There’s a relief: Willie Walsh of British Airways has “ruled out” an independent bid for Iberia. Nuttier things have happened, but it would have been an A380-sized blunder for BA to have taken on such a burden. Although such an outcome was never likely, the possibility that Mr Walsh may yet join a consortium offer also ought to worry the British group’s shareholders.
Iberia is more attractive than an airborne basket case such as Alitalia. The prospect of getting in while Iberia’s performance is improving and in time to benefit from future consolidation and deregulation, has helped fuel the interest of Texas Pacific Group, the US private equity firm, and pushed up the price. BA could join that offer or a counterbid for the same reasons, except that the size of its stake could be diluted by a leveraged takeover and its profits from the investment cut by interest payments.
A private equity consortium would also first have to convince Madrid that it could be trusted to take the controls. The FT-Harris opinion poll, published today, shows the Spaniards to be relaxed about the impact of private equity ownership – but that is partly because they have not had much experience of it. State-owned aviation would be a dangerous arena in which to blood the Spanish establishment. Locusts that get close to jet engines tend to have a turbulent flight. It is the sort of buffetting that BA, which still has challenges of its own, could do without.
The calculation for the private equity firms is quite different. TPG is enthusiastic enough to want to go ahead with state airline investments in Italy and Spain, even if constrained by guarantees to the selling government. But JPMorgan suggested in a note on Monday that even if BA sold its Iberia stake, the UK group might retain its useful commercial and operating links with the Spanish carrier. If that really is the case, then Mr Walsh and his shareholders would be better pulling out of Iberia, rather than diving into a dogfight.
The FSA, on principle
It was pure coincidence that Monday’s Financial Services Authority conference on principles-based regulation clashed with Barclays’ announcement of its agreed takeover of ABN Amro. But implicit in the reversal of the banks’ earlier suggestion that the Dutch would supply the lead regulator for the combined group is a basic principle for cross-border deals: regulation is not a bargaining chip to be traded, along with location of the head office, the number of board seats and the colour of the new logo.
Barclays’ and ABN’s tactics in setting lead supervision by the Dutch as an objective of their discussions always looked suspect. The proposal jumped the gun and seemed certain to rile the FSA. As politics, it may have played better in the Netherlands, but Nout Wellink, president of the country’s central bank, did not help the Dutch case by seeming to steer ABN towards a protectionist solution that kept the bank in one piece.
More important, however, lead supervision by the Dutch, even with the staunch support of the British, would have been a bad fit. The FSA aims to “identify, assess, prioritise and address risks”. The biggest risks, in this case, have a London postcode. Having established that the wholesale markets business of Barclays-ABN would be berthed at Canary Wharf, it made no sense to ask for a Dutch skipper at the regulatory tiller, even if the enlarged bank’s retail operations would be based in Amsterdam. Cheque fraud beside the Prinsengracht is less likely to bring the world financial system to its knees than derivatives fraud in Docklands.
Dunstone speaks for all
It is surprising that Charles Dunstone, a man not backward about coming forward, has taken this long to lay some blame on BT Openreach for delays in migrating Carphone Warehouse’s broadband customers on to its own network. Until the situation improves, much of the profit from the Talk Talk service leaches away to BT – and Carphone’s reputation suffers as customers fume.
Until now, Carphone has merely stressed, as its chief executive still does, that it has no doubts about the willingness of Openreach to do its job – on which improved competition with BT in this market depends.
If the cracks in that even-tempered approach are now showing, it must be a sign of one of two things: the performance of Openreach has got much worse, or it has improved to the point at which the entrepreneur feels public criticism will help not hinder the situation. Either way, if it leads to faster migration, then it is not only Mr Dunstone’s clients, harried customer service staff and shareholders who will have reason to thank him for giving Openreach a kick, but also his competitors.
Aim for more investors
Plans by Pentadyne, a Californian power equipment group, to float on Aim give the lie to US critics of the junior market. But as the FT’s new podcast on the future of the City, suggests (www.ft.com/newcity), the problem is not shortage of supply – plenty of international companies want the prestige of a “London listing” via Aim – but a potential lack of demand from the relatively narrow range of funds that invest there.