The remarkable aspect of the NSF bid was the conviction by its architect, John van Kuffeler that the Provvy deal was in the bag
A great shortcoming of weak-kneed big battalion shareholders has been the failure to come together to defeat bad decisions by companies in which they invest.
That is changing. The revolt by institutional investors against the vainglorious bid by Non-Standard Finance for sub-prime lender Provident Financial is a case in point.
It comes hard on the heels of the reversal of Unilever’s effort to retreat to the Netherlands, the blowback against Melrose’s takeover of GKN and the lack of support for maverick Ed Bramson’s raid on Barclays.
The remarkable aspect of the NSF bid was the conviction by its architect, John van Kuffeler, and his advisers that the Provvy deal was in the bag.
The hubris came from NSF’s privileged chief executive van Kuffeler, who was confident he knew best how to service up to 10m of the UK’s most vulnerable borrowers.
By sewing up more than 53 per cent of the votes before the reverse takeover of Provident went unconditional, NSF wrongly thought its position was unassailable.
The reverse was true. By declaring victory with the support of Neil Woodford, Invesco and Marathon he threw down the gauntlet to funds, such as M&G, Schroders and Janus Henderson, which felt frozen out.
Woodford’s motive was to try to extract value from two companies where the share price had sunk like a stone. This was at odds with investors, who rejected the bid.
They felt that Provident had been through the regulatory wringer, accepted punishment, including tighter supervision by the Financial Conduct Authority (FCA), and had the opportunity to rebuild without lending on oppressive terms.
Van Kuffeler was a throwback to an era when anything went in the scale of interest charges for hard-pressed customers.
In the end, it was the Prudential Regulation Authority (PRA), the Bank of England’s supervisory arm, and the FCA which decided it.
Why NSF and its advisers were so confident that they could bulldoze a path through regulation by claiming victory before the authorities ruled is unclear.
Indeed, the City’s legal firms and investment banks need to examine whether they are simply telling clients what they want to hear so as to collect the big bucks.
Sainsbury’s was given a totally wrong steer on the competition issues in its effort to merge with Asda.
The idea that the PRA and FCA would allow anything which would undermine stability at this juncture was cloud cuckoo land.
The FCA already is under fire for its policing of failed mini-bond outfit London Capital & Finance. Both the PRA and the FCA have worked tirelessly to make sure Metro Bank is property capitalised.
On top of all this, some regulated funds operated by that most venerated of stock pickers Neil Woodford, have deep-seated liquidity problems.
The very idea that the PRA was going to allow a regulated bank – Provvy’s Vanquis subsidiary – to fall into less safe hands was fantasy.
Woodford’s deserters
After 24 hours of turmoil, investment platform Hargreaves Lansdown and wealth advisers St James’s Place, both of which peddled the Woodford myth, are running for cover.
Hargreaves is cancelling its management charges on Woodford funds and is urging a repentant Woodford to do the same.
St James’s Place has dropped Woodford as investment manager for £3.5billion of funds, handing responsibility to Columbia Threadneedle and RWC.
Friends deserting in the hour of need is hardly honourable, but with the savings of tens of thousands of individuals at stake they hardly had a choice.
The FCA is now deeply involved and showing a strong interest in the listings of some of the assets in the LF Woodford Equity Income fund in Guernsey.
Very worrying for all of us who put faith in the great man.
Great escape
Talking of offshore financial centres, what is a company as sensitive as GVC Holdings, owner of bookies Coral and Ladbrokes, doing by holding its AGM away from public gaze in Gibraltar?
Escaping the crowds didn’t do fat cat chief executive Kenny Alexander much good, with 42 per cent of investors voting against his outrageous £19.1million pay package.
The gamble lost badly. FTSE firms, even those based in the Isle of Man, should not be allowed to go walkabout.
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