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Among the strangest aspects of the deal signed by Czech billionaire Daniel Kretinsky with the Government and Royal Mail is the use of a “golden share”.
These actions protect strategic assets from foreign marauders. Among FTSE 100 companies, Rolls-Royce and BAE enjoyed this protection.
It has been argued that gold stocks depress the market value of assets because they make companies complacent and bid-proof.
Anyone connected to ‘Turbo’ Tufan Erginbilgic’s leadership at Rolls-Royce knows that is not the case.
Its transformation has allowed shares to double during the last year.
Business Secretary Jonathan Reynolds’ deployment of gold stock into Royal Mail amounts to a stunt designed to deliver a bad deal for Britain, citizens and shareholders.
Golden boy: Czech billionaire Daniel Kretinsky has been given the green light to buy Royal Mail in a £5.3bn deal
Instead of using the gold stock to protect a vital strategic asset from looting abroad, it is being used to catapult Kretinsky into the driver’s seat.
A new gold share will be created that will force the Czech tycoon to keep the Royal Mail headquarters in Great Britain and pay his taxes here. Headquarters are the first thing to be destroyed in acquisitions.
There are questions about how robust such a requirement is.
The headquarters of British technology champion Arm remains in Cambridge. But command and control rested with its largest shareholder, Softbank in Tokyo.
A UK income system, which favors debt over equity, will allow Kretinsky and his team to offset a large interest rate obligation, in a highly leveraged deal, with taxes.
Even more discouraging, if the sale of Royal Mail goes horribly wrong, is that the taxpayer could be left exposed. The gold share must be returned to the sender.
Housing problem
Fixing the foundations has involved Labor resolving outstanding issues left by previous administrations.
The latest deal to emerge from the embers of the past is military housing. In 1996 it was decided that it might be a great idea to sell the squadrons’ property, which amounted to 55,000 homes, to a private equity consortium Annington Property, headed by Guy Hands.
The maintenance contract went elsewhere. As with so many agreements between the public and private sectors, it has not been a marriage made in heaven.
A succession of disputes arose over the deteriorating quality of ‘Annington”s portfolio, as Britain’s diminished fighting forces often lived in substandard housing.
The Ministry of Defense tried to regain control of the estate and the whole matter ended up in court.
Under a truce just reached, the MoD will pay Annington and its investors a whopping £6bn for the renunciation of their 999-year leases on 36,000 housing units and an end to all legal action.
Money that would have been better spent on troops and weapons. The lesson? Don’t mess with private equity magnates.
Latest orders
Diageo has not had the best of times since Texan Debra Crew took over. A blunder in sales and the balance sheet in Latin America was a hard blow.
But Crew will never be forgiven if pubs across the British Isles ran out of Guinness over Christmas. The demand for stout is increasing. Wetherspoons boss Tim Martin threatens Diageo with a ‘stern word’.
I suspect Crew, a former platoon leader in the American campaign in Bosnia, won’t be shaking under his military boots.
