As I See It
Deals herald key phase for Scottish business
Standard Life is merging with Aberdeen Asset Management, Wood Group is acquiring Amec Foster Wheeler, and Menzies Distribution is involved in a reverse takeover with DX Group.
All three are touting for support to get their respective deals over the line in the coming weeks in what will represent a transformative phase for Scottish business.
Should they go ahead they will create three champions in three sectors – finance, oil and logistics. But first, they all face potential banana skins.
A competition inquiry has been launched into the proposed £11 billion tie-up between Standard Life and Aberdeen to determine if the deal would lead to a “substantial lessening of competition”.
It will create Britain’s biggest asset manager and it would be an even bigger surprise if the CMA found a reason to scupper the merger. The inquiry is part of a routine process, and the regulators in Germany and the US have already approved the combination.
Even so, it is never wise to take anything for granted and it did not go unnoticed that Sir Gerry Grimstone, chairman of the planned new entity, made a big play of the relative lack of overlap of the two businesses in a briefing before the annual general meeting.
It never does any harm when faced with creating a potential market monopoly to stress just how different the respective partners happen to be.
Investors in the two companies will vote on 19 June and with a large private shareholder base to service there is work yet to be done to ensure nothing is left to chance. The companies intend the new shares to begin trading in August.
In the meantime, Menzies is facing a stubborn activist investor trying to undermine its deal with DX Group which would create a 24 hour logistics group.
Gatemore Capital Management this week acquired a further 10% stake in DX Group, increasing its overall holding in the company to 21% and says it has other shareholders on its side. This looks like a deal that may topple, or may need sweetening it if it is to succeed.
Wood Group is facing a bigger challenge completing its £2.2bn takeover of Amec Foster Wheeler.
It has offered to sell the “majority” of its target’s oil and gas business in the North Sea in a clear move to satisfy the competition authorities.
The plan was revealed in the prospectus released last week, and while it is likely to raise more concerns over jobs in the region Amec needs this deal. It recommended the offer in March when the business was toiling under £1 billion of net debt, and was a week away from a plan to suspend dividend payments and ask shareholders for £500m via a rights issue.
That hasn’t stopped the CMA demanding a peek at the books to see if there is any reason why it should stop the merger going through.
Unlike the Standard Life Aberdeen tie-up, this one features some significant overlaps which has been acknowledged by Wood’s CEO, Robin Watson. Hence the North Sea oil sale.
A more troublesome factor is the Serious Fraud Office investigation into alleged bribery and money laundering at Monaco-based Unaoil.
Wood Group is not involved in the inquiry but Amec is helping the SFO.
The US financial regulator, the Securities and Exchange Commission, and Department of Justice already have ongoing investigations into Amec Foster Wheeler in connection with these matters and it may well develop into an investigation of Amec by the SFO.
Wood Group, which is not being investigated, launched an internal inquiry of its own into its dealings with Unaoil.
Mr Watson and his chairman Ian Marchant will know these sorts of issues are never resolved quickly, but they won’t want any of it lingering over them for too long, or for it to put the creation of the £5bn combined company in doubt.