CMA launches investigation into £2.5bn Barratt-Redrow merger
The competition watchdog has launched a formal investigation into the £2.5bn tie-up between Barratt and rival housebuilder Redrow, the agency announced this morning.
The Competition and Markets Authority (CMA) said it will decide on whether to refer the housebuilding merger for a phase two investigation by early August.
The newly merged group would be expected to build about 23,000 homes a year and make more than £7bn in revenue.
Barratt said in March the deal would create the UK’s largest housebuilder and would help accelerate the “delivery of homes this country needs”.
However, the deal came shortly before the CMA published its review on the UK’s housebuilding sector, which hardly showered the industry with glory.
A Barratt spokesperson said: “We are confident that the combination of Barratt and Redrow is in the best interests of customers and will accelerate the delivery of the homes this country needs. We look forward to working constructively with the CMA as they undertake their review.”
Redrow have been contacted for comment.
This week, it was reported that England’s house building pipeline is at the lowest level since records began 17 years ago, piling pressure on the next government to mend a “deepening housing crisis”.
Ahead of the general election on 4 July, housebuilding has been a major topic of conversation, with Labour’s deputy leader Angela telling City A.M. earlier this month that the party would ramp up housebuilding if it wins the election.
Labour said it invited developers to work in “lock step” with the party to deliver 1.5m new homes over the next five years.
The Conservatives, who according to one poll this week have now fallen behind Nigel Farage’s Reform, pledged to support first time buyers and build 1.6m homes, if they win.
‘Disastrous for the UK’: How the MPs’ pension fund abandoned Britain’s stock market
Jeremy Hunt and Rachel Reeves have been squaring up to the UK’s pension sector in recent months with threats to strong-arm money managers into backing homegrown British companies.
However, data suggests they might do well to start closer to home.
The MPs’ pension fund – the Parliamentary Contributory Pension Fund (PCPF) – which pools MPs’ retirement cash and counts the chair of the Treasury Select Committee Harriet Baldwin among its trustees – has ditched UK equities rapidly over the past seven years.
At its peak in 2017, the fund held £130m in UK equities. However, at the last year-end, this had cratered by 92 per cent to only £10m.
That equity holding represents a 1.3 per cent weighting to UK equities of its total and just 2.3 per cent of its total equity portfolio, meaning the fund has dramatically tilted its allocation towards overseas stock markets, according to Peel Hunt, which analysed the data.
The figures will likely embarrass lawmakers in the UK who have been banging the drum for more domestic investment in Britain in recent years. At his budget in march, the Chancellor Jeremy Hunt outlined plans to force domestic pension funds to disclose the geographic make-up of their investments by 2027 in a bid to boost domestic investment.
However, the figures from the MPs’ pension pot suggest Westminster’s own retirement fund may fall below the average UK allocation.
“This means that not only has the fund sold down its UK holding to a very low level, but also that it is materially underweight vs the UK’s share of global equities,” said Charles Hall, head of research at Peel Hunt.
“In some ways its similar to the Coutts decision to move to a global fund allocation. May work for them but disastrous for the UK!”
Coutts diverted its funds away from the UK earlier this year. Hall added that most MPs would likely be “astounded” to realise how little their pension pots were invested in UK stocks.
Pension investment has become a political football between both parties as Westminster looks to spur a wave of investment into the London Stock Exchange and the UK’s start-ups.
A near £2.5 trillion pool of capital locked up in the funds is seen as a potential game changer in solving London’s public market malaise. After accounting changes in 2000, pension funds have dramatically fled the UK’s stock market in favour of safer bond holdings.
Just four per cent of UK equities is now held by pension funds, down from 39 per cent 20 years ago, according to the think tank New Financial.
In its manifesto yesterday, the Labour Party suggested it would push ahead with the government’s push to shake-up domestic pension investment, something left out of the Tory manifesto.
Last year, the Conservative government coerced ten of the top pension money managers in the City to commit five per cent of their assets to UK growth companies, a move that Rachel Reeves had previously backed.
“Labour is supportive of the direction of travel from the Conservative Mansion House speech – seeking to drive UK pension funds to invest in UK assets – something not mentioned in the Conservative Manifesto,” said Adrian Kennet, director of Dalriada Trustees.
