Hong Kong stock exchange bid for LSE was least credible of the lot
Blink and you missed it. The Hong Kong stock exchange’s attempt to buy its London counterpart must rank as the most feeble “hostile” bid seen in years. The £32bn approach looked flawed at the outset, was quickly rejected by the London Stock Exchange and has now been dropped a month later.
Trying to justify the failed expedition, Charles Li, the chief executive of Hong Kong Exchanges and Clearing (HKEX), cited a line he attributed to Lewis Carroll in a blogpost: “We only regret the chances we didn’t take.” He would have been closer to the mark if he had said his offer required the LSE’s board and shareholders to imitate the White Queen and believe six impossible things before breakfast.
The shortcomings in the proposal included: the mostly-shares structure; the need for about a year of regulatory scrutiny; the less-than-generous price; and the demand the LSE abandoned its popular (rightly or wrongly) $27bn (£22bn) purchase of the data group Refinitiv. Then there were the obvious Hong Kong problems – street protests, with no end in sight, and the fact that half of the board of HKEX was appointed by a government that is prodded from Beijing.
The fear of direct interference from China may explain why HKEX wanted to derisk its business but it was surely hopeless to think the LSE’s board could be wooed with loose lines about capturing east-west capital flows. Since it is virtually impossible to complete the takeover of a major stock exchange without backing from the target’s board, the proposal was always vulnerable to an instant rebuff.
Li and HKEX declared themselves “disappointed” by the outcome, but cannot be surprised. In the long list of failed bidders for the LSE, Hong Kong, in the current climate, was the least credible of the lot.
U-turn needed over Barclays post office blunder
It takes a lot to rouse the Payment Systems Regulator, one of our more obscure financial watchdogs, to anger, but Barclays has managed it. Indeed, the bank has needlessly annoyed a lot of people in one hit: Which?; Rachel Reeves, the chair of business select committee; and Martin Lewis, supposedly the most trusted man in Britain.
Barclays’ own goal was to scrap free over-the-counter cash withdrawals at post offices. Some 28 other banks have renewed a deal to offer this service – but Barclays is a refusenik. Its customers can use other services at post offices, but not the one that provokes most passion in the debate about banks’ responsibilities to customers and society.
The hardball policy probably did not reach the desk of its chief executive, Jes Staley, but the boss would be wise to pay attention now. Paying out fat bonuses to investment bankers while whacking the Post Office is a terrible look. If smaller rivals can bear the cost of offering a full service, so can Barclays. A U-turn is required – and quickly.
Lundgren’s reticence reasonable amid Brexit uncertainty
Investors are still struggling to price Brexit risks. Shares in the recruitment companies PageGroup and Robert Walters slid on profits warnings that should not have been seen as out-of-left-field developments. Business investment is weak and Brexit is a major factor. It was reasonable to assume that recruitment, notoriously sensitive to every twitch in the economy, was bound to be affected.
Over at easyJet, where the shares fell 7.5%, the problem could be described as a Brexit vacuum. There was no issue with predicted numbers for the financial year that ended in September: at £420m-£430m, pre-tax profits will arrive marginally better than some forecasts, thanks to help from strikes at Ryanair and British Airways. Instead, the stock market took fright at a refusal by the chief executive, Johan Lundgren, to predict the airline’s financial performance in 2020. All he would say was that forward bookings for the first quarter were “in line with the same time last year”.
EasyJet bosses are traditionally more vocal at this point in the year but, in Lundgren’s shoes, reticence is reasonable. There are too many Brexit variables. The biggest, in terms of potential to wreck profits, may be the risk of disruption and delay at airports. Since easyJet has no greater insight into that risk than anybody else, best to say nothing. Investors will have to get used to flying solo: companies can’t read events outside their control.