Reeves Should Protect UK Stocks From PE Predators
The Labour government should recognize that public markets are a public good.
Chancellor of the Exchequer Rachel Reeves.
Photographer: WPA Pool/Getty Images EuropeHow do you save a stock market from private equity? That is – or at least definitely should be – a question on the mind of UK policymakers. There were 11 “meaningful bids” for UK-listed firms in the third quarter says investment bank Peel Hunt Ltd., making a total of 40 for the year so far. Add in the bids announced last year and completed delistings, and the value lost to the listed market is about £97 billion ($126 billion).
The question is also increasingly on the mind of officials in Japan, where if anything the value in the market (and hence the threat) is even more pronounced. The Nikkei 225 is up a mere sixfold since 1979. (The S&P 500 is up 55 times). Forty percent of the companies on the TSE Prime Market Index trade below their book value and the average price-to-book is around 1.2 times – against more like four in the US. You can see why private equity is circling. The number of PE firms on the ground is on the up and the ongoing hostile bid by Alimentation Couche-Tard Inc. for Japan’s iconic convenience store group Seven & i Holdings Co. is a game changer, says Peter Tasker of Arcus Investments. Expect a rise in Japanese companies accepting PE bids to avoid the horrors of a hostile bid – and for Japan to soon be the deal capital of the world.