the times | Saturday November 14 2020 2GM 55Business
temper inflation. Over the next few
years, however, this is likely to change.
Massive stimulus measures un-
leashed during the pandemic will still
be working their way through the
economy even after demand has recov-
ered. When the country is finally back
on its feet, policymakers will have to
tighten policy once again, either by
raising taxes or raising interest rates, to
stem the inflationary pressure.E
ven an estate agent would
struggle to put an
optimistic gloss on this
situation. After myriad
bodge-jobs, the
Countrywide chairman Peter Long
is in a right mess. How does he fix
the house without infuriating the
shareholders?
His dilemma is one of the most
intriguing corporate puzzlers
around. And it’s no comfort to him
that he’s brought most of the
problems on himself. He took the
chair in April 2016 with the shares
at an effective £105, after which he
fired the former chief executive,
took the top job himself and tapped
investors for £140 million to fund his
“back-to-basics” turnaround.
So you can understand their sense
of humour failure when he pitched
up three weeks ago with a ludicrous
deal that involved handing control
of the company to Alchemy at a
knockdown 135p a share, in return
for the private equity firm
underwriting a £90 million cash
injection. His justification was that
without his deal — “the best result
for all stakeholders” — the company
risked going bust. Most of the debt,
a net £90 million, is held by Cross
Ocean Partners. And if it didn’t get
£50 million back by September next
year the roof would cave in.
Or so warned Mr Long. None of it
stacked up at the time. And even
less so by Monday when
Countrywide rival Connells
unveiled a mooted cash offer at
250p, valuing the owner of 60
brands including Hamptons,
John D Wood and Bairstow Eves at
£82 million. Even so, that doesn’t get
Mr Long off the hook because some
big investors don’t want to cash out
at that price. And he’s dealing with
an awkward squad register. The top
four are Oaktree with 18.3 per cent,
Hosking Partners (14 per cent),
Catalist (10.5 per cent) and Brandes
(8.8 per cent).
Mr Long’s Alchemy deal,
requiring 75 per cent approval and
leaving shareholders with as little as
a third of the company, is toast.
Some investors hated it even more
once they saw the buyout firm’s
presentation. One reckons
Alchemy’s forecast returns implied
£500 million of upside, with the new
management creaming off
£50 million via bonus schemes.
Investors want to know if two
Countrywide directors, finance chief
Himanshu Raja and managing
director Paul Creffield, really could
be along for the ride: they’re in the
prospectus as “continuing directors”.
They also suspect that Alchemy has
struck a cosy deal with Cross Ocean
over the debt.
To boot, shareholders are baffled
that the two options on the table —
Alchemy or a Connells cash-out —
are the best Mr Long can come up
with at a group with £500 million
annual sales in a vibrant housing
market and with assets it could sell.
So what else can he do? Recutting
the Alchemy deal is tough because
it wants majority control. Connells
can’t offer paper, allowing investors
to stay in, because it’s owned by a
mutual: Skipton Building Society.
Neither does it fancy a reverse
takeover. And a possible alternative
buyer, LSL Property Services, pulledan all-share tilt in February and
may not want a re-run.
A DIY job could yet be the best
option: an investor cash-call to fix
the debt plus disposals. But
shareholders would demand a new
management team and may not
trust Mr Long to find one. And the
price would be a hefty discount to
today’s 208p, lifted by Connells’ bid
approach. In short, whatever door
he opens Mr Long walks into a
problem. This estate agent malarkey
must be harder than it looks.Warning notice
I
f only Carillion’s wiped-out
shareholders got paid for every
official inquiry into the
outsourcer’s collapse. The latest is
from the Financial Conduct
Authority: a body that at least has
the powers to punish the directors
responsible for the group’s January
2018 implosion. It’s found they
behaved “recklessly”. While not
naming them, the FCA has given a
“warning notice” to three directors
that they face sanctions spanning
fines and bans. The trio are former
chief executive Richard Howson
and the ex-finance chiefs Richard
Adam and Zafar Khan, identified by
three stock market announcements
they signed off between December
2016 and May 2017.
The regulator has found they
“made misleadingly positive
statements about Carillion’s
financial performance generally”
and particularly over its “UK
construction business” — felled by
the soaring costs of hospital projects
in Liverpool and Birmingham and
the Aberdeen bypass. It remains a
mystery how the £1.5 million-a-year
Mr Howson was able to tell May
2017’s AGM of the “encouraging
start” to the year. Two months later
his stand-in replacement Keith
Cochrane unveiled a £845 million
crater in the contract book. It was
the cue for Mr Howson’s exit and an
inquest into auditor KPMG.
The FCA needs to throw the book
at the trio. Just a pity it’s restricted
itself to executive directors.
Overseeing the recklessness was
former chairman Philip Green (not
that one): a man who deserves some
sort of sanction simply for being so
holier-than-thou. Being useless, too,
hardly helped.One swift kick
S
anity at last. As lunatic rulings
go, little beat the Competition
and Markets Authority’s
decision to block JD Sports’
£90 million takeover of tiddler rival
Footasylum — in the middle of a
pandemic, too. The 70-store retailer
was on its knees in the good times.
