A provision of £ 2 million for a potential fine from the Competition and Markets Authority (CMA) for fixing the prices of copies of football shirts is considered a small beer in JD Sports, FTSE 100 worth £ 6 billion even after halving the price of its shares in the last eight months. But all this contributes to the feeling of distrust around the corporate “King of Trainers” after the confused departure last month of longtime CEO Peter Kaugil.
In fact, the alleged larks with the Rangers kit represent the second clash with the CMA in several months. The latest episode involved a £ 4.3 million fine and an illegal parking lot meeting between Cowgill and the head of Footasylum, a business JD had to keep on hand until the takeover was approved by regulators (ultimately not).
The events seem to have been one of the factors behind Kaugil’s sudden departure after a dramatic board meeting. At least that was a natural way to read the board’s complaint that “internal infrastructure, governance and control” had not kept pace with the company’s spectacular growth. In other words, the public-shy Rubin family, the 55% controlling shareholder owned by the Pentland Group, would like JD to look more like ordinary FTSE 100 equipment and avoid going into so many shorts.
If so, Kaugil’s defenestration may be for the best, even if it frightened other shareholders. But there is another reform action that JD can take on the road to corporate normalcy: to return the £ 61 million in holiday support announced during Covid.
Almost every other Footsie retailer – Primark of Associated British Foods, for example – has done so in cases where the financial results have turned out better than expected. JD’s performance definitely fits that description: the company said in February that last year’s main winnings to be announced this month would be at least £ 900 million – a record.
The board and the Rubies are said to have discussed the payment of the holiday money and are willing to do so. CMA sagas give them an additional reason to show a break with the past. As they say in a corner of the training ground: just do it.
Cazoo looking down
There were cries last summer when Alex Chesterman, known for his LoveFilm and Zoopla fame, avoided the London stock market and launched Cazoo, an online used car dealer, in New York City through one of those cool “blank check” vehicles. As Cazoo’s operations are mainly in the United Kingdom, the choice is seen as a cure for London’s ambitions to be bigger on technology and e-commerce lists.
Chesterman explained that American investors have a better understanding of the business of “investing in the short term for future growth”, which is true if he really meant that at that time they were ready to give incredible estimates to companies that are years away from the hard bottom – linear gains. Cazoo was somehow valued at $ 7 billion (£ 5.6 billion).
Price now: about $ 1 billion after a rapid reassessment by the US market of the value of technology companies at an early stage. The company is currently adopting a “business restructuring plan” – briefly cutting 750 jobs or 15% of the workforce to save money and fight a recession.
Cazoo still hopes to double the number of cars it sells this year, it must be said. And – who knows? – Taking a slower path to disrupting the used car market may eventually succeed. But promoters in London can be forgiven for sighing with relief. The United Kingdom still has Deliveroo (75% reduction) and other dogs for IPO, so it is not in a position to croak. But Cazoo was good to miss.
Biffa’s offer could be a loss
The last time Biffa, the waste management company, was bought by private capital, buyers eventually burned out. The leverage buyout in 2008 was followed by the takeover of debt against equity by creditors in 2012.
And here we are again. Biffa, after being returned to the stock market in 2016, is now the subject of a £ 1.4 billion approach from US private investment Energy Capital Partners. Given that the proposed price of 445 pence per share would be a 37% takeover premium, you can see why Biffa’s directors would “intend to recommend”.
It is more difficult to understand why prospective buyers think there is an easy choice. Trash collection and waste disposal sounds as if they should be immune to cyclical fluctuations; in practice, the changing regulatory landscape complicates matters. An unresolved dispute with HMRC over the payment of landfill taxes, where Biffa said the liabilities could be a maximum of £ 153 million, is just one of the complications in this case. This doesn’t seem like an obvious game for private equity leverage games.
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