Murphy’s law rains on Guinness’s NY parade

Sensible businesses will stay in tune to Diageo’s move

In opining that “a pint of plain is your only man”, Irish writer Flann O’Brien endorsed Guinness for every drinking occasion. The universality of the stout has however been thrown into question by the decision of Diageo to pull out of New York’s St Patrick’s day, following criticisms from gay rights campaigners.

O’Brien, himself a noted tippler, would have savoured the absurdities. The organisers stipulated gay and lesbian groups could march, but must not identify themselves. Did that prohibit the demeanour of penitent self-loathing that the hardcore religious have traditionally demanded from homosexuals? A call to boycott Guinness from Rupert Murdoch should meanwhile trigger a surge in sales among North London liberals.

For Diageo boss Ivan Menezes, the situation will have been too excruciating for contradictions to register. St Patrick’s day has grown into a worldwide festival and a big marketing opportunity for Guinness. The difficulty is that however secular the festival may have become, its roots are as a Christian saint’s day.

Forced to choose, Diageo made the right call. Western society is losing its terror of minorities. Sensible businesses will stay in tune. This matters most for owners of consumer brands such as Diageo.

The crowning irony is that sales of Guinness have been dropping in Ireland, where drinkers often prefer a nice glass of pinot noir. The beverage’s biggest market is Nigeria, where same-gender sex acts are illegal. Diageo’s egalitarianism may play less well there than at the Stonewall Inn, a bar linked with gay rights. But so be it.

As a coda, an observer of tap room mores adds “A Cork man wouldn’t be caught dead drinking any beer other than Murphy’s, regardless of his sexuality.”

Currying favour

Grandiloquence has a way of masking basic needs and visceral desires, writes Kate Burgess. Who hasn’t waxed lyrical over a vindaloo during a good night out?

David Buttress, chief executive of Just Eat, the takeaway website, takes missionary zeal to a new level, though. In Just Eat’s float notice he declares a desire to “evangelise” and “empower consumers to love their takeaway experience”.

Still, that may not be enough to justify a price of £900m-plus for an online network that made underlying earnings of £14m in 2013. That is close to 70 times earnings for a business that is hardly haute cuisine.

Just Eat is a well-advertised website which lists independent takeaways in return for a fee (£699 per eatery) and commission (£2.11 on average per order). It has grown fast, processing 40m orders for 36,500 restaurants last year. But as is clear from US rival Grubhub, which recently filed its IPO prospectus, the race is on between online takeaway markets. The risk is always that a challenger with better technology will emerge

To justify its price tag, Just Eat has to retain existing customers and spread its network. That won’t be cheap. Expanding overseas cost about £15m in earnings in 2013. Keeping customers isn’t straightforward either. After all, vindaloos that inspire paens at midnight leave most consumers with little but vague memories and indigestion in the morning.

Inelastic Ono brand

No IPO for Ono. Instead, Vodafone is taking over the Spanish cable group for €7.2bn. Bull market prophets had imagined M&A would surge in tandem with floats. But the resurgence in initial public offerings has been more striking. This reflects steep valuations for open share sales and a scramble by private equity investors to reduce inventories.

Voda cannot be accused of stretching its budget, buying Ono for 7.5 times 2013 earnings before interest, tax, depreciation and amortisation. Chief executive Vittorio Colao, a would-be consolidator in a European market where bandwidth is increasingly a commodity, paid 12.4 times ebitda for Kabel Deutschland, a more impressive German asset.

We may surmise a weakening Spanish equity market allowed the traditional advantage of the trade buyer – synergies – to reassert itself. Mr Colao’s timing looks canny. The UK group foresees savings of some £3bn at current values from the takeover, some £1bn more than City forecasts. He is buying on a dip of sorts, which is more than you can say of investors in UK tech IPOs.

Shares totalling £5bn have been sold through IPOs on UK exchanges so far this year, says Dealogic, compared with £322m in the same period of 2013. UK-related takeovers are up by a bigger amount, but a smaller percentage, at £77bn. Shiny new M&A firm Robertson Robey advised Voda’s board. Downturns spawn boutiques which provide independent competition for big banks when economies recover.

jonathan.guthrie@ft.com

JustEat: kate.burgess@ft.com

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