What a weekend for twitchers. All those Essex birds, celebrating the end of Boris Island. Sure, there’s been a predictable flap from one quarter this week over the latest witterings from Sir Howard Davies’s airports commission. But you don’t have to be a member of the oystercatcher brigade to spot that it wasn’t a tricky decision. These days, not everyone can afford a £100 billion social re-engineering project shifting west London east, even if it does come with a floppy hairdo and a new airport.
No, having a poke around fantasy island was just the commission’s latest way of spinning out its inquiry until after the election. Now comes some proper decision making: Heathrow or Gatwick? Or more precisely, which first? Put like that, it’s not the toughest decision either — because the only way Sir Howard can keep both options alive for the long term is to plump for Gatwick.
A bit of context. It took UK regulators 20 years to break up the London monopoly enshrined in 1987’s privatisation of BAA, which ridiculously gave it control of Heathrow, Gatwick and Stansted. So, you hope the commission’s not daft enough immediately to entrench a new monopoly.
Yet, that’s what will happen if Heathrow is given the green light for a third runway. True, Gatwick’s backers have deep pockets. But they won’t write a cheque for a £9 billion second runway if Heathrow gets the nod to double passenger capacity to about 140 million a year — so dwarfing the 36 million that Gatwick handles at present. Two runways each and they’d be proper competition, driving down air fares.
But what of the hub concept that Heathrow keeps banging on about? Well, the facts seem to be working against it. Today, transfer passengers account for only 14 per cent of the London airports market — a number predicted to fall as the emerging Middle Eastern hubs pull traffic away, not least on the Indian sub-continent to America routes.
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Gulf airports are building like crazy to cater for another 300 million passengers within five years or so — and it is airlines from that region, such as Emirates and Etihad, that are chiefly buying the jumbo kit, such as Airbus A380s, for a hub strategy. By contrast, two thirds of the traffic via London is short-haul, flying point-to-point — as the rise of Ryanair and easyJet highlights.
So, a London hub’s neither where the market is — nor heading to. Not only that: another runway at Heathrow could cost twice one at Gatwick, with the taxpayer in for a fair chunk for digging up the M25. The battles over noise, air pollution and planning will be on a different scale too. Twenty years on, with quieter planes, Heathrow might have a better chance.
Of course, ministers can overrule the commission. But, going for Gatwick has a chance of take-off. It would give the twitchers a different sort of flying machine to look at too.
Hyder to nothing
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What’s this then: a double Dutch auction? Most people thought Arcadis, from Amsterdam, had already won the bid for Hyder Consulting, with last month’s 730p-a-share offer. It added up to £288 million, enough you’d think to finish off Nippon Koei, particularly as its Japanese rival is worth only £238 million.
Well, not the Dutch. Arcadis is now bidding against itself, raising its offer to 750p, just to ensure the Japanese get a good clogging. It’s not quite as nuts as it seems. Arcadis has snapped up a 9.6 per cent stake from Hyder’s biggest shareholder, Aberforth, which cleverly held out for more. So now Arcadis has to match that for all shareholders, with a new bid worth £296 million.
The strategic logic? Well, add the Aberforth stake to the 15.6 per cent Arcadis already held and it now has 25.2 per cent. That’s enough to block any rival bid based on a scheme of arrangement, requiring 75 per cent approval — and all for £6.5 million. A conventional bid would only need just over half the votes but couldn’t squeeze out Arcadis’s stake.
It’s a result for Hyder boss, Ivor Catto, who’s now recommended four bids, having thought the initial 650p a share, worth £256 million, fully valued the company. Bizarrely, the shares closed at 753p, up 17½p, anticipating an even higher offer. What’s the market expecting now? Arcadis to bid against itself again?
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Ripping yarns
Not for nothing is Low & Bonar a supplier of industrial yarns. It came up with a good one as recently as July 10, claiming “full-year profits will show significant growth over last year” (report, page 50).
Yeah, whatever. Now it reckons they might be no better than last time’s £25.3 million and the shares are off 19 per cent. Its European civil engineering arm is reeling from a sudden construction slowdown in Poland — spooked by Vladimir Putin’s adventures in Ukraine — destocking in France and Norway, and the cancellation of landfill projects in Germany. Oh, and delays in Saudi Arabia over product certification, costing £1 million.
It’s not the finest way for Steve Good, chief executive, to bow out after five years at the helm — and a bit of hospital pass for his successor, Brett Simpson, who’s just joined. Let’s hope his yarns don’t unravel.