Bussiness View: After the invasion, they'll be sounding a retreat from the Square Mile
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Your support makes all the difference.On Tuesday the FTSE 100 closed at 3,452 and oil was at $33.30. By Wednesday the stock market was down to 3,287 while oil spiked at over $38. By Friday oil had slithered to just over $30 and the FTSE was back up over 3,600.
All this and the war hasn't even begun.
There is a strange mood in the City at the moment. It is a mixture of a fear of the unknown and an inertia that has been caused by the constant beating of the drums of war. As these intensify, it is a brave investor who puts money into the market, not least because of the political uncertainty caused by the rift in the Cabinet. Clare Short's famous comments about renationalisation led UBS Warburg to cut the price of the Railtrack – and she wasn't even in power then. Her comments last Sunday about Tony Blair were a contributing factor to the early-week malaise in the Square Mile.
The market has not looked so cheap for nearly half a century. But is it cheap for a reason?
The people who should know don't think so. I went to the PLC awards dinner on Thursday and the talk among the bosses of smaller quoted companies was less about war and poor economic prospects, and more about how undervalued people's businesses were and whether they should do a management buyout. I have said before that a tidal wave of public-to-privates is about to engulf the market. Once the Iraq crisis is out of the way, it will be the dominant theme in the City this year.
Stay on the shelfOne small distraction from the Baghdad beat will be the supermarket shuffle. Towards the end of the week, Patricia Hewitt will decide which of the five remaining suitors for Safeway will have to submit their plans to the Competition Commission. Unless the Trade Secretary has had a mad moment, Asda, J Sainsbury and Tesco will all be sent for further scrutiny. Wm Morrison is harder to call. There is quite an argument for letting it through, not least because it would be very hard to argue for Philip Green's bid approach to be referred (overlaps between Safeway and Bhs in sandwiches, perhaps, or the old "too much leverage in the bid" get-out). You could see how the regulators might not want to give Mr Green and his cost-cutters a free run at Safeway.
If Morrisons avoids a referral, it will stuff up to a billion of cash into its offer and put pressure on the rest. If Mr Green gets approval, the expectation is he will make a £3bn cash bid, but the suspicion is that he hasn't got the backing from his bankers yet.
Even if both get clearance, shareholders have little to gain by accepting the bids now. If the Commission does not put too many restrictions on a takeover by Asda or Sainsbury's (Tesco has no chance), they could put anything up to £3.5bn on the table.
My guess is that Mr Green will not make a bid. That Morrisons will rekindle its friendship with Sainsbury's and the two will make a joint bid to carve up Safeway. And that Asda will have to pay a pretty penny if it is going to beat them.
Don't sell now.
What's Diamond worth?Talking of Sainsbury's, Derek Higgs may think that with friends like Sir Peter Davis, he doesn't need enemies. The plan for Sir Peter to be chairman of Sainsbury's drives a coach and horses through the Higgs proposals and is a little embarrassing for Lord Sainsbury, the DTI minister who is still a major shareholder in the family business (though the stock is now held in a trust which he can't influence).
No surprise that Sir Peter declined the invitation to spearhead this corporate governance review and passed it on to his old mucker from the Pru. At Barclays, they are considering a similar move with Matt Barrett moving up to chairman. There might be a bit more of a case to make an exception at the bank, were it not for the other curious governance issue that Barclays has yet to address.
Bob Diamond, the boss of Barclays Capital, is seen as Mr Barrett's likely successor. But despite the importance of his current job, he is not on the main board. Is this an oversight? Surely not. Maybe it is because Mr Diamond is so highly paid (the rumour is up to £14m a year) that it would be embarrassing to disclose his income.
I'm sure Mr Diamond would make a very good chief executive of Barclays. But can he afford the pay cut?
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