Grant Shapps sounded terribly pleased with his nine-point response to the P&O Ferries debacle, but it is hard to see how any of the transport secretary’s measures will force the company to reinstate the 800 workers it sacked without consultation a fortnight ago, which seemed the government’s aim only a few days ago.
The toughest new policy will create powers to block ferries with crews paid less than the minimum wage from British ports. The Harbours Act of 1965 will be revised via primary legislation; until then, port operators will be told to refuse access to non-compliant ferries.
Fine, that reform will close a minimum wage loophole – or, rather, a door that the government deliberately left open for ferry firms when it altered rules covering other seafarers in 2020, Tim Tyndall, employment partner at Keystone Law, told the Guardian this week. But P&O Ferries will probably regard the change as perfectly acceptable from its point of view.
The company, it seems, cannot be compelled to reinstate anybody on old rates – ones that worked out at £36,000 on average under a Jersey-based contract, according to chief executive Peter Hebblethwaite. In the meantime, P&O Ferries’ competitors, the under-cutters he grumbled about, will have to fall into line with enforcement of minimum wages. So P&O Ferries won’t be able to pay its irregular crew of agency staff £5.50 an hour average, which was its plan A, but it may get the “level playing field” it said it sought.
In the meantime, DP World, the parent company that blessed the law-breaking sackings and is the power behind the ferries, probably now has fewer reasons to fear being thrown off the UK’s freeport programme, where its big assets are ports in the Thames and Solent. Shapps said the Dubai-backed firm was “very welcome to invest in this country” but should understand that “we take employment law seriously” and it needed “to deal with this P&O situation”.
It wasn’t clear what “dealing with” meant, but DP could try sacking the arrogant Hebblethwaite, who, viewed from Dubai, has probably now served his purpose as a lightning rod for public anger. He looks expendable, even before the Insolvency Service has had a chance to consider his suitability to serve as a company director. Shapps would get a scalp and DP would hope to suffer no collateral damage for its role in this shameful saga. P&O Ferries’ former employees still wouldn’t get their jobs back, however.
Pearson is no pushover
Education publisher Pearson has disappointed its shareholders, on and off, for about 20 years. Andy Bird, a digital-savvy boss on a (potentially) bountiful bonus deal, was meant to change all that, but the ex-Disney executive hasn’t worked much magic on the share price during his 18 months in charge. A trading update in October sent the stock down 12% a day; the pace of revival in the US has appeared pedestrian so far, just as it has always been.
So, you might assume, Pearson would be a sitting duck if a large US private equity predator showed up. But, no, the plot has not worked out that way. Would-be bidder Apollo walked away on Wednesday after its third shot – 884p-a-share, or £7.2bn including debt – was dismissed by Pearson’s board as a “significant undervaluation” of the company and its prospects.
And, actually, the undervaluation line is fair. Expectations for takeover bids have risen. Supermarket chain Morrisons (where Apollo dropped out of the running at early stage) was carted off at 60% premium to its pre-action share price last year, so 40%-ish for Pearson, a business with more turnaround potential, wasn’t obviously compelling. It also felt too soon to give up on Bird’s plan to get Pearson airborne. A three-year crack at the job seems only fair: there may be more operational progress than it seems from outside.
The other conclusion, possibly, is that the UK takeover game has become slightly less loaded in favour of private equity raiders. The cost of borrowing has nudged higher in the past year, which makes it trickier to stretch borrowing ratios. Apollo, having bought and sold Pearson rival McGraw Hill a few years ago, arrived with expertise in the US textbook market, but ultimately wasn’t able, or wasn’t willing, to go high enough to force Pearson’s board to enter negotiations.
The picture could change again in the buyout barons’ next big adventure, but the lack of drama on this occasion is welcome. FTSE 100 companies, even those with Pearson’s underwhelming record, should not be pushovers.
