Mark Kleinman: Telling Sid is a risk for Hunt’s Natwest sale
Mark Kleinman is Sky News’ City Editor and is the man that gets the City talking in his weekly City PM column. This week he tackles WeWork’s collapse, Alison Rose’s battle with the ICO and the Nationwide ad that’s infuriated other banks
It’s only taken 15 years, but Sid finally looks like he’s about to be told. Jeremy Hunt’s channelling of the Thatcherite privatisation campaigns of the 1980s, as he flagged a potential retail offering of part of the state’s NatWest Group shareholding, was the most surprising element of a varied but predictably politicised autumn statement.
It isn’t hard to discern the logic in the chancellor’s thinking: provide a fillip to moribund UK equity markets by cultivating a new generation of stock market investors, while simultaneously taking a further step towards returning NatWest to full private ownership.
A retail offering would, the Treasury said, be subject to value-for-money considerations and market conditions, but Hunt’s anticipated timetable of the next 12 months suggests he believes there may be some political benefit to a share sale structured in this way. With an election at the end of that year-long window, you can be sure that value-for-money concerns might not be quite as rigorously tested as taxpayers might want.
That’s not to say that a retail offering is without political risk for Hunt. A skinny discount to the prevailing NatWest share price is unlikely to deliver much of a feelgood factor at the moment the Conservatives will need it most – in the polling stations. Indeed, any exogenous shock – or, heaven forbid, another brush with Nigel Farage – might leave participating investors underwater, which would be a political disaster for the Tories.
That suggests a much larger discount will be needed if punters are going to be persuaded to invest in a stock they can already buy in the usual way.
More sensible (albeit not from the perspective of the public purse) if Hunt wants to foment a share-owning democracy would be to give a chunk of the NatWest stake away for free. Handing Britons a small slice of the state-owned stock might cost Hunt £2.5bn, but it could yield lasting benefits for British business.
The government’s 39% stake is currently worth in the region of £7bn. A £2.5bn giveaway might involve roughly 15% of NatWest shares. Getting shot of this perennially troublesome investment for the government won’t be achievable before the country goes to the polls, but Hunt’s belief that there’s enough time to make a major dent in it will be sorely tested.
Sale may be best way to end this sorry Saga
What an apt name Saga has turned out to be; despite myriad corporate pivots, capital-raisings and changes of leadership over many years, the company’s balance sheet is still in a mess.
The latest management overhaul, announced this week, sees Euan Sutherland exiting as chief executive. Under his stewardship, Saga’s shares have fallen from 720p on the day he joined in January 2020 to around 115-120p at the start of this month.
That comparison isn’t quite like-for-like, because of a share consolidation which has taken place since then. Nevertheless, the company’s market capitalisation now stands at around £175m, even as the company groans under more than £650m of net borrowings. It’s lucky Saga’s two cruise ships aren’t laden with that debt-pile or they wouldn’t remain afloat for very long.
“What an apt name Saga has turned out to be…the company’s balance sheet is still in a mess.”
Its board, as I reported this week, has now instructed Lazard to review its refinancing options, and come up with clever new ways to shore up its balance sheet ahead of a £150m bond repayment due next May.
The most logical answer would be to revive the sale of its insurance underwriting arm, a process it pulled earlier this year as its board cited a material shortfall in value because of underlying conditions in the motor insurance market.
Saga’s board, chaired by Roger De Haan, looks boxed in, however, so relaunching an auction looks likely the least unpalatable of the options available to it.
Another, I’m told, would be to extend the borrowings secured against the Spirit of Adventure and Spirit of Destiny, its two ocean-going vessels.
With hindsight, the decision to reject a takeover bid for the company in 2020 has increasingly looked like a mistake. Shopping it around and removing it from the glare of public markets as it restructures might yet be the optimal way to end this particular Saga.
Buckland joins Tories’ moves to light fire under regulators
Economic regulators, beware. Bim Afolami, the new City minister, might only get a year in his job (which would make him a veteran by the standards of, say, the Truss administration) but he’s already making strides by moving to light a fire under industry watchdogs including the Financial Reporting Council, Ofcom and Ofgem.
Among the groups pressing for such a shift has been the Regulatory Reform Group (RRG), a coalition of private sector companies and parliamentarians – and chaired until his arrival at the Treasury by Afolami.
I understand that the RRG plans to name Robert Buckland, the former Welsh secretary who also had a spell at the Ministry of Justice, as his successor.
Kemi Badenoch, the business and trade secretary, has signalled her desire to reorient the UK’s economic regulators towards a growth objective. With Afolami joining the party, and Buckland about to do the same, don’t be surprised if you hear more about the RRG in the race towards the general election.