ALEX BRUMMER: Menzies buyer aims high and illustrates how undervalued shares quoted in London have become
The assault by Kuwait’s National Aviation Services (NAS) on Edinburgh-based competitor John Menzies illustrates how undervalued shares quoted in London have become.
Since NAS began its aggressive pursuit, Menzies’s share price has more than doubled. The stock rose 25pc after NAS, advised by Barclays Capital, decided it had enough of the haggling by spending £70m on buying itself a 13pc stake in the market at 609p, setting a minimum price for a full takeover.
Unlike the board of Morrisons and other recent UK takeover targets, John Menzies is showing a Ukraine-style refusal to buckle amid the smell of cordite. Many will still think of Menzies, with a heritage dating back to 1881, as a distributor of newspapers and magazines.
Since NAS began its aggressive pursuit, Menzies’s share price has more than doubled
In the 1980s it harnessed its logistics skills in a different direction, developing as a serious player in global aviation, providing services from refuelling to baggage handling. It has operations in 200 locations and 37 countries from South Africa to the United States.
Menzies competes with European rivals such as Swissport, which looks to have supplied great swathes of its management, including chairman and chief executive Philipp Joeinig. NAS claims that together it and Menzies will be stronger as they operate in different, non-competing geographies. Britain’s aviation sector has been in the frontline of attacks.
In short order, flight refuelling pioneer Cobham and private jet services provider Signature have fallen into overseas hands and a number of other sensitive technology enterprises including Senior Engineering and Meggitt have been targeted.
Menzies declares on its website ‘safety and security’ at airports are at the heart of all it does. The possibility of a Middle-East buyer, even a friendly one, should make any NAS deal a candidate for scrutiny under the National Security & Investment Act. US regulators may not be disinterested parties either.
In 2006 the Americans refused to sell Eastern Seaboard ports, owned by P&O, to a Dubai-controlled group on national security grounds. A takeover should also be source of concern for Nicola Sturgeon. She will be anxious not to forfeit a listed firm with Edinburgh headquarters.
Standard Chartered chief executive Bill Winters, at the helm for the last seven years, has spent his tenure cutting costs, restoring safety to the balance sheet and escaping the regulatory breaches of predecessors
Standard Chartered kicked off UK bank reporting season but it is hard to draw lessons from its performance. All that it has in common with other British banks is that it is regulated here. This allowed it to write back provisions made to cope with the pandemic. It should also benefit over time from the restoration of interest rate margins as central banks fight back against inflation.
Standard Chartered ought to be a great proxy for global Britain with so much of the business focused in the Pacific, Middle-East and Africa. It doesn’t quite work like that. Chief executive Bill Winters, at the helm for the last seven years, has spent his tenure cutting costs, restoring safety to the balance sheet and escaping the regulatory breaches of predecessors.
As is the case with other British firms with large Pacific operations, Standard Chartered faces tough strategic decisions. The bank’s top brass, in common with HSBC, decided to knuckle down to tighter Chinese control over Hong Kong arguing it would keep pathways open to Beijing.
Indeed, if it is to achieve a new target of 10pc returns by 2024, and be more fully valued, it will need to tap into China’s growth. Similar to other UK firms with a big Hong Kong base, it is suffering from the way in which the authorities have clamped down on movement in and out of the territory, making it perilous to do business.
That should be a critical consideration for the Pru, having decided its next chief executive should be based in the region. Winters might have hoped that a doubling of pre-tax profits to £2.4bn and a share buyback would have excited investors. Instead the shares dropped as it seeks to lift the serial under-performer label.
There are few better examples of disastrous mergers than Reckitt Benckiser’s purchase of baby food giant Mead Johnson for £12bn in 2017. Reckitt’s record of converting basic products into super brands from Cillit Bang to Durex is indisputable. Chief executive Laxman Narasimham has written down the value of Mead Johnson by £8.5bn. Sale of the China arm of the baby food offshoot turned an operating profit of £2.9bn for 2021 into a loss of £804m. Crikey.