Emigrating Brits in the famous Pre-Raphaelite painting “The Last of England” look far too glum. Shipping out has always been a sound strategy in times of economic stress. Big plumbers’ merchant Ferguson is following the money to the US, spinning off a sluggish UK business. Insurer Prudential is demerging its British arm too. Deutsche Bahn of Germany plans to shed Arriva, its UK rail and bus outpost, probably via a trade sale.
Do not mention the “B” word. Ferguson and its ilk decry any link between Brexit and itchy feet, saying wanderlust is longstanding. But the historic FTSE 100 company, nevertheless, announced its partial departure on a day of political crisis. Brexit uncertainty has dragged down economic confidence and sterling with it. Share prices are tainted too, even when overseas earnings are steep.
Ferguson makes almost 95 per cent of yearly trading profits of $1.5bn in North America. Previously known as Wolseley, it has an American trade name, an American activist investor — Nelson Peltz — and accounts in dollars. In November it will also get an American group chief executive, Kevin Murphy, who already runs the US operation.
Incongruously, Ferguson will not get a US listing — yet. Some UK funds are resisting a switch that would force them to sell out. Ferguson, one suspects, is playing a long game. Demerging the UK arm and marketing its shares to US investors would help raise their slice of the share register from two-fifths to over half. As UK ownership waned, so would resistance to a switch.
Ferguson shares should theoretically get a lift from a New York listing, helping it to a market worth of some $20bn. The S&P 500 index is at a 44 per cent premium to the FTSE 100, the widest spread since the financial crisis. The stock currently trades at a 20 per cent discount to a US peer group selected by broker Jefferies.
Marooned on Boris Island, rump British business Wolseley UK would be worth less than £1bn, Lex reckons. Ferguson would have plenty to go at in the fragmented US market, even if economic growth slows. The counterpart to “The Last of England” is a contemporaneous Punch cartoon contrasting a prospering emigrant with the penniless Brit who stayed at home. A trend for multinationals to cut loose British subsidiaries may be gathering momentum.
If you are a subscriber and would like to receive alerts when Lex articles are published, just click the button “Add to myFT”, which appears at the top of this page above the headline.
Get alerts on Ferguson PLC when a new story is published