The press comment is somewhat underwhelmed by the new bids. There was a general expectation that one of the bidders might come up with something a bit different, or increase the offer enough to be hailed a clear winner. But instead there is still no clear view of what the result might be. The Times commentary is headlined: "Rowland climbs off the canvas", which is a pretty positive heading to read first thing in the morning, and goes on to say, "neither offer amounts to a knockout blow ..... the option of NatWest retaining its independence now seems a distinct possibility." There is much praise for the fight Sir David has put up, and a view that the Scots may split the vote to our benefit.
George Graham in the FT writes about the problem investors have in assessing the bids when so much of their value is in shares rather than cash. He also reports our evidence on the problems of previous mergers, but neither his piece nor the FT editorial comes down firmly on either side. The editorial does finish by saying "institutional shareholders in the two Scottish banks should, when confronted with increased offers, weigh carefully the case for a "no" vote." The piece is not so much a vote of confidence for NatWest, more a reflection of the emerging fears that the winner will be taking on substantial risk.
The new Bank of Scotland offer document emerges. It is a weighty object, running to 156 pages of pretty good quality paper. The first ten pages are in presentation, bullet point form, and although they make some good points, I think the appearance is a little amateurish. Then we have the Chairman’s letter, followed by all the legal and background stuff that one assumes no one ever reads.
The headline stuff states that the offer is worth £15.43 a share, which of course it isn't (already) because the share prices are so volatile. While some good points are made, the material looks a little unfocused, almost random. "NatWest needs help", it says; we are inefficient with a poor growth record. BoS is a better choice than RBS because it is focused on banking, rather than being a financial conglomerate like RBS. BoS is better placed to grow NatWest and is a more efficient operation.
There is a comparison with NatWest’s offer for Legal and General, which seems to be suggesting that, if our directors were recommending the L&G deal then they should recommend the new BoS offer. But this seems to me just a little confusing and bringing up L&G which is long dead hardly seems an example of “focus." The BoS bid, they claim, represents lowest risk and highest reward. They have the Plans and the People. This may well be true, but I would probably recommend a new graphic designer or publicist. The messages are not particularly clear, or physically well presented; my secretary and I could have knocked together a better presentation in half an hour on PowerPoint.
It is hard to describe the tedium of the detail within these documents. As an illustration, I quote from page 43 of this particular example.
"NatWest Shareholders who validly accept the New Offer may elect to receive 50 pence in cash (from Credit Suisse First Boston and MSDW in equal proportions) for a portion of the New Bank of Scotland Ordinary Stock Units in respect of which they have validly elected for the Ordinary Stock Partial Cash Alternative equivalent to 0.0827 New Bank of Scotland Ordinary Stock Units or (if 93% of the closing middle market quotation for a bank of Scotland Ordinary Stock Unit on Monday 31 January 2000, as derived from the Daily official List, is less than 605p) such number ofNew Bank of Scotland Ordinary Stock Units as is equal to 1.75 less the number produced by the following calculation: 1.75- (50/n) where n = 93% of the closing middle market quotation referred to above in pence."
So, do lawyers and investment bankers get paid lots because they understand this, or because they have to suffer the tedium of trying to understand this? Or do they just make these things complicated to persuade us of their value? Who knows. But I do feel that some of the nuances of both bids (mix and match options, loan notes, delayed capital returns and so on) hint of advisers showing off rather than being there to help investors. But I could be wrong; I freely accept that despite my Maths degree, I don't understand much of these details.
There is some good stuff hidden away within the appendices of the document. For instance, there is an interesting section on UK and US bank mergers. But I am unconvinced how many readers will plough through the boring stuff to extract the nuggets.
We put out a short Stock Exchange announcement, responding to the latest increased offers, which, it goes without saying, we still consider to be inadequate. Both bidders will be stretched if they succeed; the RBS tier 1 capital ratio will fall to 5.8% (which is apparently something the Bank of England don't like). BoS have not revealed their ratios, which sounds like the cue for a "Carry On Banking" type joke.
We restate the points about merger risk and past experience of hostile takeovers, and claim that neither bidder has a management team with major integration experience. NatWest, meanwhile, has a new leadership ready to deliver income growth and cost savings.
