Mark Kleinman: £1bn Leonardo deal betrays Whitehall toxicity
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his weekly Morning Wire column
How’s this for joined-up government? The chancellor, could not bear to let 3,000 skilled manufacturing jobs at a helicopter factory in Somerset evaporate – or so the story went – because “Rachel cares about keeping the country safe and driving jobs in the UK because our security and economic growth are fundamentally connected”.
That’s according to Treasury insiders. So who was to blame, then, for the delay to a £1bn deal with Leonardo, the Italian defence contractor? According to those same sources, it was the fault of their colleagues down the road at the Ministry of Defence who had “deprioritised” the procurement process.
Well, that’s one version. According to some of those who have been monitoring the fate of Leonardo’s Yeovil plant since the MoD tender process kicked off two years ago, it’s also a little disingenuous.
John Healey, the defence secretary, had been due to visit the Yeovil site last Thursday before the trip was cancelled at the eleventh hour – a decision which was down to uncertainty about the Treasury’s willingness to approve the deal.
Leonardo’s chief executive had repeatedly warned that its investment in Britain would be jeopardised unless it was awarded the new MoD contract.
Just hours before the Leonardo offer expired, the Treasury’s position changed again, with officials claiming that the chancellor’s intervention had been “driven by her determination to ensure that UK defence spending protects and drives British business and jobs”.
A source added: “Rachel cares about keeping the country safe and driving jobs in the UK because our security and economic growth are fundamentally connected
“This project is key to those principles – she wasn’t going to let this deal collapse under her watch.”
All of this may be true, but the Whitehall infighting – at a critical time for national security, as the last few days’ events in the Middle East have illustrated – speaks to the jaded toxicity of an administration in power for 20 years rather than the fresh-faced approach of one in office for 20 months.
Like the steel strategy and myriad other policies either delayed or discarded, the Defence Investment Plan is now at the mercy of a government seemingly paralysed in so many key areas
Brewdog buyer may end up toasting a bargain
Every dog has its day, or so the saying goes. For Brewdog, that day as an independent pioneering brand is well and truly in the rearview mirror. This week’s pre-pack administration of the business, with Tilray Brands acquiring part of its UK business for £33m, is the symbol of an ignominious decline.
The recruitment of Alixpartners to advise on a sale process for the owner of Punk IPA and Elvis Juice was always an inauspicious sign for a once-feted brand. So too was the timetable set by the firm: bidders were given just 72 hours to table indicative offers, followed by a second round of bids just a week later.
Now – unthinkably for a business which had apparently sober aspirations of a $2bn valuation and a march towards the public markets just a couple of years ago – Brewdog is in the hands of administrators.
That’s left hundreds of thousands of punters – or Equity Punks, as the company styled them – fuming about the loss of their investment.
This was always likely to make a rescue bid planned by James Watt, its co-founder and former chief executive, a tricky tightrope to walk – even with his promises of handing them 20% of a new holding company. Watt has divided opinion since well before allegations of a toxic culture at the company surfaced in 2021. One online biography of him describes Watt as “the visionary co-founder of…a global craft beer powerhouse he transformed from a modest startup into a multi-billion-dollar brand”. It’s now been transformed back again into a rather-more modestly valued enterprise – but the strength of its brands might just mean that Tilray has got itself a bargain.
Johnson Matthey boss looks on borrowed time
Is there a crisis of confidence hiding in plain sight at Johnson Matthey, the FTSE-250 industrial chemicals and manufacturing group? It might seem like an odd question to pose in relation to a company which has seen its stock rise by a third over the last year, but it’s also one now being posed by reams of shareholders.
Last week, days after I reported that a price chip might be on the cards, Johnson Matthey issued a confirmatory statement that a deal to sell its Catalyst Technologies arm to Honeywell had been slashed in value by £475m – or about a quarter of the original price.
The only salvation for Johnson Matthey shareholders was that the deal wasn’t abandoned altogether. A Long Stop Date to allow for competition clearances in various jurisdictions has been pushed out six months, which should provide enough time for antitrust conditions to be satisfied.
Yet the situation is now a precarious one for Liam Condon, Johnson Matthey’s chief executive since 2022. Condon had pledged to return £1.4bn of the sale proceeds to investors, a figure now reduced to £1bn.
Johnson Matthey shares were down as much as 17% on the morning of its confirmation, and with Standard Investments, the activist investor, firmly ensconced on its share register, Condon is looking like he may have few cards left to play.