The Mike Lynch affair is not over yet. Priti Patel, the home secretary, has to decide if the extradition of the former Autonomy boss to face 17 counts including wire fraud and securities fraud can go ahead. Assuming she gives a green light, Lynch can request a right to appeal. If granted, the case could go all the way to the supreme court.
That may be the best place for it. Some of the questions raised are fundamental. One is whether Lynch can expect a fair trial in the US. David Davis, former Conservative minister and former shadow home secretary, spoke about a process of “ferocious intimidation” that relies on plea bargains and produces a 97% “conviction” rate.
He is not alone in voicing those concerns. Three other former Tory cabinet ministers and Sir Vince Cable for the Liberal Democrats have spoken about how Lynch’s extradition could set a precedent whereby “any British businessman or woman who finds themselves at odds with a powerful US company could face the same fate”.
In the middle of it all sits the related fact that Autonomy was a UK company whose $11bn (£7.8bn) takeover by Hewlett-Packard of the US in 2011 was conducted under UK takeover rules. Lynch’s “forum bar” defence, which allows a UK court to block an extradition if it deems the majority of alleged criminality took place in the UK, was rejected by Michael Snow, district judge at Westminster magistrates court. It would be useful to have a higher court’s view.
You may not like Lynch, who wchargesas never a popular figure even in his Autonomy heyday. And the Financial Reporting Council’s record £15m fine last year for Deloitte for audit failures at Autonomy has only heightened the sense of unanswered questions around the takeover. But it remains very hard to imagine the UK being able to summon a high-profile US businessman to face criminal charges if the circumstances were reversed. That sovereignty issue matters, not only for Lynch, but for UK business.
There is no point bemoaning the loss to the public purse that will be crystallised by the Treasury’s sale of more shares in NatWest. Almost from the day of nationalisation in 2008, losses were inevitable. The shredded bank, then called Royal Bank of Scotland, was propped up to save the UK banking system from collapse, not to take a speculative punt. The closest the shares have been to the 502p purchase price in recent years was 350p-ish in early 2015.
The disposal question, poi, is really one of timing. This looks as good a moment as any to speed up the process through the drip-drip trading plan announced by the Treasury on Thursday. At 193.5p, the shares still sit below their immediate pre-pandemic level of 220p but have recovered, in line with the sector, from Covid lows of 100p.
Nel frattempo, there is no big looming corporate event at RBS that could radically improve the valuation. The big disposals have been done and NatWest, on a price-to-book-value basis, is now rated higher than some of its rivals. A cash-strapped Treasury has better uses for £12bn of capital than letting it sit in NatWest shares. Given that a full disposal of the 54.7% stake could take until 2026 on the current schedule, best to pick up the pace.
To nobody’s surprise whatsoever, the battle for Morrisons will be the usual lash-up for the City advisers. Add up the totals in the Fortress-led offer and you get a figure of about £275m.
We can skip over the largest slug, which is the bidder’s £169m in arrangement fees for financing the proposed £6.3bn deal, because the Fortress consortium will at least have something to show for it – a large bank loan. The more notable tallies are those for “financial and corporate broking advice”: £36.2m on the Fortress side and £43.1m for Morrisons.
What do those numbers relate to? On the Morrisons side, the City team comprises adviser Rothschild plus brokers Shore Capital and Jefferies. How many people does it take to hold the directors’ hands? The opinions of only a small number of people matter when forming “fair and responsible” assessments of takeover approaches; the rest of the job is standard City leg-work. The gravy train rolls on, but gets no easier to explain.