be a hammer blow for UK tech
Mark Kleinman is Sky News’ City editor and the man who gets the Square Mile talking in his City AM column.
Monzo deal needn’t be a hammer blow for UK tech
Monzo, Oaknorth, Revolut, Starling Bank – the queue of British fintech champions waiting to float in London is fast-disappearing.
The latest to more-or-less evaporate? Monzo, if a mooted takeover by the New York-listed company Nu Holdings, which owns Sao Paulo-based Nubank, takes place.
That’s not a given. As I revealed on Sky News last weekend, talks between the two sides, which could value Monzo at anywhere between £8bn and £10bn, are still at a relatively early stage. Morgan Stanley and Qatayst have been engaged to advise the British company, but it’s safe to assume that a concrete deal remains months away, and could just as easily fall apart.
It’s logical for shareholders to be considering a sale at this juncture, though, with Monzo’s US operation curtailed and immediate expansion ambitions sensibly targeted within Europe.
Its Irish operation is now live and an expansion into Spain is next on the list, which might also be seen as one of the obvious attractions to Nubank, whose existing strongholds in Brazil, Mexico and Colombia have helped it amass a 140 million-strong customer base – not far off ten times that of Monzo.
One crucial question will be the attitude of regulators in the UK to a sale of Monzo to a Brazilian-based parent. Logic dictates that the Prudential Regulation Authority and Financial Conduct Authority would demand some degree of restructuring to give them greater oversight of Monzo’s UK operations, although an already-floated redomiciling would achieve this.
If a sale doesn’t happen, Monzo’s board and shareholders are also considering a more conventional funding round to deliver the proceeds required to fund its international excursions, while a stake sale to a single deep-pocketed private equity investor such as Advent International is also a viable option.
Would an outright sale damage the UK fintech sector? A deal would certainly cement the impression that a British-based scale-up can only grow so far before falling prey to an overseas predator. At the same time, firm commitments from Nubank to, say, establishing an international headquarters in Britain would soften the perception that a takeover is another hammer blow for the UK tech sector.
Burnham’s water policy taps are running dry despite leaks
Like a dripping tap. That might be the best way of summarising the government’s on-the-hoof process for determining policy on the future of the British water industry.
Having flip-flopped relentlessly since taking office over whether Thames Water would be forced into a special administration regime, Andy Burnham’s administration has tasked Angela Eagle, his environment secretary, with drawing up options for the sector.
This week’s speech by the PM at the Labour Party conference, confirmed that regional mayors would have some oversight of companies under his blueprint for the industry – although the details remain lamentably thin.
More than a year on from the rigorous review conducted by Sir Jon Cunliffe, the former Bank of England deputy governor, there is precious little clarity about which of his 88 recommendations will be absorbed by a new Water Act, nor what the shape of the industry’s new regulatory framework will be, nor who will be in charge of it.
How, for example, will the new regional bodies interact with the replacement for Ofwat? How will “greater public control” manifest itself to deliver Burnham’s pledge without saddling taxpayers with an enormous bill? What will a new enforcement regime look like? How will all this be balanced with the need to secure vast amounts of investment?
It’s all very well making keynote speeches labelling an industry as broken – at least half a dozen Labour ministers have done so with water since the party came to power. The critical thing is how the government intends to fix it. Time for Thames Water and other troubled companies in the sector is running out. Ministers might be about to discover that the investor taps can run just as dry as the policy ones.
Fujitsu deal is latest to hit hot pension risk transfer market
It might not quite rival the frenzied investment into anything with AI tagged onto the end of its name, but the unglamorous world of pension risk transfers is just about the hottest area in mainstream finance right now.
Fresh from Apollo-backed Athora’s £5bn purchase of Pension Insurance Corporation last year, Standard Life recently confirmed a £2bn partnership with the private equity behemoth CVC Capital Partners, Goldman Sachs, Prudential Financial and MS&AD.
The latter venture was conceived in response to an overall market opportunity of between £350bn and £550bn of assets in line to be de-risked over the next decade.
Also in the mix are industry giant Rothesay Life and Brookfield Corporation, the Canadian investment giant, which recently acquired Just Retirement Group and installed the City grandee Sir Nigel Wilson as its chairman. Its journey is proving somewhat trickier, as my revelation this week that it’s axing a quarter of its workforce indicates.
One consequence of this PRT feeding frenzy is, of course, likely to be more competitive pricing dynamics. The trend continues unabated though: I understand that Fujitsu, the Japanese technology group at the centre of the Post Office Horizon scandal, has just agreed to offload one of its UK pension schemes – unrelated to the Post Office contract – to PIC. Neither party would comment, but expect plenty more to follow.