Comment: Tucker has the City’s – and bookies’ – backing
AND then there were two. At least it looks that way in terms of the shortlist for the position of governor of the Bank of England.
Gus O’Donnell, the former Whitehall mandarin who was one of the three favourites to succeed Sir Mervyn King, has publicly withdrawn from the race for what many might think is a poisoned chalice given the six more years of austerity we are said to be facing.
It leaves central bank insider Paul Tucker, the Bank’s deputy governor for financial stability, and Lord Turner, chairman of the Financial Services Authority, wresting it out for this politically charged position.
Ironically, both have seen their lustre tarnished: Tucker for his part in the Barclays/Bob Diamond Libor imbroglio, and Turner for the pretty poor war the FSA had as the banking industry went rogue in the jungle of Acronym Banking (CDOs, SIVs etc).
Having said that, both men are commanding intellectual figures, with strong economic credentials. Tucker is probably slightly preferred in the City for his banking knowledge and the fact that he has never been an out-and-out regulator.
Turner would be viewed with some doubt in the Square Mile, particularly given his outspoken denunciation of some “socially useless” banking activities that got us into the austerity mess.
In fact, bookmaker Paddy Power reckons it is all over bar the shouting at Threadneedle Street, installing Tucker as its 8/11 on favourite to win the job.
You could argue that a left-field appointment might just emerge, perhaps in the form of John Vickers, of Independent Commission on Banking fame. But it would be a radical move for an organisation like the BoE not renowned for assimilating radicalism. It does look a two-horse race with Tucker a good head in front.
Political naïvety of merger sweethearts
ONE wonders whether BAE Systems and EADS fully appraised the massive geopolitical complications of their proposed merger before they went public. Such a tie-up was never going to go through purely on commercial considerations and strategic logic.
Those two giants are in a red-line industry, particularly in the more defence-oriented BAE’s case. And yet they seem to have been jolted by the political commotion in the UK, France, Germany and the United States on the merger.
The £28 billion marriage hangs in the balance right up to and probably beyond the first deadline of 4pm tomorrow. The UK is threatening to veto the deal with its “golden share” in BAE if France and Germany do not agree to have shareholdings in the combined group low enough to prevent them affecting commercial decisions.
Germany has stunned everyone by suddenly saying it would like the HQ of any new entity to be switched from Toulouse in France to Munich. The French, amour-propre pricked, are fuming.
Given the complexity of the deal – ring-fencing the American defence business, for instance – and the flaky political antennae of the two companies, it is virtually certain the City’s Takeover Panel will grant an extension to the timetable for a firm merger proposal. After all, the Panel granted a number of extensions to the bid approach by Canadian pension funds for Goals Soccer Centres recently and that company didn’t have a Tornado jet programme of any description.
Now, BAE’s biggest shareholder, Invesco Perpetual, with 13 per cent of the shares, is understood to have told management it also has “significant reservations” about the value of the tie-up.
It plainly thinks the British defence giant has a fetish for dealmaking that has contributed to the low rating of the shares. If the helmet fits, it has to be said…
BAE wants to get back into commercial aviation given retrenched US defence spending. But it was never going to be a simple U-turn. The BAE/EADS combination looks to be teetering on the edge of a hugely embarrassing retreat.
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