By David Benady
The rats – or are they fat cats? – are deserting the sinking ship. HMS UK Plc is listing badly and those able to leap overboard to safety are fleeing quick.
Some of the UK’s best known brands are panic selling at bargain basement prices and will soon be erased from our memories by their new owners.
Businesses that only last year were turning their noses up at sizeable take-over offers are now selling out for a quarter of the price. The declining economy has slashed company valuations, though they have not yet hit rock bottom.
We find ourselves in an interregnum between boom and a predicted bust. This is a fine time to sell – before values drop even further. And it’s a good time to acquire, before rivals barge in.
Just this week, Somerfield and Alliance & Leicester are being sold – at knock down prices – to competitors who are planning to merge them into their existing businesses.
The high street will look rather different when this round of takeovers is played out. Somerfield, the chain of 880 largely local supermarkets, has been snapped up at a snip by the Co-operative Group for £1.57bn. The consortium of owners who took control of Somerfield in 2005 for £1.2bn had been holding out for a sale price of £2.5bn. They had to considerably lower their sights, though will still make a tidy £400m in the process. But now begins the massive and arduous task of converting the Somerfield stores to the Co-op’s new format.
Retail mergers often lead to years of chaos – as with Morrisons’ takeover of Safeway and Somerfield’s acquisition of Kwik Save. Observers believe that the Co-op’s recent discovery of marketing and branding will help it thrive amid a vaunted high street renaissance. Whether Somerfield strengthens this position or undermines it will soon become apparent.
Meanwhile, Spanish bank Santander, which owns Abbey, is buying the struggling Alliance & Leicester bank for £1.3bn, some 317p per share. That’s somewhat below last year’s high of £12 a share, but A&L gambled and lost in the UK’s banking casino. Santander appears to be on to a safe bet, given the low stakes it is investing.
Maybe there is something in the Spanish Government’s boast that its banks have been ultra-conservative over the past decade, thus avoiding the banking crashes of the UK and US. Frenzied and wreckless poker playing by some of our great financial institutions, with the Financial Services Authority taking the role of incompetent croupier, have managed to bust the house as well as most of the players.
The upshot is that tottering UK businesses are there for the taking and brand ownership is being transformed as share prices collapse. Some expect Santander to convert Alliance & Leicester’s 254 branches and 2,500 ATMs to the Abbey brand in the long term. Ultimately, it would make sense to rebrand the whole caboodle as Santander.
Another deal from UK Plc’s great summer fire sale is SMG offloading Virgin Radio to the Times of India Group for £53.2m. This is way below the £225m SMG paid Chris Evans’s Ginger Productions for the station back in 2000.
And no examination of corporate sell-offs would be complete without at least a mention of the brand owners’ brand, ITV. The prospect of a bid is rising as its depressed shareprice struggles to hit 50p. John De Mol, the Endemol boss who invented Big Brother, has said this week he wouldn’t rule out buying the UK’s top commercial broadcaster.
It would be no surprise if more UK brands were snapped up over coming months. These moves will have dramatic implications for marketers. The rebranding of some of our great businesses could actually give a boost to marketing and advertising at a time when other companies are slashing their budgets. Meanwhile, the fleeing rats will be basking in the sun after escaping the downturn in the nick of time.