A spokesperson for the House of Commons said:”In common with most large diversified investors, the PCPF has financial exposure to a number of companies, sectors, and geographical locations including the UK.
“The PCPF invests in a wide range of asset classes on a global basis, including illiquid and alternative asset classes. Besides listed equities, the fund invests in a range of productive assets, including a 10 per cent allocation to UK properties and 10 per cent committed capital in infrastructure funds, which include UK investment.”
CAB Payments confirms new boss less than a year after disastrous London float
CAB Payments has confirmed that veteran banker Neeraj Kapur has taken over as its new chief executive after its previous boss quit just months after the fintech’s disastrous London float last year.
The company announced that Kapur had received the necessary regulatory approval and would immediately take over from Bhairav Trivedi, who will remain as a senior adviser to the board.
CAB Payments said Kapur and Trivedi had been working closely together since February to ensure a smooth transition.
Trivedi remains a shareholder of CAB Payments, and his new role will see him “building and strengthening important relationships with central banks, regulators, and current and prospective strategic clients”, the firm said.
The announcement of his departure in February came after Trivedi floated CAB Payments to much fanfare last July at a valuation of £800m.
However, the firm fired out a profit warning in October after it was caught up in a major foreign currency policy shift from the Nigerian central bank, which hammered its revenues and sent shares plummeting.
CAB Payments’ stock price remains down 59 per cent from its IPO.
Kapur served as chief financial officer of Provident Financial, later Vanquis Banking Group, between April 2020 and August 2023.
He was previously CFO of Secure Trust Bank for nine years, listing it on the London Stock Exchange in 2016.
Kapur originally qualified as a chartered accountant in 1992 before entering the banking sector in 2001 with a stint at RBS.
Ann Cairns, CAB Payments’ chair, touted Kapur’s credentials as “an experienced PLC director with the right skills to take the business forward”.
“I took this role because I strongly believe in the purpose of the group and its long-term future especially in delivering international aid throughout hard-to-reach markets,” Kapur added.
“The success of the business to date has been impressive and I am now looking forward to working with my executive team to ensure CAB Payments takes advantage of the unique growth opportunity ahead of it, executing our strategy and delivering our purpose to parts of the world where it is much needed.”
How to be the Gareth Southgate of business
AI is the new star in the boardroom, but as Southgate knows a singular brilliant player doesn’t win a game, says Simon James
This weekend, English football fans everywhere will be going through the usual mixture of tension and hope. Friday marks the start of the 2024 Euros, and another shot at greatness for England for the 17th time asking.
England delivered a major tournament in the final at the delayed 2020 Euros, powered by the guile of Jack Grealish, Bukayo Saka and Declan Rice.
A lot has changed since 2021, both in business and football. And where new faces like Jude Bellingham present potential to become standouts on the pitch, in the boardroom there’s one player who’s already leaving a lasting impression: AI.
But a singular brilliant player does not win a football game. It takes the management of talent and proper implementation of skills to realise a company’s goals and how AI can work within them. If business leaders want to be like Gareth Southgate and manage successfully they need to understand that AI is a team sport. It needs the right coach, the right line-up, in the right moment to deploy the right tactics.
Firstly, AI needs a sound defence. The gap between what we can do and what we should do with people’s data has never been wider. Defence is about trust, and without the right ethical policies, trust is hard-won and easily destroyed. Some companies are so concerned about ethics, that they are appointing Chief Ethics Officers. A Matthias Sammer to patrol the defence and turn it into attack in the blink of an eye by extolling the virtues of an ethical approach to AI in their earnings calls. Others prefer the no-nonsense approach to defence through AI-enhanced governance and risk processes, like deploying Chiellini and Bonucci in the cyber security team.
Secondly, AI needs to score some actual goals. The way to find the back of the net through AI is to figure out where the value can be generated in a business. Automation is one of the lowest risk applications of AI, replacing all those manual, error-prone processes with the highly optimised metronome of a Xavi-style conductor, linking the disparate parts of the business into a well-oiled machine. Getting more on the front foot, AI is great at giving people superpowers, unlocking a level of productivity that was seemingly impossible. This augmentation of the individual, a human-machine hybrid, like Ronaldo in full flight, is the future of the workforce given the ubiquity of AI in the form of Microsoft Co-Pilot.
