Just days after Greene King (GNK) got scooped up by a Hong Kong billionaire, and as Cobham (COB) announces the scheme particulars for its mooted takeover by a US peer, I read that plumbing and bathrooms kit company Ferguson (FERG) is thinking about switching to a US market listing. So woe betide the future of the UK market? In my opinion not at all...but you just have to face facts…
Ferguson is a strange old beast. The company generates around ninety percent of its revenues from the United States and if you have ever paced through its results statements, the US-centric nature of the business quickly becomes very apparent. This process has been deepened by various small European disposals over time. Adding to this is the recent addition to the company's shareholder register of a US activist investor (Trian Partners), which believes the company is 'an attractive business that trades at a discount to comparable US peers'.
You can guess the rest. The US does not have a God-given right to trade at a higher multiple than its peers in the UK, Europe or the rest of the world. However the harsh reality of much of the last generation is that it does – and frankly the post global financial crisis superior growth in the US has justified it at some level. So Trian hassles the company's board to consider it with the lure of the higher prestige and pay that no doubt go with a higher market capitalisation.
However...apparently some top UK-based investors are not happy citing not petty nationalism but the hassles of owning stocks that are not UK-listed. Oh please! As an ex institutional fund manager I know that some collective products have quite strict listing requirements but a very strict UK-only criteria is becoming more of the exception than the rule, especially in the wealth sector where a more general risk profiling matters more. So no doubt there will be some super conservative types arguing against such a move but frankly the tail should not wag the dog. If Ferguson wants to run off and list on the US market...then I say 'so be it'. Most investors will find a way of continuing to hold the stock...if they really want to.
As for the UK market, we should continue to try to be the dynamic, open-minded and global economy that attracts the listing of businesses who sell a slug of their product in the UK or truly international ones selling everywhere who want a respected, professional listing. However - for the UK, US or any other major bourse - if a company is primarily listed in a country different from another single country where it is generating ninety odd percent of its revenues, then you should be asking questions. And that is why you have to be super careful of many of those crazy Chinese, Australian and Canadian-focused (and initially listed) businesses that suddenly discover a need to have a primary quote in London...
Filed under: Ferguson, Nostra Terra, ProphetFX, Tertiary Minerals, gold, Rank, ShareProphets Radio
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