When JD boss Peter Cowgill
showed up offering half the float
price, investors bit his hand off.
Imagine a solo Footasylum in a
corona world. The likeliest thing it’d
be kicking is the bucket.
Luckily, the Competition Appeal
Tribunal agrees, overturning the
CMA’s verdict and finding it “acted
irrationally”. Quite.[email protected]business commentary Alistair Osborne
even after recovery
10
9 8 7 6 5 4 3 2 1 0UnemploymentCurrent forecast
Forecast with vaccine2008 10 12 14 16 18 202240%35302520151050
1981 2015 17 19 Jun OctProportion of workers
working from home%1101051009590858075
2019 2020 2021 2022ForecastPre-Covid-19 forecast
Forecast with vaccine
Current forecast(Q4 2019 = 100)Level of Real GDPSource:Capital economicsSource:Capital economicsSource:Bank of England‘Stores might
never reopen
if lockdown
is extended’
More than 60 high street bosses have
warned the government that many
stores may never reopen if the lock-
down is extended into the crucial
Christmas trading period.
Retailers classed as “non-essential”
have been forced to shut their doors in
England for the second time this year to
stop the spread of coronavirus. The
British Retail Consortium has already
challenged the rationale for the closure
of shops, arguing that it has minimal
impact on the transmission of Covid-19
and noting the millions of pounds spent
to make stores Covid-safe.
Steve Rowe, of Marks & Spencer,
Alex Baldock, of Dixons Carphone,
Will Kernan, of River Island, Peter
Cowgill, of JD Sports, and Christos
Angelides, at Reiss, are among those to
have raised concerns that thousands
more retail jobs will be at risk if the
lockdown runs past December 2.
In a letter signed by 61 retail chief
executives, they say that the closures
have deprived retailers of £2 billion a
week, while November and December
account for a fifth of the year’s retail
sales. They say: “With less than two
weeks to go until the chancellor’s
spending review it is vital that retailers
get the clarity they need over the future.
“A continued period of retail closure
will see more shuttered high streets and
many more job losses at the heart of the
festive season. Retailers of all shapes
and sizes must be allowed to reopen by
the start of December. Without this,
there will be little festive cheer left on
our high streets.”
Mr Baldock told The Times: “We
don’t want extra handouts, we just want
to trade.” He joined a chorus of retailers
pushing for extended opening hours
and a deregulation of Sunday trading.
There are concerns that pent-up de-
mand could lead to queues outside
stores that would make social distanc-
ing difficult.
To read the letter in full please visit:
http://www.thetimes.co.uk/businessAshley Armstrong Retail Editorretail sector.” The permanent damage
caused by the coronavirus outbreak
should keep inflation in check even as
consumer spending rebounds sharply.
Rising demand will be more than
matched with a recovery on the supply-
side of the economy, as restaurants and
pubs reopen. Economists said that
unemployment and lower incomes
would limit the surge in demand,
sustaining an output gap that shouldStep forward for JD Sports
with ruling on Footasylum
JD Sports has successfully appealed
against the competition watchdog’s
decision to block its takeover of rival
footwear retailer Footasylum after a
tribunal found that the regulator had
“acted irrationally” and without suffi-
cient evidence.
The Competition and Markets
Authority said in May that JD Sports
would have to unwind its £90 million
takeover of Footasylum because the
deal would lead to a substantial lessen-
ing of competition.
It is rare for the CMA’s judgments to
be overturned, with the only other case
being Intercontinental Exchange’s
merger with Trayport in 2016. How-
ever, the Competition Appeals Tribu-
nal said that the CMA had failed to in-vestigate how the unfolding pandemic
would alter the market. The tribunal
agreed with JD Sports that the rise of
online shopping since the start of the
coronavirus outbreak meant that the
retailer faced increasing competition
from Nike and Adidas’ websites.
The tribunal quashed the watchdog’s
verdict and said that the deal had to be
referred back to the CMA. The forced
sale process of Footasylum also has
been halted as a result. However, the
tribunal did not agree with JD Sports’
argument that Mike Ashley’s Frasers
Group’s strategy to improve Sports
Direct’s relationship with brands would
significantly change the competitive
constraints on the merged business.
Peter Cowgill, executive chairman of
JD Sports, welcomed the decision and
said he was preparing further evidence.Ashley Armstrong Retail Editorthat it was proposing to publicly
censure Carillion itself but was not
planning to levy a fine on the failed
group, which collapsed into liquidation
in January 2018.
The London-listed company was a
government contractor that undertook
a wide range of outsourced jobs for the
state, including working on the HS2 rail
project. It employed 43,000 people.
The FCA did not identify the
individuals it was preparing to sanction,
other than saying that they were
executive directors at “material times”
between July 1, 2016, and July 10, 2017.
It highlighted three announcements
that Carillion made in December 2016
and in March and May 2017, which were
“misleadingly positive” regarding the
company’s financial performance.
The FCA concluded that “Carillion
and the relevant executive directors
acted recklessly”. No final decision has
been made on what action the
regulator will take. Carillion’s collapse is
the subject of several other inquiries,
including three by the Financial
Reporting Council.A performance to
bring house down