Are UK boards ‘too hot to trot’ in selling off companies?

Stuart Chambers stands on the brink of an unusual feat in the UK corporate world — presiding over the sale of three big London-listed companies to a foreign buyer.

He was chair of chip designer Arm Holdings when Japan’s SoftBank acquired it for $32bn in 2016. Chambers also held the same position at consumer packaging company Rexam when it was taken over by US drinks can manufacturer Ball Corporation in 2015. Now as chair of Anglo American, he is dealing with an attempt by Australia’s BHP to acquire the London-listed miner.

That bid looks like it is in a difficult place, after Anglo rejected BHP’s revised £34bn offer for the company. Others may step in if BHP fails. But that has not stopped Chambers facing criticism that he and other UK chairs are “too hot to trot” in selling off British companies. 

As the value of bids for London-listed companies this year has hit the highest level since 2018, is that fair? And more broadly, do such sales indicate failure? If so, for whom — boards, shareholders or the country?

Several FTSE chairs pointed out to me they have an obligation to support a deal if it delivers more value for shareholders than staying independent, rather than taking an ideological or nationalistic view.

“We have a fiduciary duty,” says Chambers, defending his record. “There is no way you can obstruct the collective will of shareholders to sell. It doesn’t happen by one individual’s whims alone.” He adds that SoftBank was rebuffed three times before a deal at a higher price was approved by shareholders.

At the same time, according to one former FTSE chair, it is surprising how quick many City investment funds are to back a potential acquisition. “In my experience, many are too keen to take the money and run,” he said. The result is the UK frequently develops intellectual property and builds businesses to a certain size only for a foreign buyer to then invest in scaling up the company without having taken on any of the initial risk.

One or two do not matter but a steady stream of UK exits is a cause for concern. Among deals to have been agreed this year alone are US private equity firm Thoma Bravo’s £4.3bn acquisition of cyber security company Darktrace and International Paper’s £7.8bn purchase of paper and packaging group DS Smith.

Shareholder profits can of course be reinvested in other companies and an openness to deals makes London a more attractive place to list. But much has shifted since former UK chancellor Philip Hammond declared the Arm sale was a “big vote of confidence in British business”.

Such a deal would be unlikely in the current environment where geopolitical tensions and supply chain shocks have spurred governments to be more interventionist in protecting strategic interests such as semiconductors.

The problem is that it is not entirely clear what the UK government now believes is worth protecting. It blocked the Daily Telegraph newspaper falling into the hands of the UAE-backed firm RedBird IMI but has been more accommodating on the potential sale of Royal Mail to Czech billionaire Daniel Křetínský.

What needs to be addressed are the underlying causes for why company executives and board directors feel it is in a UK company’s interests to turn to another market — either through a sale or change in listing venue — to realise a corporation’s full value. Culturally, entrepreneurs and new business ideas are valued, but risk-taking is not. Superstar talent is sought after but bumper pay packages are shunned. At the same time if the government wants to stem the flow of UK takeovers, it should be clearer on what the ground rules are.

“You have to start with absolute clarity as to what our key assets and interests are,” said Paul Drechsler, chair of International Chamber of Commerce, citing industries from defence and automotives to higher education that would merit intervention. “What are the areas the UK wants to build as strengths? We have to say from the outset where we stand. Do these industries matter to the UK or not — what’s the UK’s place, role and intent in the world?”

It is not up to boards or shareholders to decide these things. That is the role of government.

anjli.raval@ft.com