Mark Kleinman: FCA chief Rathi not at the exit door after all
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his weekly CityAM column. Today, he looks at the FCA chief, big Boots to fill and a high street icon
FCA chief Rathi not at the exit door after all
Embattled, besieged, under-fire: a few short weeks ago, there seemed no shortage of brickbats flying at Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA).
Those were not only being hurled at him by those the City watchdog regulates (largely as a result of the ongoing furore about its name-and-shame approach to enforcement, on which it capitulated completely yesterday).
Amid a broader challenge to regulators to remove barriers to economic growth, the FCA was regarded in Whitehall as being one of the principal targets for a rolling back of red tape.
Alongside the Competition and Markets Authority, whose chairman, Marcus Bokkerink, has already been removed, the FCA is arguably Britain’s most important economic regulator, holding the keys to overseeing the critical growth engines of the economy.
During his four-and-a-half years in office, Rathi has raised few doubts about his competence but proven to be resistant to moves by his political masters to loosen the shackles of regulation in order to improve the UK’s competitiveness.
It was, therefore, assumed that he would step down at the end of his five-year term, which expires on 30 September.
The rumour mill had already cranked into gear about the identities of possible successors, both internal and external.
“The current CEO of the Financial Conduct Authority has a term running until 30 September 2025. The appointment process for the next term will be outlined in due course,” the Treasury said initially in response to enquiries about the recruitment of a successor.
By the end of last week, that stance had shifted. A recruitment process would not commence in the coming weeks, a spokesman said.
On 25 March, Rathi and Ashley Alder, the FCA chairman, will outline its priorities for the five years until 2030 – a period that would encompass a second full term for the watchdog’s chief executive.
It is expected to focus on a narrower range of policy consumer protection priorities with fewer new measures that would increase red tape for major firms.
The odds on Rathi remaining in post, despite his recent travails, must just have shortened dramatically.
Can Sycamore fill its Boots after WBA takeover?
How are the mighty fallen. By any measure, a retailer spanning both sides of the Atlantic and with a market capitalisation of over $10bn ranks as a substantial company. Bear in mind, though, that Walgreens Boots Alliance was, less than a decade ago, valued by public investors at more than $100bn, and the level of value destruction at arguably the most important healthcare retailer in both Britain and the US becomes apparent.
After months of talks, WBA is going private through a cut-price deal with the buyout firm Sycamore Partners. Years of failing to adapt technologically and to shifting consumption habits in the consumer healthcare industry have cost investors billions.
Among them, of course, is Stefano Pessina, architect of the WBA merger which created the company in its current form. I wouldn’t be as sure as many purport to be, though, that he will end up back in control of the Nottingham-based pharmacy chain.
For a start, Sycamore is likely to perform its most immediate surgery on the US-based subsidiaries most in need of intensive care – namely Shields, the speciality pharma division, and Village MD, the primary care provider.
That will likely leave Boots under Sycamore’s control for at least 12-18 months, by which time it will anticipate a period of sustained performance that would enable it to consider a public listing in London as the most attractive exit option.
That’s not to say Boots won’t draw interest from suitors – both trade and financial bidders will inevitably contemplate offers during Sycamore’s initial period of ownership. Pessina, though, may be less likely than many assume to play an ongoing role in Boots’ future.
WH Smith bidders show sale not a fait accompli
And then there were two. My revelation in January that WH Smith was in talks to offload its entire high street chain, bringing the curtain down on more than 230 years of British retail history, triggered a fresh bout of nostalgia for the long-standing fascias which have disappeared in recent times.
The economics of a deal do not look hugely promising – a sale would fetch, at best, a sum in the mid-tens of millions of pounds, while the auction has featured a line-up of suitors accustomed to chasing distressed retail transactions.
As I reported at the weekend, only two of those are left on the shortlist: Alteri, owner of the Bensons for Beds chain, and Modella Capital, which owns Hobbycraft and only last month snapped up The Original Factory Shop from long-standing owner Duke Street.
In one sense, this is a surprise. The HMV owner Doug Putman, who had also expressed an interest, had greater direct industrial synergies because of his toy and book retailing operations. It would also be naïve to believe that either Alteri or Modella would refrain from taking an axe to a long tail of underperforming shops, particularly as the estate has such short average remaining lease obligations. Either buyer, therefore, may pose a headache for the seller – even if the deal does not include one of Britain’s oldest high street brands.