Mark Kleinman: BP risks being left a Shell without new chair
BP risks being left a Shell without new chair
A not-so-supermajor? Speculation about a Shell tilt at BP to establish a £200bn oil and gas behemoth has been running wild since a Bloomberg News report in May that the Anglo-Dutch group was “studying” such a move.
Last week, that speculation lurched into overdrive, when the Wall Street Journal reported that the two companies were in “active” early-stage discussions with one another. BP’s board, the article said, was considering its rival’s approach “carefully”.
BP declined to comment, while Shell swiftly, and firmly, denied the story: “This is further market speculation,” it said. “No talks are taking place.”
The following morning, Shell went further, ruling itself out of a bid for six months under the Takeover Code (with the usual caveats) and saying it had not even been actively thinking about a BP offer.
There seems little scope in here for the conventional sophistry of corporate responses to reports of deal discussions, where shades of grey often number more than 50.
Nevertheless, it would be naive to discount the WSJ report entirely on the basis of Shell’s reaction. It has been common knowledge across the City in recent months that Shell has been war-gaming the merits and valuation metrics attached to a takeover of its smaller peer.
One source describes BP’s stock price, and the relative gulf to Shell’s, as still being “in the kill zone”, even with a conventional takeover premium attached.
While Shell’s denial appears to represent a reprieve for BP as it seeks to preserve its independence, it highlights the crucial nature of BP’s search for its next chairman. As I reported on Sky News, both Sam Laidlaw, the former Centrica chief executive, and Ken Mackenzie, former BHP chairman, were sounded out, but since turned the approaches down.
Another logical candidate would have been Stuart Chambers, the Anglo American chairman who successfully fended off BHP’s advances last year, but he would be unlikely to in a position to accept given the existing demands on his time.
BP can’t afford to wait for a chairman who might be crucial to remaining a proudly independent British company. A swift appointment has just become even more urgent.
Ministers’ industrial strategy is missing the XLinks factor
Every little helps – particularly when it comes to reducing Britain’s frustratingly high wholesale electricity costs. So it was understandable that the former Tesco chief executive, Sir Dave Lewis, expressed “bitter disappointment” at energy security secretary Ed Miliband’s decision to reject a request for the government to back Xlinks, a 2500-mile subsea cable connecting Morocco and the Devon coast.
Through this link would, according to the project’s backers, have flowed enough electricity to generate close to 10pc of Britain’s demand, at a price roughly half that to be generated by a fleet of new nuclear power stations.
Government sources said the project presented “a high level of inherent risk, related to both delivery and security”, notably because of the growing sabotage risk to undersea cables and pipelines.
Its statement drew a furious response from Xlinks, which lambasted the government’s decision to “walk away from an opportunity to unlock the substantial value that a large-scale renewable energy project like this would bring, not least the opportunity to lower the wholesale price of electricity, which is currently one of the highest in Europe”.
“We are hugely surprised and bitterly disappointed that the UK Government would choose to walk away from an opportunity to unlock the substantial value that a large-scale renewable energy project like this would bring,” Sir Dave added.
Combined with the collapse of the Lindsey oil refinery in Lincolnshire, which was forced into compulsory liquidation this week, the closure of Nippon Electric Glass’s factory in Wigan and the potential shutdown of Associated British Foods’ Vivergo bioethanol plant in Hull, it’s a deeply uncomfortable backdrop to the industrial strategy unveiled by ministers last week. ‘Not a good look’ would be an understatement.
Propel’s £1.5bn lending deal is an asset to owners
With Rachel Reeves’ annual Mansion House speech looming large this month, the issue of financing UK SMEs remains a deep concern for Treasury officials. At a meeting in May, bank executives were summoned to meet ministers for talks amid the alarming statistic that loan success rates for smaller companies are in sharp decline.
This has left a vacuum for non-bank lenders. One asset-based finance house, Propel Finance, is seeking to boost its presence in the SME financing space, with a new £1.5bn credit facility to be announced this week.
Propel lends to companies which need access to finance to acquire business-critical equipment in sectors such as manufacturing, transport and construction.
Majority-owned by the private equity firm Cabot Square Capital, Propel has lent more than £1bn since 2022, and says it has supported more than 40,000 SMEs during this period.
The latest financing, it adds, has been arranged with Bank of America, Barclays, Citi, the British Business Bank and an unnamed alternative investment firm. It expects the new facility to allow it to more than double new lending over the next three years.
Mark Catton, Propel chief executive, described the deal as “transformative”. City insiders say it could pave the way for a Cabot Square Capital exit in due course, which should also yield a decent return for Barclays, a strategic investor in the business.