ALEX BRUMMER: Vodafone loses plot with Frankfurt float


ALEX BRUMMER: Vodafone loses the plot by choosing Frankfurt flotation over London

  • Vodafone is a serial disappointment to investors 
  • It has an unimpressive board, headed by a sub-octane chairman Gerard Kleisterlee

Vodafone is a serial disappointment to investors, in spite of its habit of tossing out a big cash bone as when it sold its hugely valuable stake in Verizon Wireless. 

An unimpressive board, headed by a sub-octane chairman Gerard Kleisterlee, is choosing to float what it describes as ‘Europe’s leading tower company’ in Frankfurt rather than the UK. 

Its rationale for doing so is that it has established a corporate headquarters for Vantage Towers in Düsseldorf, and a large part of the enterprise will be on the Continent. This ignores facts on the ground which are that more than 14,000 major mast sites are in the UK and Vodafone, from its earliest days, has been a wholly British creation. 

Signing off: Vodafone has an unimpressive board, headed by a sub-octane chairman Gerard Kleisterlee

Signing off: Vodafone has an unimpressive board, headed by a sub-octane chairman Gerard Kleisterlee

As a spin-off from the late Ernest Harrison’s Racal, Vodafone used its London-quoted equity and the City’s global debt market capacity to conquer the world. 

This included what, at the time, was the world’s biggest takeover when it bought Mannesmann of Germany for £125billion in 2000. UK investors placed their faith in the then chief executive Sir Christopher Gent to create the first global mobile telecoms provider of the digital era. There have many moments of tension between Voda and long-term investors. Generally they have been supportive and Vodafone has used the flexibility of a London quote to become among the most renowned dealmakers in Britain. It was only a year ago that it landed control of Liberty Global. 

Under the proposed arrangements, Vantage Towers will be partially floated in Frankfurt with Vodafone retaining a majority stake. As the initial public offering is likely to be the largest in Europe next year, the decision to choose Germany is a major snub to the City. Contrast this with the dowager of British insurance, the Prudential. When it split its international operations in Asia and the US from its domestic operations in Britain, it made a deliberate decision to keep the global side, bearing the Prudential name, in London, which allowed it to bridge different time zones and to have access to the financial skills of the City. 

If Vodafone were better advised, and had a board which better understood UK investment culture, it would have looked at the precedents. Unilever received a bloody nose when its weighted Dutch board sought to switch domicile from London to Rotterdam. Plumbing group Ferguson and medical devices champion Smith & Nephew both reversed course on switching domicile to the US after the intervention of UK long investors unable to hold overseas shares. 

A Frankfurt quote for Vantage Towers would create significant problems and punish loyalty. Chief executive Nick Read should think again rather than risk a bitter struggle with the company’s reputation and share price the losers.

Pharmacy makeover 

Ownership of the world’s largest pharmacy and medicine supply chain in a pandemic might appear a licence to print money. It hasn’t worked like that for Stefano Pessina, the 79-year-old chief executive and biggest shareholder in Walgreens Boots who is stepping down as chief executive without naming a successor. 

Pessina achieved much of his ambition to be a global leader in pharma, starting with wholesale pharmacy and distribution in Continental Europe before capturing the imagination with a series of audacious retail takeovers including Boots in the UK and Walgreens in the US. There was no shortage of ambition, with Pessina promising to bring the magic of Boots Number 7 to the Americans via Walgreens. It hasn’t quite worked like that. 

American retail is very different from Europe, and firing up Walgreens has been a Herculean task. Saddled with a debt mountain in lockdown, neither Walgreens or Boots were able to cash in as consumers chose to buy their beauty products and Panadol online rather than on the High Street. Pessina now takes on the title of executive chairman and plans to think strategically. 

Among the more obvious moves would be to break up the empire he created, re-floating Boots and the Continental enterprises – but not in Frankfurt!

Rolls rescue 

Travel quarantines have a direct impact on consumers, travel firms and airlines. In Britain’s case, the indirect consequences on the aerospace supply chain are potentially catastrophic. Bonds issued by Rolls-Royce, the most impeccable name in British engineering, have been consigned junk status. Rishi Sunak may yet be required to borrow from the late Ted Heath’s playbook and come to the rescue. 

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