Finally, AI is great for creating something out of nothing, hence the name generative, and whilst the focus today is on automation and productivity, the real star of the show is innovation. It’s not about just enhancing processes with AI, but capturing the most value, like a Marco van Basten volley. The process of deploying AI generates proprietary data that would not exist, which in turn creates competitive advantage, and insight into the next generation of AI solutions.
AI will not adopt itself – at least not until Artificial General Intelligence (AGI) comes along. Someone needs to play the role of coach. Businesses are trying to determine whether they need to hire a specialist urbane chief AI officer or promote a tracksuit manager from within the ranks.
Given the nascent stage of the lifecycle of AI technology, it’s perhaps not surprising that very few people have been-there-done-that and can show us their medals. It’s clear that for now, there are more caretaker managers than there are grand appointments. But by the time we get to the next World Cup, the teams scoring the AI goals will be the ones that start investing in their all star line-up now.
Simon James is international lead and group VP of data & AI at Publicis Sapient
Nationwide urges members to back tripling of chief’s maximum bonus
Nationwide is urging members to vote in favour of tripling of its chief’s maximum long-term bonus, as the building society looks to bring her remuneration opportunity more in line with its high street rivals.
Chief executive Debbie Crosbie, who joined Nationwide from TSB Bank in June 2022, would see her maximum payout jump to £3.42m from £1.14m under the plans.
Nationwide told its 16m members in letters this week that the potential pay rise was a result of Crosbie’s remuneration opportunity currently sitting “substantially below UK banking peers of a similar size and complexity”.
Under Crosbie’s leadership, the society is poised to grow bigger and more diversified, having agreed to acquire Virgin Money for £2.9bn in March. The potential merger would see Nationwide grow its assets by a third, become the UK’s second-largest mortgages and savings provider, and expand into business banking.
The deal, poised to be the UK’s biggest banking tie-up since the financial crisis, is currently being probed by the Competition and Markets Authority, with an outcome due by 26 July. It also requires approval from the Financial Conduct Authority, Bank of England and courts.
Nationwide said Crosbie could receieve up to £4.8m from the lifting of her maximum long-term bonus to an initial 190 per cent of base pay, with a plan to eventually raise it to 300 per cent.
Members are due to vote on the proposal at Nationwide’s annual meeting on 17 July. Some are calling for members to vote against all resolutions at the AGM after Nationwide chose not to put the Virgin Money deal to a vote among them.
Crosbie was paid £2.41m for the year ending on 4 April. This figure was up from £1.75m a year before, exlcuding a £1.71m “replacement award” to cover the forfeiture of variable pay awards from her role as CEO of TSB.
Under Crosbie, Nationwide has concentrated on championing its mutual status in contrast to the major listed banks. It is set to award £100 directly into the accounts of around 3.9m eligible members this month after reporting another bumper annual profit on the back of higher interest rates.
However, some adverts starring Dominic West were banned by the advertising watchdog in April for misleading consumers that Nationwide would not close brances like its “big bank” rivals.
A Nationwide spokesperson said Crosbie’s maximum bonus would only be paid for outstanding performance.
They added: “Nationwide is systemically important to the UK economy. We want to attract, retain and motivate talented individuals to continue to increase value for members and provide leading customer service.”
Keywords Studios: EQT closes in on £2bn takeover
Videogame developer Keywords Studios has extended a deadline for its takeover by EQT today as the private equity giant puts the final touches to a deal worth more than £2bn.
In a statement to the market this morning, Keywords said it had extended a regulatory deadline until the 28th June to allow EQT to finalise its “confirmatory due diligence” before buying the company.
AIM-listed Keywords has said previously it will likely accept a cash offer for Keywords Studios of 2,550p per share, valuing the firm north of £2bn and a 73 per cent premium on its then trading price.
The deal will strike another blow to the London Stock Exchange after a torrent of takeovers in the opening half of the year.
Dublin-based Keywords has swelled to become one of the biggest companies on London’s junior AIM market by providing services to some of the world’s biggest video games, including Assassin’s Creed and Fortnite.
EQT had previously made four unsolicited proposals for Keywords, all of which were rejected by the company’s board. The current figure represents a significant increase from the initial proposal, it said previously.
The Keywords board concluded that it “would be minded to recommend” the proposal to the company’s shareholders, the statement last month said.
