Tonight:
5°c
It is now two months since Resolution shook even the most jaundiced City investors with its announcement that the Financial Services Authority had decided to look again at the year-old deal that saw its previous business of closed life assurance funds being acquired (after a prolonged battle) by Hugh Osmond's Pearl Group. At the time — 9 March — Resolution expressed the hope the inquiry would be “swiftly” resolved. It may be that, by the FSA's standards, eight weeks is well within the meaning of swift.
Others, however, are less patient, and some of Resolution's shareholders are beginning to twitch. The company's successful £500 million-plus fundraising was one of the biggest equity new issues seen in the London market last year. The point of the issue was to create a war chest that would allow founder Clive Cowdery and a team including former FSA chief executive John Tiner, to take advantage of bombed-out valuations in the financial sector, and to become an agent of consolidation and change — much as Cowdery had done so successfully with Resolution Mark One. Unfortunately the investigation has put any such plans on hold. The company clearly cannot make any bids in an area as sensitive as finance until the FSA officially gives it the all-clear.
The question is — as days have turned into weeks and now months — just when this clearance will come and how long shareholders will be willing to wait before they start to agitate for their money to be returned.
Resolution's rival Pearl is seeking to recapitalise itself to take advantage of the bargains in the sector, as are others. There is a risk, if this inquiry drags on, that by the time Resolution's name is cleared the best of the bargains will have gone.
FSA inquiries in the past have forced individuals to sit on the sidelines for months and sometimes years. But this is the first time an entire company has been put into limbo in this way. It will have been rough justice indeed if it turns out there is no case to answer.
Fast-lane Fiat? I'm dreaming
I think I may have been asleep for several years. Last time I paid any attention to Fiat, it was a sub-scale manufacturer of distinctly average cars, veering between profit and loss, with the latter almost always the more likely of the two, and finding it ever more difficult to get the huge sums needed to put new models into production.
Every so often, serious doubts would arise about its ability to survive but somehow it seemed to muddle through. Yet last week it emerged as a partner for Chrysler — the US car company that has a history of reducing to rags anyone daft enough to think they can sort it out — and this week it again attracted the limelight with its plan to take over the European businesses of General Motors, namely Opel in Germany, Vauxhall in Britain and Saab in Sweden. The result of that — were it to succeed — would make it the world's second-largest car manufacturer. Clearly I have missed something. This cannot be the basket-case Fiat I remember.
And yet it so obviously is. True, its financial performance seems to have improved a bit but it still beggars belief to think it has the managerial, not to mention the technical, resources to take on one of these businesses, let alone the lot. Clearly it does not have the money, but presumably it is relying on massive infusions of state aid from various governments to solve that problem — though any overt signs of largesse from these sources seem likely to be challenged by the competition authorities in Brussels.
There is nothing in Fiat's history to suggest it could make a success of so many acquisitions. Indeed, there is little in the long history of motor industry mergers and co-operation to suggest that they are likely to deliver anything other than pain.
And this would be no different. There is overcapacity in the world's motor industry, and there is particular over-capacity in Europe. Even in good times, the industry has the capacity to produce four cars for every three it can sell. To any informed observer, Fiat would be the last choice of firm to sort it. Any suggestion to the contrary must surely be a dream.
