Shareholders in Misys must think Mike Lawrie is an alchemist. Four years ago, as new chief executive of the UK software group, he inherited a large amount of dross following a prolonged but abortive buy-out attempt led by predecessor and founder Kevin Lomax. Now he seems poised to turn at least some of it to gold.
Less than two years after the acquisition of a majority stake in Allscripts of the US, which Mr Lawrie promised would increase earnings per share, he plans to offload the Nasdaq-quoted healthcare software subsidiary in a deal also billed as accretive to Misys earnings. The latest miracle owes more to the automatic effect of a hefty promised buyback of some £900m of Misys shares, but, if and when the pay-out comes, newly enriched shareholders in the UK group are unlikely to argue with it. They may, however, wonder what is left at the bottom of the alchemist’s pot.
Precisely how good the latest deal is, depends on the price at which Misys places its Allscripts shares and the consummation of Allscripts’ merger with Eclipsys, another IT company. If all goes to plan, Misys could get back double its implicit investment in Allscripts in 2008.
But while Misys would be easier to understand without its healthcare business, it would be a less interesting investment prospect. It would rely on selling software for financial institutions and corporate treasury departments – a difficult and competitive market. Mr Lawrie came to Misys from ValueAct Capital, the activist US hedge fund, which now owns 29 per cent. Mr Lawrie says he will try to work his magic on the rest of Misys. ValueAct’s presence helped get the Allscripts deal done in the turbulence of late 2008 and it protects the rump business against a cut-price opportunistic takeover. But the return of Misys’s chief financial officer to ValueAct looks like a portent. If the activist fund can sell its stake, or see the rest of Misys sold, at a profit, it should be able to walk away itself, with the satisfaction of a job well done.
New line from Asos
We’ve all been there: Saturday morning at the Post Office, clutching our red “while you were out” cards. The weekend queues are testament to how online retailing often hits a real-world barrier of small letter-boxes, long delivery slots and the demands of the working week.
Asos, the clothing e-tailer, now wants to offer customers the option to end the hassle and pick up their purchases at a high street store. For retailers that sign up, it could be a good way of increasing visits from key customers – women aged between 16 and 34 – and boosting the profitability of their shops: a “win-win” situation, as Nick Robertson, Asos chief executive, puts it. But only for the right retailer and at the right price.
At Boots, shoppers could choose a lipstick to go with their new dress. WH Smith might benefit from people picking up a magazine or chocolate on their way to the till. On the other hand, consumers are less likely to impulse-buy at catalogue emporium Argos. Fashion retailers may be tempted by the promise of Asos customers buying another dress while in store – but they could conclude that encouraging them to leave with bags of competitors’ goods undermines their own brand.
A bricks-clicks collaboration could also fall victim to Asos’s success. The online retailer should easily hit its goal of £1bn of annual sales in the next five years. On that basis, the Saturday queues could simply transfer to stores, with gaggles of girls getting in the way of retailers’ primary customers, taking up staff time and clogging storage areas with their orders of Asos’s washed Georgette empire full-skirt dresses. At the right price, most of these logistical problems could be solved. It’s a question of whether Asos can afford to pay that price and chainstores can afford to turn down the opportunity.
BP and broken bones
Last week, BP’s Tony Hayward trotted out the familiar “sticks and stones” defence against personal criticism: “They’ve thrown some words at me, but I’m a Brit”, he said. Worries are now mounting that the reverse may be true: because companies are British, words – or worse – may be thrown at them by American politicians and consumers. There’s clearly a case for passing on such concerns at the highest level. But David Cameron shares with Mr Hayward an easily misunderstood British talent for self-deprecation. The PM won’t make much headway when he raises the issue with President Barack Obama. The president has had to crank up the noise level for domestic consumption. That may sound strident to the British, but it sounds strong to most Americans. What was that again about two nations divided by a common language?