I have lunch with Bill Gates. Bill likes to have a little private chat every now and again so I can get his business back on track, you know how it is. Well, OK, lunch is not quite as impressive as it sounds. Unfortunately, there are 300 other people there at the Royal Lancaster Hotel, cramping my style and ability to have the heart to heart I thought Bill wanted when I got the invitation. This event marks the launch of Windows 2000, Bill's latest attempt to either;
a) make our lives better and easier, and our computers even more productive, or
b) achieve divine rulership of the universe and enslave all of mankind.
Your view will depend on how you perceive Microsoft's domination of software markets, and whether you think Bill is the greatest genius of the 20th century or a lucky and ruthless nerd.
The event is totally chaotic. There are actually three sessions overlapping, so I am in a queue to register while another group is leaving and a third are in session listening to the great man.
Dell Computers have invited me, but there is no-one to welcome me and I stand around the lunch table like a lemon until two chaps from Barclays and two from ICI turn up. The food is poor and there is no wine. Eventually, the Microsoft marketing head stands up and gives Bill the big build up, culminating with, "Ladies and Gentlemen, Bill Gates!"
We applaud wildly. Absolutely nothing happens. We stop applauding. Still nothing happens. The marketing man turns bright red, waffles incoherently but bravely, and mutters that this always happens. I really wish they were serving wine. Finally, he tries the build up again; and to everyone's relief, Bill appears.
"It's great to be here", says Bill, showing little sign that he has any clue which hotel, city or even country he is in. He is also totally without any hint of personal charisma. Within 30 seconds he is deeply into software languages used for internet protocols and I am lost. The man clearly and absolutely genuinely loves this techie stuff.
He covers a few more generally interesting things like the importance of mobile computing and Internet access, then invites the MD and Technology Head from Nomura up on stage for a rehearsed "interview" about Windows 2000. All goes well for a while until the poor IT guy gets a question from Bill and completely freezes. We have probably ten seconds of silence that feels like years. Finally, he comes through it and ends up with huge sympathetic applause. I guess being on stage in front of 300 people talking to the richest man in the history of the universe is a bit scary.
What impresses me most about Bill though is his conduct during this interview. He asks the questions, and then shuts up. He doesn't interrupt or embellish the responses. OK, I'm sure it is somewhat rehearsed, but most senior businesspeople I know have egos that, in a situation like this, would make such restraint impossible. My conclusion, admittedly based on little evidence, is that he is very smart, probably highly competitive, but not a man with a huge sense of arrogance or self-importance.
I get a call from a headhunter- the job of European Purchasing Head at Seagram is available again! I had a chat about it last summer, but it wasn't really senior enough. Apparently, they appointed someone who only lasted a matter of weeks. They have made it more senior, although the salary and overall package is a bit below my current. However, there would be some attractions for me given the sectors they operate in. I carry out a detailed assessment of the role.
Seagram area of activity and benefit to me
MUSIC (Polygram records, bought from Philips)
One of the 2 or 3 biggest music companies in the world. Invites to award ceremonies. Free CD's, saving me thousands of pounds a year given the number I buy. Possibility of meeting attractive young pop stars (purely business interest of course.)
ARTS (Universal Studios, Pictures and theme parks.... I don't think I better tell Ginny about this job.)
Chance to sell them a film script and become a famous writer. Possibility of meeting attractive young film stars (purely business interest of course.)
WINE and SPIRITS (Oddbins, my favourite wine retailer; lots of good wine producers in France, Australia and the US, plus some spirits)
Free tasting and staff discounts. Danger of becoming alcoholic. Possibility of meeting attractive young wines (purely business interest of course.)
So why on earth did I say no to the job last time? They're going to send me the details again. I also talk to a recruitment lady at PwC about the BBC Head of Purchasing job, which they are trying to fill after Liz Wilkinson's retirement. I'm not sure I would really want to take on the challenge; from what I know and previous discussions with Liz, there is much to be done, but the BBC culture makes progress quite difficult. It is also a bit early to know how Greg Dyke will want to play it, but I'm interested enough to keep my name in the frame at this stage. We might survive, we might do Redgrave, I might not be wanted at all; I don’t want to make a hasty move now, but I must start thinking seriously about my options.