Those consultants currently getting fat on government business are in the wrong line of advisory work. Bigger troughs, as always, can be found in the world of investment banking. Look at this detail in GardaWorld’s formal proposal to buy unloved security firm G4S for £3bn: a cool £100m could be spent on “financial and corporate broking advice”.
That figure, note, doesn’t include fees for banks that would provide the funding for the Canadian security firm’s adventure – that would be £180m on top. Then there are wedges for lawyers, accountants, PR folk and lobbyists, taking the tally, according to the bid document, to a possible £312m.
Yes, the full whack depends on the bid succeeding, but £100m for pure takeover advice would be staggering in a deal of this size. The sum would be split four ways – between Barclays, Jefferies, UBS and Bank of America – so an average of £25m for each. Even rival investment bankers are surprised since this is not a complicated bid battle. The only currency is cash.
The outlines are also fairly clear: GardaWorld’s current offer of 190p a share is too low (an insight, exclusive to all commentators, that comes for free) but, at 220p-plus, a bidder is in with a shout. Identifying the precise location of “the killing zone”, in charming takeover parlance, requires judgment and a few phone calls to the right fund managers at the crucial moment. But we’re not talking about the labours of Hercules.
G4S, of course, will also throw big money at its defence team, and we should prepare to be shocked a second time when that bill is published. But, on the evidence of GardaWorld’s bid document, G4S investors should draw a simple conclusion: if the Canadians, and their private equity backer BC Partners, are prepared to shower rich rewards on advisers, their final bid price had better be similarly lavish.
Landsec’s selloff of London office space could stiffen its lagging share price
The tumbleweed currently blowing through the deserted streets of London may be misleading. As far as one can tell – and, admittedly, deal-making has been thin – the pandemic has not collapsed the value of office blocks in the capital.
Big foreign investors still seem interested in what they regard as a relatively safe international property market. A few optimists even think valuations will rise with the demand created by giving socially distanced workers more elbow room.
In this context, Landsec’s new strategy – “positioning for growth” – looks more promising than its bland title. It involves selling almost a third of the property group’s £12.8bn portfolio over the next few years and, given that London office blocks will be to the fore, there’s a chance to narrow the gap between the supposed value of the assets and Landsec’s share price.
That gap is more like a chasm: a supposed book value of £11.82 at the last count plays a share price of 532p. Put another way, confidence in the book valuation is low. If Landsec can prove via a few disposals that the marks are even approximately correct, shareholders’ lot could improve.
The trick will be harder to perform with Landsec’s regional shopping centres but at least realism about lower rents has arrived. Owning fewer retail parks would have been a better idea five years ago, but that’s hardly the fault of new chief executive Mark Allan.
The “growth” part of his thinking involves investment in mixed-use “urban opportunities”. We’ll see what that produces but, yes, this is now the fashionable corner of the commercial property market.
The approach can’t be called revolutionary since property developers always turn over their portfolios. Allan is merely proposing to pick up the pace and tweak the mix of assets. Fair enough. If those London offices really have held their value, it ought to work eventually.
Flybe relaunch: don’t buy your tickets yet
Flybe flies again. Well, maybe. Thyme Opco, a company affiliated to Cyrus Capital, one of Flybe’s former hedge fund shareholders, says it expects to relaunch the airline next year, having bought the brand and a few remaining assets from the administrator.
Since those assets do not appear to include any planes, it’s hard to tell if this is a clever hedge fund manoeuvre or a genuine attempt at revival. One hopes it’s the latter for the sake of the hard-pressed regional airports. But there’s no need to alert their control towers just yet.