What happened to Sir Philip Green’s supposed talent for bullying? The great vote on the restructuring of his Arcadia empire was postponed on Wednesday afternoon because too many landlords were in revolt. He tried pleading personally with the big beasts of the property world, which will have been an unexpected humiliation for him, but got nowhere. Negotiation by brinkmanship doesn’t always work, it seems.
Green now has a week to come up with something new, which means a more generous proposal. It won’t be easy because many of the landlords cannot even be described as floating voters. Talk to members of the hardline no camp and they make two points, both of which carry cold commercial logic.
First, they argue, Arcadia’s proposals, which involve rent cuts of up to 70% on 194 shops, were too extreme. If granted, every other retailer on the same high street or in the same shopping centre would want the same concession. The landlords fondly characterise their stance as an act of fairness to other tenants. What they mean is that they are desperately trying to cling to out-of-date rental levels. They know rents across the market are only heading downwards, but they would rather defer the pain.
That is because of their second argument: if Arcadia were to fall into administration, they argue, that’s not so awful for them. The flagship Topshop/Topman chain, they calculate, would attract a new, and better-capitalised, owner. They’ll take their chances with the other brands, the likes of Dorothy Perkins, Evans and Wallis.
For that crew of landlords, only a better rental proposal is worthy of attention. Green may not be prepared to budge. But, for the waverers, he can try other tactics. Affected landlords are being offered 20% of the proceeds if Arcadia is ever sold. How about making it 40%?
Or, better, inject more up-front equity into Arcadia to demonstrate real commitment to reviving the underinvested business. Under plan A, only £50m of new equity was proposed, a sum that could be lost in the wash given the competition from Asos, Boohoo, Zara et al. Try £100m or more.
Sympathies should lie with Arcadia’s 18,000 staff, the people whose livelihoods are at risk in this stand-off. It is clearly possible that Green could choose the extreme course of bringing down the roof on Arcadia and seeing out his days in Monaco.
But the landlords’ tough line is not unreasonable. They, like everybody else, can see that Big Phil and Lady Tina paid themselves a £1.2bn dividend from Arcadia in 2005 and are still bobbing around the Med on a vast superyacht. If there was ever a moment for landlords to demand more, this is it.
Provident takeover proves a multimillion-pound shambles
The worst-managed hostile bid of modern times? Non-Standard Finance’s attempt to bag the bigger doorstep lender Provident Financial – abandoned in chaotic fashion on Tuesday night – is a strong contender.
The NSF chief executive John van Kuffeler’s first mistake was to believe Neil Woodford was still a force in the land, an iffy assumption even four months ago.
Woodford, demonstrating his fatal obsession with oversized bets on third-tier companies, had big holdings in both bidder and target. Add stakes controlled by co-travellers Invesco, Woodford’s old shop, and the hedge fund Marathon and the bid was supposed to have unstoppable momentum. NSF could boast 50% support before a shot had been fired. Surely other investors in Provident would roll over?
Well, they didn’t. Instead, they resented a perceived attempt by Woodford and co to bounce them into a deal with no takeover premium and little strategic merit. Provident may have been a shockingly poor performer in recent years but a self-help strategy still looked safer than backing Van Kuffeler. He was Provident’s boss in happier days but he had not enriched his shareholders during NSF’s four years as a public company.
When a large chunk of Provident minorities said they wouldn’t accept the terms, NSF was in a pickle. Even with final support of 53%, it would not be able to consolidate its purchase, a flaw that undermined the capital calculations behind the bid. Thus retreat followed. But come on: the possibility that minorities would object was hardly a remote outcome. It should have been considered at the outset.
The net result is that NSF has wasted £10m on its doomed adventure, while Provident has spent £20m defending itself. What a waste of money. As for Woodford, he’s left overexposed to one investment, NSF, that has merely acquired a credibility hole; and he has advertised his lack of trust in Provident, a larger holding in cash terms. What a shambles.
