Permira retraces roots and springs surprise

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Britvic under pressure after stake-building

Permira’s purchase of an 11 per cent block of Britvic shares is a display of unusual aggression for a buy-out firm.

Talks between Permira and the drinks group collapsed in October after they leaked. Normally a private equity firm would chalk up such a failure as experience and move on.

Coming back with a hostile bid would almost certainly be out of the question; banks generally do not finance such moves by buy-out firms.

So why is Permira stake-building now? The face-value explanation is that it is part of its normal investment activity. While the group typically takes controlling stakes in businesses, it has also said it might buy “significant” minority stakes.

But this looks more like a tactic to pressurise Britvic back to the negotiation table. Permira has, after all, bought the stake through a vehicle called Snowdon Acquisitions.

One benefit of the tactic is that it provides an insurance policy if Britvic ever falls to another bidder. Permira could then sell its shares for a profit to the successful buyer. That could be valuable for Permira, which was outbid in auctions for McCarthy & Stone, the retirement homes group, and De Vere, the hotels chain.

This is, however, an especially risky tactic for a private equity firm. If Britvic refuses to enter talks, and there is no rival bid, Permira will be left tying up client capital in a stake with no strategic merit.

Moreover, Permira really needs to be ultra charming to Gerald Corbett, Britvic’s chairman. He encountered two private equity approaches as chairman of Woolworths. One, from Apax, collapsed with the group making damaging statements about the quality of the company.

Permira’s move also risks giving buy-out firms more generally a reputation as corporate raiders.

In Latin, Permira means “very surprising, very different”. Its latest behaviour certainly fits with that. But this may not be how Permira’s investors had interpreted the motto.

Legal challenge

When HSBC’s former head of equity trading accused the bank in March of sacking him for being gay, the case was set to be a watershed.

It was the first test in the City of new legislation combating discrimination on the grounds of sexual orientation. But so far, Peter Lewis and HSBC look like losers.

To re-cap, HSBC dismissed Mr Lewis in 2004 following allegations of sexual harassment in the company gym. Mr Lewis has repeatedly denied the allegations. An employment tribunal later cleared the bank of dismissing him because he was gay. Nevertheless, it found that HSBC’s initial investigation against Mr Lewis had been biased.

Now a judge has ordered fresh hearings into the earlier findings against HSBC, following an appeal that succeeded on a legal technicality.

It is hard to gauge the damage to HSBC’s business, but it cannot be insignificant. For starters, the bank lost a top person from a hard-to-fill role barely months after his appointment. Now it faces renewed questioning over whether its treatment of Mr Lewis was prejudiced by attitudes associated with the “macho culture” of City trading floors.

Mr Lewis must also brace himself for fresh cross examination. He does not qualify for legal aid.

Allegations of sexual harassment are serious. They should be investigated thoroughly but also fairly. The outcome of this case is critical to the modern City’s reputation as a meritocracy. So far, the episode may only have deterred possible victims of homophobic discrimination from bringing similar actions to Mr Lewis’s.

It would be wrong to be overly pessimistic. These are new laws. It takes test cases such as this to get discrimination laws right. Hopefully, the tangles of the case will pave the way to legislation that functions more smoothly. For the time being, that will come as little consolation to either Mr Lewis or to HSBC.

Panel beating

Where the Takeover Panel leads, the Financial Services Authority seems increasingly to follow.

The FSA is looking into why so many takeover bids leak, given the rise in share prices before deals are announced. The Panel has been taking action against such instances for years, forcing announcements when talks are under way or bids are in the offing.

The aim of the FSA’s work is to develop firmer guidance for companies and their advisers involved in bid situations. The big integrated investment banks might seem in particular need of help. Deals are bigger and involve more people nowadays. Some insider lists contain 1,000 people. The use of BlackBerries carries the added risk that a careless “Reply To All” widens the circle of those possessing inside information.

The hope must be that the FSA comes up with guidance that proves as effective at preventing leaks as the Panel is at dealing with the consequences of them.

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