As the former non-executive chairman of British satellite pioneer Inmarsat, Andrew Sukawaty and his executive crew should be hanging their heads in shame.
Just two years after selling out to private equity barons Apax and Warburg Pincus, the UK firm, with its fine record of research and development (R&D), is being sold on to an American rival at a profit close to £1billion.
Inmarsat’s former management let investors down by failing to secure the best price but more importantly paved the way for a US competitor to gain access to valuable satellite communications technology.
Tech pioneer: Just two years after selling out to private equity barons, satellite firm Inmarsat, with its fine record of R&D, is being sold onto an American rival at a profit close to £1bn
Fears of strategic leakage could be overdone given the close security co-operation between Britain and the US and now Australia. What is really worrying is that Inmarsat, and all its science, has been warehoused to an overseas buyer so easily.
There are traces of Cobham when private equity shark Advent conducted a rapid fire sale of its flight refuelling technology to a US rival.
As Lady Cobham, upholder of the family heritage, has noted the Americans sought to buy the British refuelling technology for years but had been kept at bay by the Dorset company.
Under the cover of Covid and private equity ownership, the aerospace know-how, which helped win the Falklands War, was lost in a flash.
What both the Inmarsat and Cobham takeovers demonstrate is that when private equity spins a yarn about providing new capital, better management and preserving the UK’s science, technology and manufacturing base, the pledges are too vague.
Much of private equity is interested in quick turnarounds and wants no truck with longer-term investment.
There is a pile of guff from Inmarsat’s new proposed California owner Viasat about more R&D and being better able to compete with low-orbit satellite companies such as Elon Musk’s Starlink.
Britain already has some skin in the game having invested taxpayers’ money on Oneweb, bought out of US bankruptcy.
The real prize for the Americans is Inmarsat’s breakthrough tech for in-flight communications, which has huge commercial value and potential national security uses.
As of writing, the Government is manoeuvring to get binding undertakings before invoking a National Security and Investment Act review which can be imposed retrospectively. It is seeking assurances on R&D, manufacturing and jobs.
Cold experience tells us that such stipulations – look at Cobham! – are far from binding. Given overlapping technologies, this is a deal which screams out for a full Competition and Markets Authority review.
Business Secretary Kwasi Kwarteng has shown an admirable willingness to intervene over the proposed sales of Ultra Electronics and Meggitt, in contrast to the hands-off approach of his predecessors.
He has another golden opportunity to establish a Kwarteng doctrine by balancing free market capitalism with the national interest.
Frills and spills
Among the advantages of being a tightly held public company is that executives do not have to buckle to current trends.
Primark owner Associated British Foods (ABF) comes under enormous pressure to go digital to better compete with upstarts Asos, Boohoo and the like.
As others have fled or vanished from the high streets, Primark has become ever bigger in the UK, Europe and the US. Its formula of fast, no-frills fashion thrives despite a Cop26 climate change-aware world.
The pandemic was a nightmare for Primark although ABF, which generates more than half its income from food, rolled with the punches. After a bumpy 2020-21 due to closures it expects a £2billion jump in sales this year and plans to hold margins at 10 per cent. Its sales model only really makes sense if it doesn’t have to cope with online logistics.
Intentions are clear. It plans to expand from 398 to 530 stores by 2026 and is rewarding investors with a special dividend. Old-style shopping is not yet dead and buried.
Breaking up
The decision of American industrial conglomerate GE to carve itself into three separate quoted outfits is the end of an era.
In the days of legendary boss Jack Welch, GE was the US’s most valuable company, and it still had revenues of £132billion in 2008, seven years after he retired.
It plans to split out energy and healthcare, and keep aerospace as its core, shedding £56billion of debt. That looks ambitious.
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