City’s old rules were there for a reason

The things that happen on some stock markets. Look at this: a board turns down a higher cash bid to sell a business to the company’s biggest investor, a chap with a 27.2 per cent stake. Worse, its chairman and the top shareholder are former colleagues from another group. Even worse, the other owners, holding 72.8 per cent, don’t even get a vote on the deal. Naturally, you think, it couldn’t happen here. Except it just has — and all perfectly legitimately, too, under the Financial Conduct Authority’s new listing rules, introduced at the end of July. In selling the Topshop and Topman brands, the fast-fashion group Asos has made itself an early test of the new regulations for related-party transactions — if regulations is the right word, given almost none remain. All that was required for this deal to happen was board approval and “an opinion from a sponsor”, in this case JP Morgan Cazenove, that “the transaction is fair and reasonable”. A quick recap. Asos, which is chaired by Jorgen Lindemann, agreed to sell a 75 per cent stake in the brands for £135 million to Heartland, a business owned by the family of Anders Holch Povlsen, the Danish billionaire who doubles up as the fashion outfit’s largest shareholder. The deal valued the brands at £180 million. But in doing so, as The Sunday Times disclosed, Lindemann turned down a joint cash bid at £215.5 million from its rival Shein and America’s Authentic Brands Group. The board’s preference was Povlsen, who was also an ex-colleague of Lindemann three years ago when they were both non-execs at Zalando, the German online fashion retailer. True, in this case, Asos’s other shareholders seemed anything but fussed. Even if they didn’t know about the rival bid, there was logic in selling to Povlsen, the owner of the retailer Bestseller, with 2,700 stores in 32 countries, in the hope that he’d find a way to rekindle Topshop’s old Kate Moss magic. Do that and Asos would benefit, thanks to its remaining stake — 22.5 per cent, due to other complexities of the deal. Better that, maybe, than cashing out to a China-founded wannabe float candidate and Authentic Brands, whose exploits with Ted Baker saw that business go bust. Besides, when Asos unveiled its Top Shop sale, alongside a crucial debt refinancing, the shares shot up 18 per cent to 434p. Even so, anyone can see the potential problems here. A deal has been done that, in the wrong hands, could be ridiculously cosy: an asset sold at an apparent knockdown price to a dominant shareholder without other investors having any say. True, the old rules did not always stop abuse of related-party deals, as the Bakrie family proved at miner Bumi. Neither did an investor vote prevent the Playtech founder Teddy Sagi selling his own, arguably overpriced, businesses to the group, before removing £800 million cash.
Yet it’s less than a year ago that Hipgnosis investors were saved by the former rules. Luckily, they got a vote on the board’s conflict-ridden $440 million catalogue sale that had been signed off by its advisers. The result? They voted it down by 84 per cent and cleared out the directors — en route to landing a £1.27 billion takeover. The FCA’s related-party rule change is all part of its efforts to make London a more attractive market. But when it canvassed opinion among key parties over the shareholder vote, it was notable that 15 out of 26 “objected” to plans to axe it, rightly saying it “served as a check on the board and enabled shareholders to protect value”. The FCA went ahead anyway. The Asos deal is no cause for alarm. But next time investors may not be so lucky.
Last time Centamin was on the receiving end of a bid, the goldminer gave it the full Sir David Attenborough treatment: “Board of Cheetah unanimously rejects Elephant’s proposal.” It stuck out a statement, complete with codenames, detailing why it had told the pachyderm Endeavour Mining and its since-sacked boss Sébastien de Montessus, to shove off. In the end, Endeavour pulled 2019’s £1.5 billion tilt anyway. This time, the Cheetah’s far more game. The Centamin board, chaired by James Rutherford, can see “compelling … strategic merits” in bunking up with the bigger suitor AngloGold Ashanti — via an agreed £1.9 billion cash-and-shares offer, worth 163p a share when the deal was struck. It’s not that hard to see why. The deal brings AngloGold Centamin’s Sukari goldmine in Egypt, a tier one, low-cost, cash-producing asset that’s been top of the list for Alberto Calderon, the AngloGold boss, for a while. But for Centamin, the takeover also delivers an upfront 36.7 per cent premium, plus the chance for its investors to become part of a bigger miner, with 16.4 per cent of the merged group. Most of the offer is in AngloGold paper: 0.06983 new shares plus $0.125 in cash (or an implied $147 million) for each of Centamin’s. As such, neither side is taking a punt on a glittering gold price, even if Calderon is astutely making use of AngloGold paper when it’s near a record high. Centamin shares leapt 23 per cent to 147p as merger arbs switched out of AngloGold, whose New York-listed stock fell 6 per cent to $27. No need for the Cheetah to get its claws into this deal.
Call it the luck of the Irish. Lose a court case and see Apple pay the nation €13 billion. The saga of the iPhone maker’s tax arrangements in Ireland, where it’s said to have paid a sub-1 per cent rate, was always more than what the Apple boss Tim Cook called “total political crap”. But, given the EU’s legal flip-flopping since 2016, how is any multinational supposed to know where it stands?