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Are UK boards too hot to sell the company?

Are UK boards too hot to sell the company?


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Stuart Chambers is on the verge of achieving an unusual feat in British business by taking on the sale of three large London-listed companies to foreign buyers.

He was chairman of chip designer Arm Holdings when it was acquired by Japan's Softbank for $32 billion in 2016. Chambers also held the same position at consumer goods packaging company Rexam when it was acquired by US beverage can manufacturer Ball Corporation in 2015. The American, now chairman of Anglo, is handling Australia's BHP's attempt to take over the London-listed miner.

The bid appears to be in trouble after Anglo rejected BHP's revised 34 billion offer for the company. If BHP fails, others may step in. But Chambers nevertheless faced criticism that he and other British commissioners were too zealous to sell the British company.

This year's bids for London-listed companies hit their highest since 2018, but is that really fair? And more broadly, does such a sale mean failure? So who is it for – the board, the shareholders or the state?

Several FTSE chairs have pointed out to me that, rather than taking an ideological or nationalist view, they have an obligation to support a deal if it provides more value to shareholders than maintaining independence.

Chambers protects his records and says he has a fiduciary duty. There is no way to thwart the collective will of shareholders to sell. That doesn't happen just on the whim of one individual. He added that the higher-priced deal was rejected by SoftBank three times before it was approved by shareholders.

Stuart Chambers (right), Masayoshi Son Niklas Hallen/AFP/Getty Images

At the same time, it is surprising how quickly many city investment funds are willing to back potential acquisitions, according to one former FTSE chairman. In my experience, many people are too intent on running away with their money, he said. As a result, the UK often develops intellectual property and builds businesses to a certain scale so that foreign buyers can invest in scaling the company without taking on upfront risk.

One or two may not matter, but the UK's steady stream of departures is cause for concern. Among the deals agreed this year alone are US private equity firm Thoma Bravos' $4.3 billion acquisition of cybersecurity company Darktrace and International Papers' $7.8 billion acquisition of paper and packaging group DS Smith.

Of course, shareholder profits can be reinvested in other companies and the openness to trading makes London a more attractive place to list. But much has changed since former British Prime Minister Philip Hammond declared the arms sale was a huge vote of confidence in British business.

Such a deal is unlikely to happen in the current environment, where geopolitical tensions and supply chain shocks have forced governments to become more interventionist in protecting strategic interests such as semiconductors.

The problem is that it is not entirely clear what the UK government currently believes is worth protecting. It prevented the Daily Telegraph newspaper from falling into the hands of UAE-backed company RedBird IMI, but it has become more accepting of the possibility of Royal Mail being sold to Czech billionaire Daniel Ketnsk.

What needs to be addressed are the underlying reasons why corporate executives and boards feel it is in the interest of UK businesses to transition to another market, either through a sale or a change of listing location, in order to realize the full value of the business. Business ideas are valuable, but taking risks is not. Superstar talent is sought out but bumper pay packages are shunned. At the same time, if the government wants to stem the flow of UK takeovers, it needs to be clearer what the ground rules are.

We need to start with absolute clarity about what our core assets and interests are, said Paul Drechsler, president of the International Chamber of Commerce, citing industries worth intervening from defense and automotive to higher education. What are the areas where the UK is looking to build on its strengths? We must say from the beginning where we stand. Are these industries important to the UK? Or what is Britain's place, role and intentions in the world?

It is not up to the board of directors or shareholders to decide these matters. That is the role of government.

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