Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his weekly City AM column. This week, he tackles changes at the CMA, Achilles’ new target, and a logistics funding boost.
Will there even be a competition regulator at this rate?After this week’s latest summons to Downing Street for a group of Britain’s top economic regulators, that question is glib, but becoming decreasingly so.
Rachel Reeves signalled as part of the government’s latest reset of regulation this week that the Competition and Markets Authority (CMA) would be further reined in, weeks after the defenestration of former chairman Marcus Bokkerink.
An excoriating critique of Britain’s economic regulatory architecture suggested this week that it could be costing businesses £60bn, a sizeable chunk of which is superfluous and duplicative.
The chancellor now plans to legislate to restrict the scope of the CMA’s interventions under its ‘share of supply’ and ‘material influence’ tests. Sarah Cardell, the watchdog’s chief executive, had already laid the foundations for this when she said the CMA had an “unusually broad jurisdiction” by international standards.
Since the ousting of Bokkerink and the shift in stance from ministers early in the new year, the CMA has – in terms of interventions – barely said boo to a goose. While officials protest that the agency isn’t suddenly going to avoid scrutinising, or is now going to wave through, anti-competitive deals, it’s hard not to assume that there is a broad window opening for industry-reshaping deals.
Joel Bamford, a senior executive at the regulator, told The Times that its evolving remit was not tantamount to “open season on bad deals”.
“What [people] should take away is that the CMA is open to engaging, will operate in an effective and proportionate way, and we’ll make sure that we can drive investment for everybody”.
The danger here, of course, lies in the risk to consumers and other end-users of businesses affected by the CMA’s mergers regime. Shifts in pricing and other post-merger dynamics frequently take several years to feed through, meaning it could be a significant period of time before the effects of poorly judged takeover approvals begin to be felt, according to antitrust advisers.
People close to the CMA say rank-and-file staff are bewildered by the speed at which its agenda has pivoted, with morale reported by one insider to be “shaky”.
There has certainly never been a better time for major companies to launch takeover bids which would previously have been thwarted for competition reasons. Supermarkets, banks and technology companies are all on high alert – reform of the CMA is about to provide an unlikely, but now inevitable, boon for M&A bankers.
Mills and Naylor find trusts’ Achilles heel
Achilles: the name is not an accident. The latest vehicle of Christopher Mills, the Harwood activist, and serial chairman Robert Naylor should have investment trusts seeking out their most vulnerable body-parts in a hurry.
Floated last month with £54m from investors, the duet who forced Hipgnosis Songs are on the march again – this time focused on forcing mismanaged or poorly governed investment trusts to get their act together.
First on their target list is Urban Logistics, a £600m market cap vehicle focused on last-mile real estate and whose gross asset value at the end of last September was nearly double that. With clients including Amazon, Boots and Royal Mail, the size of the discount at which it trades is glaring, suggesting some form
Lo and behold, last week, as Achilles disclosed its stake, Urban Logistics rushed out an announcement that it was moving to an internalised management model. It said a “significant majority” of shareholders had expressed support for the plan.
That won’t be enough to get Achilles off its heels. Naylor told me: “The company’s shares have significantly underperformed and traded at a persistent discount.
“While internalising the management contract of an externally managed fund typically enhances alignment, the board’s proposed terms are wholly unacceptable.”
He warned: “If a satisfactory outcome is not achieved, Achilles has the ability to requisition an EGM to seek board representation.
“We would propose to consult with shareholders to decide a strategy to maximise shareholder value.”
Given the track record of Mills and Naylor, either Urban Logistics’ chairman, Nigel Rich, gives significant ground or he will find his future the subject of an EGM resolution faster than an Amazon parcel delivery arriving at its destination.
Fin Delivery’s $10m funding boost shows there’s life in last-mile logistics
Speaking of parcel deliveries, to describe the last-mile logistics sector as embattled would be like labelling Manchester United’s season underwhelming – a gross understatement.
There are signs of life in the market, though. I hear that Fin Delivery, a zero-carbon delivery business founded by former Google executive Rich Pleeth, is in the process of raising about $10m to fund its expansion plans.
Fin’s efforts to avoid falling into the same capital-intensive value trap as some of its peers means it does not own its vehicles, but instead partners with other logistics players to reduce its cost base.
Sources tell me that MaC Venture Capital, a seed-stage investor, is among the parties which have handed Fin term sheets with a view to investing funds at a valuation of about $60m.
Pleeth is now said to be plotting a New York launch next month, while adding five further cities in the UK to its network by the end of this year. The new capital, investors say, will be used to expand its partner network and scale its higher-margin software-as-a-service licensing business.
Given the tough funding environment for start-ups, Fin is unlikely to conclude its raise for several months. Doing so successfully, at whatever pace, would breathe new life into the idea that the British last-mile logistics market has legs