Section:GDN 1N PaGe:28 Edition Date:190821 Edition:01 Zone:S Sent at 20/8/2019 18:47 cYanmaGentaYellow
- The Guardian Wednesday 21 Au g u st 2019
(^28) FinancialFinancial
Business view
Larry Elliott
T
he number of pubs
in Britain has been
falling for many
years. Changing
consumer habits
and the availability
of cheap supermarket off ers
has resulted in boarded-up and
demolished boozers all over
the country.
In the short term, therefore, the
agreed sale of the pub and beer
business Greene King to the Hong
Kong property company CKA looks
like good news.
On closer inspection, it is a
classic case of glass half empty,
glass half full.
On the glass half full side, the
willingness of CKA to pay a hefty
50% premium on the Greene King
share price to grab the company’sportfolio of 2,700 pubs, restaurants
and hotels suggests that overseas
investors are looking through any
Brexit disruption and envisage the
economy bouncing back.
Given that consumer spending
has surprised on the upside
since the EU referendum, that’s a
reasonable assumption.
From the glass half empty
perspective, CKA is merely the
latest in a string of overseas
predators taking advantage of the
weakness of sterling to pick up UK
assets on the cheap.
Greene King is not the fi rst
company to fall into foreign hands
and it will not be the last.
There are plenty of other UK
businesses like it – UK focused
and with depressed share prices- that look attractive at current
exchange rates. There are bargains
to be had.
It’s not hard to see why Greene
King looked attractive. CKA is a
property company and Greene King
has an estate that has a current
market value of £4.6bn against a
book value of £3.6bn.
Many of these properties are in
desirable parts of the country, and
would be worth more if converted
into homes than they would be if
they stayed as pubs.
It is in CKA’s interests at present
to say that it is impressed by Greene
King’s ability to generate strong
cash fl ow but any Greene King
regular who thinks this deal will not
lead to pub closures has probably
had one too many.Pay gaps still a concern
The average pay for the chief
executive of a FTSE 100 company
fell by 13% between 2017 and 2018
but it would be premature to say
that the corporate gravy train has hit
the buff ers. Being held briefl y at a
red signal would be more accurate.
To be sure, the annual survey
by the Chartered Institute of
Personnel and Development and
the High Pay Centre thinktank
shows some evidence of restraint in
the boardroom, which is welcome.
But as the study also points
out, pay at the top tends to go in
cycles because of the way in whichremuneration packages are put
together. Feast tends to follow
famine. What’s more, the gap
between what a CEO receives and
the pay of the average employee
continues to be colossal.
While not quite in the same
league as the US, where it would
take an average worker 278 years
to earn what the boss of one of the
country’s 350 biggest companies
makes in 12 months, the chief
executive-employee pay ratio in the
UK is still a chunky 117, and up from
47 two decades ago.
Mark Littlewood , the director
general of the free-market thinktank
the Institute of Economic Aff airs
(IEA), says fretting about top rates
of pay has become an obsession
that ignores the achievements of
successful chief executives.
This argument would carry more
weight if the IEA occasionally called
out cases where pay has been way
out of whack with performance.
It might also be pointed out
that paying chief executives more
appears to have made no material
diff erence to the performance of
the UK and US economies.
But if bosses really think they
can justify what they are coining in,
they would presumably welcome
the suggestion of the TUC leader,
Frances O’Grady, that workers
should sit on executive pay
committees. Don’t hold your breath.CKA is merely the latest
in a string of overseas
predators taking
advantage of sterling’s
weakness to pick up
UK assets on the cheap▲ Greene King
has a portfolio
of 2,700 pubs,
restaurants and
hotelsGreene King’s estate looked like
a bargain to CKA – and that may
mean last orders for pubgoers
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