Brexit: The American takeover of Britain now at full pace

29th November 2021 / United Kingdom
Brexit: The American takeover of Britain now at full pace

By TruePublica: Founded more than eight decades ago, Butlin’s was established in 1936 by Billy Butlin, who – according to its official history – “felt sorry for families staying in drab guest-houses with nothing much to do” during a trip to Barry Island. To this day, it still offers seaside holidays at resorts in Bognor Regis, Minehead and Skegness.

In February this year, Butlin’s was bought by U.S. private equity group Blackstone.

Lionel Assant, European head of private equity at Blackstone, said the group had confidence in the UK’s domestic market. “We are long-term believers in the UK and are delighted to invest meaningful capital.

Paul Flaum, group chief executive officer said the deal marks the beginning of a new chapter – “Blackstone [has] demonstrated a real understanding of our business and sector, and we look forward to working together to deliver on our exciting plans for the future.

“We are also delighted that our founding families will continue to be involved in the business through their significant family minority co-investment. We see compelling opportunities to grow Haven, Butlin’s and Warner Leisure Hotels.”

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Just nine months later, Blackstone has now put the business up for sale because there’s a quick profit in it for them. It’s the way of aggressive American investors. This is no isolated story.

In the immediate aftermath of Brexit (heavily funded with dark-money from corporate America) a 20 per cent plus fall in the value of Sterling occurred – and US dollars have been pouring in ever since.

As The Guardian reported last month – “Uncle Sam’s shopping trolley has been filled to overflowing with a bargain-hunting frenzy that has seen bids for notable names including outsourcer G4S, infrastructure builder John Laing and defence companies Meggitt and Ultra Electronics.”

The following week, three more buyouts were announced: supermarket Morrisons, inhaler-maker Vectura and bookmaker Entain with American investors looking for bargains to profit from or asset strip.

The first six months of 2021 saw the Americans taking a bite of British ownership to the tune of something like $45billion or £34billion according to data from the Office for National Statistics – and accordingly, 2021 will likely be one of the biggest selloffs in UK corporate history.

Global law firm Mayer Brown reports that – “the number of UK businesses acquired by US private equity houses has jumped 75 per cent this year.” The reason it says – “is the relatively depressed valuations of UK companies versus their European peers has made them particularly good value for US-based funds. Mayer Brown goes on to say – “the fall in valuations has been caused by the slowdown in the UK economy since the EU Brexit referendum and during that period, the EU economy has held up relatively well.”

James West, private equity partner in the Corporate & Securities practice at Mayer Brown, said: “US groups have huge amounts of cash to deploy and they prefer the UK when targeting deals as it has a similar culture and regulation to the US. UK central government and local government don’t have the reputation amongst investors for intervening in commercial decisions of businesses that some countries in the EU have.

Reuters reported in August that there was rising concern in political circles particularly about American investors snapping up British businesses – “This year’s unprecedented private equity buying spree in Britain is causing unease among politicians, trade unions and investors, about potential job losses and rising debt.” That article also reported record corporate raids, with the last two years amounting to ten years of average acquisitions of British businesses by American investors.

There is no doubting what has happened. The FT reported in July that – “Depressed valuations of public companies since Brexit are fuelling a surge of interest from buyout firms flush with cash” and that more deals have been done in the first half of 2021 than any other year on record. Indeed, the number of actual deals done are 60 per cent up in the UK, whilst in the EU, corporate raids are up just 14 per cent because EU businesses have not suffered quite so much and have higher valuations.

The FT also says – “The boom in private equity deals in the UK is also being driven by the relative cheapness of equities compared with other markets. Since the Brexit vote in 2016, investors have pulled more than £29bn from UK equity income funds, according to Morningstar.”

Leading the raid on Britain is US-based KKR, Blackstone and Carlyle, all who have appointed additional dealmakers to focus on British companies and aggressively make a move on them while prices are depressed. On a price to earnings basis, the gap between the UK market and other leading economies is at its widest in the past two decades, according to JPMorgan.

The warnings are now coming in thick and fast.Lord Paul Myners, the former City minister says – “Basically any predominantly British-listed company, with one or two exceptions . . . is vulnerable to a takeover offer in a way that doesn’t apply elsewhere in the world.”

And all this activity is causing real alarm. Some politicians and industry executives fear that the increase in debt levels that accompanies such deals could lead to high-profile corporate failures. Others question whether it makes sense for it to be so easy to acquire a listed company. Myners also commented – “Britain is open for business in the same way that a car boot sale is open for business.” 

Shares Magazine reported exactly one year ago that North American investors were on a feeding frenzy in Britain and claimed that half of corporate Britain had sold out to foreign investors, predominantly the Americans. “Since Brexit, though many foreign investment managers shunned UK companies, there was a remarkable acceleration in interest from those in North America.”

Research has shown that UK institutions now own a third less of corporate Britain than American investors.

In investment terms, the tectonic plates are shifting beneath us and ownership of the UK market is being pulled across the Atlantic,’ says Jason Black, chief operating officer at Orient Capital.

Our data shows significant change in ownership of the UK’s biggest listed companies predominantly due to the growth of passive investing driven by the big three North American asset management houses; BlackRock, Vanguard and State Street, who together manage more than $17 trillion in assets.

The result of such large ownership of corporate Britain by American investors will be political pressure to deregulate, increased exposure to debt and the increased risk of business failures and their associated job losses.

 

 

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