So now we know what Archie Norman and his Knutsford bid vehicle are really up to. Clearly, the game plan was never to launch a hostile takeover of a major ailing retail chain, but to take over an ailing political party.
Stormin’ Norman’s promotion to the Tory front bench – surely the equivalent of an appointment to the board in British industry – is no short-term asset-stripping exercise. The Conservative Party currently has no assets to strip. Norman must be looking to turn around the fortunes of the Tory Party, in much the same way that he turned around Asda.
How else to explain that Norman last week resigned as a director of Railtrack and as a consultant to Asda, but maintains his directorship of and shareholding in Knutsford? One can see why the fellow directors that comprise Knutsford’s so-called Awesome Foursome should be anxious to hold on to the commercial talents of Norman. Without him, they’re a Tiresome Threesome. At their most philosophical, they may prefer to be known as Winsome Losesome.
The brief history of Knutsford has not fulfilled its early promise which, with its photo opportunities of the Foursome posing like Sixties moptops on park benches, was less Archie than just plain arch. Here were Nigel Wray, Nick Leslau and Julian Richer made credible by Norman’s presence and coyly hinting at big things to come.
The City certainly believed them. Knutsford’s share price took off to a silly 275p in November, valuing the company – with its only assets being its line-up of talent – at about £700m. A feeble bid for boring conglomerate Wassall later and Norman’s promotion to John Prescott’s transport and environment goad, and the shares are down 20 per cent over a week to 140p, and have been as low as 80p.
The original idea, apparently, was to build a retail business around Richer (of Richer Sounds) before he brought in Norman, and we all thought that they must be after bigger prey, such as Sainsbury’s or Storehouse. Wassall, the argument went, would have provided the critical mass, not to mention a £350m cash pile, to give them a bash at one of the wounded main chains.
Those ambitions will have been revised as Norman’s political ambitions have been revived. Norman wasn’t made chief executive of Barclays, nor chairman of Marks & Spencer, but that’s no reason to suppose that he couldn’t have taken on the heaviest of retail battalions. Anyone who can take on Prescott could clearly take on, say, the Sainsbury family.
But it is not to be. I remember writing here last summer that business people’s forays into politics are often ill-fated. I had Lord Simon, erstwhile chief executive of BP, principally in mind after his unhappy experience at the Department of Trade & Industry. But I mentioned Norman in the context of someone who was also said to be cooling on the idea of a political career.
The Knutsford development seemed to be confirming that view, until William Hague had a rush of blood to his head and suddenly saw his future alongside the likes of Norman and Michael Portillo. One hopes that Norman hasn’t succumbed to vanity, but I have to say it’s unlikely. I’ve lunched with Norman and he comes over gritty and scientific, not vain and impressionable.
But there are two commercial points to be made regarding the political rise of Norman, which must be in inverse proportion to the commercial fall of Knutsford. The first is that politics was obviously distracting him and that is why, perhaps, Knutsford didn’t act with the speed and purpose with which it might have done when its paper value was highly rated and investors’ blood was up.
Speed is of the essence in bidding circumstances and one feels that Knutsford’s moment has passed. That Norman’s moment has come in politics serves only to emphasise that point. But there is another reason why speed of action would have served Knutsford’s purpose and it brings me to my second point.
Going back a further summer to August 1998, I argued that the Office of Fair Trading was probably broaching competition issues in the supermarket sector and investigating allegations of “rip-off Britain” five years too late. In the meantime, unreliability of research statistics, bogus comparisons with Continental retail industries and competitive pressure on margins had conspired to rescue UK supermarkets from their rip-off reputation.
A preliminary report from the Competition Commission last week seems to agree with me. The supermarkets breathed a collective sigh of relief and, apart from clothing, which remains under the retail regulatory microscope, they can develop their markets unencumbered by competition threats.
Share prices rose and then settled back on this news, but there can be no doubt that a major regulatory shadow has been lifted. In one sense, this ought to be good news for an outfit such as Knutsford. But Norman ought to relish the opportunity of operating in a tough regulatory environment – and it has to be said that it will be harder to make a case for a takeover with the regulatory threat lifted. Even the ailing might prosper rather more now.
All of which supports Norman’s decision for pursuing politics rather than business. But it’s still a pity. There is much yet to be done in the retailing industry, which will miss Norman’s talents sorely for the time being.
George Pitcher is a partner of issue management consultancy Luther Pendragon