Yahoo Finance Who's afraid of Jeremy Corbyn? The board of JLIF, it seems
Who’s afraid of Jeremy Corbyn? The board of John Laing Infrastructure Fund (JLIF), which invests in trains, hospitals, schools, police stations and so on, seems to be. It is “minded to recommend” a takeover offer at 142.5p, or £1.45bn, a price it surely would have rejected without a second thought last September when JLIF’s shares stood at 139p.
JLIF’s decision to smile upon the joint approach from Dalmore Capital and Equitix Investment Management owes much to the political heat around PFI projects, which comprise the bulk of the group’s portfolio. The shadow chancellor, John McDonnell, described PFI as a “waste of taxpayer money” at Labour’s party conference last year and said he wanted to nationalise. JLIF said soon afterwards that it would expect to get only 86% of book value if all of its 57 PFI contracts were taken back into public control. Confidence in PFI was further dented when Carillion collapsed in the new year.
In this unpromising climate, JLIF’s shares fell as low as 110p in April and were only 118p at the end of last week. That explains the board’s willingness to talk to Dalmore and Equitix. On a bald calculation, the bidders are offering a 20% premium to the share price. They are also offering more than the book value of the assets –about 130p, according to City analysts’ latest estimates – which will have been a key consideration. If the stock market is not willing to shoulder the political risks, the scope to raise equity for expansion is limited. Thus the decision to talk to the would-be bidders looks simultaneously timid and logical.
The interesting question is why Dalmore and Equitix spy value where others see danger. Perhaps they think Corbyn will never reach Downing Street. Perhaps, as big investors in projects such as the Thames Tideway “super sewer” and the HS1 rail link, they think they are too big to be pushed around. Or perhaps, since they are managing money for a lot of pension funds and local authorities, they think a future Labour government wouldn’t bite too hard in practice.
Whatever the explanation, this situation is odd. Stock markets are giving up on infrastructure and anything vaguely related to PFI. Yet private pools of capital, including pension fund money, are gung ho for more. Even allowing for different investment horizons, both camps can’t be right.
Wishy-washy formula
The UK corporate governance code, it could be said, is an exercise in pointing out to boards what should have been obvious to them in the first place. Still, we should raise a small cheer that the Financial Reporting Council (FRC), the guardian of the code, is introducing what could be called a “Persimmon clause” that would give remuneration committees powers to override “formulaic outcomes”.
If such an arrangement had been in place at the housebuilder, the chief executive Jeff Fairburn’s £100m jackpot via a share-based scheme could have been cut down automatically to a less ridiculous size. As it was, Persimmon’s board had failed to put a cap on potential rewards and found itself begging Fairburn and a couple of his colleagues to be less greedy. The chairman and the chair of the pay committee resigned in shame or embarrassment. The FRC’s new stricture may prevent similar fiascos in future.
Other reforms to be welcomed include the command that boards “should take into account workforce remuneration” and that executive directors’ pensions contributions “should be aligned with those available to the workforce”. Yes, there ought to be limits to how far a company can pretend its executive directors inhabit a different universe on pay, although implementation is obviously everything.
In that context, it’s a shame that the reformed code, while talking a lot about the need for listed companies to have a “purpose”, left it wholly open to boards to decide how to take account of the views of staff and outsiders. The least demanding method is to designate a non-executive director to “engage” with stakeholders. It’s what the government, after abandoning its bullish talk about worker representation, signalled it wanted. But, come on, the formula is wishy-washy in the extreme.
Elon Musk’s fan club must be concerned
Is Elon Musk’s fan club getting worried? It should be. In recent weeks, the Tesla billionaire has taken angry shots at Wall Street analysts and the press, while sounding more interested in his space adventures than the earthly pursuit of ramping up the production of electric cars.
Now Musk has made a baseless allegation against a British cave diver involved in the Thailand rescue. One hopes the diver, Vernon Unsworth, sues. Tesla investors may wish the same. If unchecked, the founder’s erratic behaviour could be a long-term danger to their wealth.