Harworth Group: Green light for logistics hub at major Northern rail interchange
Property developer Harworth Group has been given the green light to build a 1.5 million sq ft industrial and logistics hub.
The London-listed developer secured a resolution to grant planning permission from North Yorkshire Council to create seven units on the Gascoigne Interchange in a move the firm said has the potential to deliver up to £190m in gross development value.
The brownfield site is situated in Selby, to the east of Leeds and adjacent to Sherburn Industrial Estate.
Lynda Shillaw, chief executive at Harworth, said: “Our development at Gascoigne Interchange is another example of Harworth’s unique ability to identify, acquire and transform brownfield sites to generate value, create jobs and increase investment in the region.
“This development complements our extensive pipeline of industrial and logistics sites and we continue to see high demand for high-specification strategically-connected grade A industrial space.”
Harworth Group made a return to profitability during the last financial year, reporting operating profits of £54.2m in 2023, up from £44.5m the year before, but still down on £121.9m in 2021.
The firm said it had developed 193,000 sq ft of industrial and logistics space during the period and had a remaining pipeline of 37.7m sqft as it described growth in market rents.
Shillaw said continued uncertainty in the market was likely to weigh on businesses for some time yet, particularly in the case of house buyer confidence.
Across the commercial market she said the drivers of demand were still intact though Harworth would focus on de-risking its activity by focusing on pre-let and build-to-suit opportunities, as well as land sales.
Bankers fired for ‘simulating’ being at their keyboards
Wall Street bank Wells Fargo has fired more than a dozen employees for allegedly faking being at their keyboards, as financial firms crack down on non-compliance among hybrid workers.
The bank said it dismissed the staff last month “after review of allegations involving simulation of keyboard activity creating impression of active work”, according to filings with the US Financial Industry Regulatory Authority (Finra).
The staff were all employed in Wells Fargo’s investment and wealth management divisions, with many having joined within the last two years. At least one had worked for the lender for more than seven years.
“Wells Fargo holds employees to the highest standards and does not tolerate unethical behavior,” a spokesperson for the bank commented.
It is not clear from the Finra filings what techniques the staff had used to allegedly fake work. As working from home grew more popular during the Covid-19 pandemic, devices like “mouse jigglers” boomed in popularity, designed to fool bosses into thinking staff are actively working when they are not.
Finra recently reinstated workplace rules that were loosened during the pandemic that some have warned would force firms to inspect staff’s home office set-ups and put a strain on hybrid working arrangements.
Last month, Barclays and Citigroup told hundreds of workers they would have to come into the office five days a week from June, in response to Finra’s regulations that they said would make it more difficult for them to keep remote workers.
Wall Street firms have been among the most aggressive in ordering staff back to the office. Wells Fargo moved slower than the likes of JPMorgan Chase and Goldman Sachs, although it now expects most staff to be in the office for at least three days per week.
In January, Bank of America sent “letters of education” to employees threatening disciplinary action if they didn’t clock a minimum number of days in the office.
Global Ports Holding: Record number of cruise passengers heading to Norway
One of the world’s largest cruise port operator, Global Ports Holding, has seen a record number of cruise ship passengers pass through its hubs, with visitors to Malta and Italy outstripping their pre-pandemic levels
More than 13.4 million people passed through ports operated by the London-listed firm in the 12 months ending March 31, 2024, up from just over nine million in the year before.
Its central Mediterranean and Northern Europe hubs, which include Malta, Italy and Norway did particularly well, with passenger numbers hitting 1.7 million – an increase of 69 per cent on the previous period.
Visitors to Global Ports Holding’s American ports also reached new heights as passenger volumes rose 34 per cent to reach 5.8 million, a substantial increase from the 4.4 million recorded in 2023.
The company continued its expansion in the region by adding two new Caribbean ports in San Juan and Saint Lucia. Although these were added after the reporting period the operator said their performance since has been strong, with Saint Lucia expected to bring in more than 1,000,000 people over the next 12 months.
Despite increased passenger numbers, Global Ports Holding’s total revenue decreased slightly from £2.1m to just under £194m, although adjusted revenue was up 47 per cent to almost £178m.
CEO Mehmet Kutman said:”The 2024 reporting period was one of significant achievement for Global Ports Holding.
“We successfully expanded our cruise port network, completed our largest-ever investment project, and increased our shareholding at a number of key ports.
