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Never a dull moment for Carolyn McCall, chief executive of EasyJet, which is 38 per cent owned by founder Sir Stelios Haji-Ioannou and his family. The low-cost European airline said in a Stock Exchange statement on Monday that Sir Stelios had notified it of his plans to set up another airline, Fastjet.
On Friday, the serial entrepreneur dropped an attempt to oust Rigas Doganis, EasyJet non-executive director. Ms McCall had been confident of defeating the challenge. But the scoreline looked like a draw when you considered that earlier in the week EasyJet had announced plans to pay ordinary and special dividends totalling £190m. Sir Stelios has long campaigned for pay-outs to shareholders.
Where detail is lacking, supposition may fill the gaps. So it would be a mistake to read too much into the appearance in cyberspace of a crimson webpage announcing “Fastjet.com by Stelios. Coming soon!”
We do not know whether Fastjet would compete head-on with EasyJet, whose brand Sir Stelios has committed to enhancing. It would be an odd move for the Greek Cypriot entrepreneur to create a venture that cannibalised the revenues of a business in which he and his family are the dominant shareholders. However, some overlap appears possible. In a brief statement alleging “a smear campaign” by EasyJet, he said that he had “terminated” the effect of a comfort letter that he sent to EasyJet last year. Its provisions included an undertaking not to acquire an interest in an airline licensed by a country in the European Economic Area or by Switzerland.
Other shareholders – and Ms McCall – can therefore be forgiven any queasiness they feel at the advent of Fastjet. Sir Stelios revolutionised the European airline industry in the nineties, pioneering a low-cost model previously deployed in the US by carriers such as Southwest Airlines. It is questionable whether he could shake up the industry again, given that EasyJet and Ryanair have plucked so much of the low-hanging fruit. But you would be brave to bet against him.
There is a certain consistency to the pivotal role played by Barclays in the cross-border financing deals that US tax authorities claim were intended to generate artificial foreign tax credits. In the run-up to the publication of Sir John Vickers’ report on UK bank regulation, rumours circulated that Barclays might relocate its headquarters to New York if the conclusions were too irksome.
A flexible approach to borders is a hallmark of the archetypal all-conquering multinational as described by admiring neoliberals in the nineties and early noughties. It took the financial and philosophical failure of efficient market theories during the credit crunch to reassert the supremacy of nation states.
In fact, the zing had begun to vanish from Stars – structured trust advantaged repackaged securities – a year or so before Lehman’s collapse. Even the laisser faire Bush administration was uncomfortable with the scope of Stars-style deals, in which many banks engaged, for generating US tax credits.
But depressed developed economies make it tougher to get new tax arbitrage deals off the ground, for all the hubristic crowing of anonymous proponents. First, the profits and liquidity are not there to support the transactions. That was what killed off tax-driven aircraft finance in the nineties. Second, cash-strapped governments are less permissive towards loopholes than revenue-rich predecessors.
Meanwhile, Barclays’ involvement in Stars deals – and litigation between its partner banks and the Inland Revenue Service – means that the US might not welcome the bank very warmly were it inclined to move there.
Birds of a feather
It is customary for companies that have agreed a takeover to stress the similarity of their cultures. This can sometimes sound like wishful thinking. Many combinations fail because of incompatibility. However, the £230m acquisition of consulting engineers Halcrow by CH2M Hill of the US has a decent chance of succeeding because both are substantially owned by employees.
The deal therefore resembles an engagement in a religious community that discourages “marrying out”. About 26 per cent of Halcrow’s shares belong to its workers. The balance is held by a trust in whose decision-making employees have an indirect say. CH2M Hill is, for its part, 100 per cent owned by its 23,500 staff. Trustees and staff shareholders in Halcrow, whose trading flagged last year, can thus neatly rebut suggestions that they are “selling out” the community-spirited ideals that underpin their business.
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