Mark Kleinman: Dr Martens boss risks tripping over his own shoelaces
Mark Kleinman is Sky News’ City Editor and is the man that gets the City talking in his weekly CityAM column. This week he tackles Dr Martens, the Coventry Building Society bid for the Co-op Bank, and the next stage of the Telegraph sale
It’s a headline-writer’s dream: Dr Martens chief gets the boot. Unfortunately for Kenny Wilson, the odds on that featuring in a forthcoming edition of CityAM have shortened dramatically after last week’s dismal profit warning.
Investors’ faith has been badly shaken in the last 12 months by management’s inability to get a grip on distribution challenges at a Los Angeles warehouse and to reinvigorate American consumers’ appetite for its products.
For some institutional investors, it has become a question more of trust than of patience – though they are fast running out of both.
Wilson has been in place now for over five years, overseeing the transition from privately owned business to public company.
His time, surely, is nearly up. The series of profit alerts – four at the latest count – implies a board and executive team with too little control of the basics of the business.
Yet Paul Mason, the veteran retail executive who chairs Dr Martens, has been in his role for eight years. Under governance rules, Mason will cease to be regarded as independent once he has served nine years, in the autumn of 2024.
That may leave the company’s board in a quandary. It makes little sense for Mason to choose Wilson’s successor if he is to make way for a new chairman in the next 12 months; equally, it’s hard to see the chief executive surviving another profit alert.
The public shareholders who bought in at the time of Dr Martens’ initial public offering are understandably aggrieved. They have reason to coalesce around the analysis of Sparta Capital, which earlier this year wrote to the board to urge a sharpening of its execution and to buy back some of its stock – a demand it subsequently heeded.
Permira’s stratospheric valuation of the business when it went public at 370p-a-share in January 2021 has begun to look like the kind of adventurous pricing that can only make it more difficult for private equity firms to take their portfolio companies public. Permira now hopes to take Golden Goose, the luxury sneaker brand, onto the Milan stock market. It would be wise to price it cheaply, because on the evidence of Dr Martens, it is hard to envisage anything other than fund managers giving it the cold shoulder – or, more appropriately, the boot.
Nunn happier than Charlie with Barclays payback
No prizes for guessing the City’s happiest banker of the week: step forward, Charlie Nunn. I can only imagine the scene at Lloyds Banking Group’s headquarters on Monday lunchtime when confirmation arrived that a £1.2bn loan to the Barclay family, made more than 15 years ago and long-since written down, had final been repaid in full. Nunn and his colleagues must have felt like they’d won the biggest Lottery rollover in history.
Their reward demonstrates the benefit of a hardball negotiating position; Lloyds rejected a handful of lower offers before the Barclays eventually offered to repay the bank in full.
That tough stance will result in a £500m-plus windfall for Lloyds’ shareholders come its annual results in the first quarter; Nunn and his board will deserve credit for that amid a wider growth plan which looks challenging.
The response of readers polled on the issue suggests the UAE-based powers behind the vehicle will need to go further.
Nevertheless, what’s good for the bank is not necessarily good for the Telegraph itself. The growing revolt among senior writers, past and present, for the newspaper betrays an understandable anxiety about the prospect of foreign state ownership.
Their voices may prove to be influential in a quasi-judicial process run on a tight timetable, and with Ofcom under pressure to demonstrate robust scrutiny of the editorial independence issues raised by Lucy Frazer, the culture secretary, in her public interest intervention notice last week.
RedBird IMI is adamant that its assurances of editorial independence, along with a legally binding guarantee, should provide sufficient comfort to the government. The response of readers polled on the issue suggests the UAE-based powers behind the vehicle will need to go further.
A restructured deal reducing the proportion of Abu Dhabi equity in the takeover vehicle to substantially below 50% would be a neat compromise for Ofcom. Whether it would be acceptable to RedBird IMI and its investors is another question. But I suspect that a remedy like that one will ultimately be required if Frazer is to wave through the acquisition of a politically sensitive media asset in a general election year.
Coventry’s Co-op move looks to have mutual benefit
Hidden in plain sight. The logic underpinning the Coventry Building Society’s proposed takeover of the Co-operative Bank, which I revealed on Sky News yesterday, is clear to see.
Remutualising what was at one point one of the most influential customer-owned financial services businesses in Britain would strike a powerful blow for the mutual model, and create a group spanning mortgages, current accounts, savings products and business banking services.
With close to £90bn of assets, it would be of a comparable size to Virgin Money.
A tie-up isn’t without risk, given the scale of the proposed deal and the integration mishaps which so often plague banking industry mergers.
The ambition on both sides, though, is laudable. It wouldn’t be a surprise if the Coventry had secured a period of exclusivity within which to negotiate a deal by Christmas.