“In addition, we strengthened our balance sheet through a successful investment-grade-rated issuance of secured private placement notes and extended the concession length at a number of ports.
“We have started the 2024 cruise season strongly and we are well positioned to be a key enabler and beneficiary of the cruise industry’s continued growth and success in the years ahead.”
‘Lessen competition and deter investment’: BT lashes out at Vodafone-Three UK deal
Last June, Vodafone chief executive Margherita Della Valle announced a proposed tie-up of the company’s UK operations with Three UK, a deal she said would be “great for customers, great for the country and great for competition.”
But not everyone agrees with Della Valle and, exactly a year on from that moment, the £15bn merger is still waiting for the Competition and Markets Authority (CMA) to cast the final verdict.
In March this year the watchdog said the proposed tie-up raises concerns for the industry and consumers. It referred the deal to a detailed phase two investigation, a process now expected to last until 12 October at the earliest.
The case against the Vodafone merger
On Thursday, the CMA published 10 responses to an issues statement it had released in May setting out the scope of its inquiry.
Among the letters was a formidable document from telecoms giant BT mounting a 40-page challenge to the deal, which it believes “raises serious competition concerns”.
Vodafone and Three’s rival said the proposed terms will give the merged company a “disproportionate share of capacity and spectrum, unprecedented in UK and Western European mobile markets, which will substantially lessen competition and deter investment.”
It echoes the CMA’s initial findings that the merger poses serious competition concerns, likely leading to higher prices for customers, poorer network quality and fewer incentives to invest.
Unite the Union also welcomed the regulator’s phase two inquiry and said the deal “must be blocked”. It repeated its strong objections that the deal would result in job losses, higher prices, and “further profiteering, without delivering the promised investment”.
The union also raised additional concerns about national security and anti-union activities associated with Three UK’s owner, CK Hutchinson. Vodafone and Three have dismissed these allegations, but the opposition adds to the scrutiny surrounding the deal.
The case for the merger
Some of the responses to the CMA backed the merger. Swedish telecoms company Ericsson argued that it could create a more sustainable market structure, offer returns on digital infrastructure investments and attract more capital into the network.
“Consolidation is broadly seen as a pivotal measure towards helping operators to attain the necessary scale for expanding their future network infrastructure,” Ericsson explained.
One of Vodafone and Three’s key arguments is that their deal is essential for rolling out nationwide 5G standalone networks. Research by independent analytics firm Opensignal said the merger will create “substantially improved” 5G coverage, especially in underserved or remote areas.
The CMA appears to believe Vodafone and Three are capable of continuing their 5G network investments without merging. However, Three UK’s chief executive Robert Finnegan recently described the company’s financial performance as “clearly unsustainable” leading it to halt the geographic expansion of its 5G network.
Another anonymous company, which described itself as an alternative full fibre network provider, said the Vodafone and Three tie-up would lower wholesale prices and help it compete with the likes of EE, VM02 and Sky. This competition could ultimately benefit consumers through lower costs and improved service.
Regulatory temperature check
In February, the European Commission approved the merger of Spanish telcos Orange and MasMovil, but only after significant concessions, including divesting mobile spectrum to a rival to re-balance competition.
Analysts have suggested that Vodafone and Three might face similar conditions to placate the regulator, requiring them to find a third-party buyer for divested assets to keep their plans alive.
Vodafone’s chief Della Valle has said the deal should pass sans any concessions, though CCS Insight analyst Kester Mann suggested this is likely just part of a negotiation strategy.
She may also consider that such a requirement would undermine too much of what the deal aims to achieve, said Mann. Like many in the industry, he believes that the merger would drive greater investment and competition, “subject to a more even allocation of mobile spectrum”.
The position of the notoriously inscrutable CMA remains a big uncertainty. Mann said it is “hard to gauge” the watchdog’s temperature, especially after its initial resistance to the £54bn Microsoft-Activision Blizzard merger diverged from approvals by US and EU counterparts.
The CMA “was always going to be the toughest nut to crack,” he added. Another analyst recently told City A.M. the pendulum could swing in either direction, so contentious is the deal.
Realistically, the merger’s approval will likely hinge on the remedies stipulated by the CMA and the extent to which Vodafone and Three are willing to compromise.