Mark Kleinman: Corley’s LSEG board post looks messy
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his weekly Morning Wire column
Aren’t asset managers supposed to be the exemplars of robust corporate governance?
It’s a question worth posing in the context of goings-on at Schroders, the FTSE-100 money manager where last week’s confirmation of my scoop that its chair, Dame Elizabeth Corley, is joining the board of London Stock Exchange Group (LSEG) has raised myriad eyebrows.
People close to the situation say her appointment is likely to put her in a strong position as the eventual successor to Don Robert, LSEG’s chair since May 2019.
Ostensibly, Robert isn’t going anywhere anytime soon, but succession questions will soon begin to abound at LSEG, given that chief executive David Schwimmer has been running the company since 2018. Normal governance convention would have it that a new chair would be selected first in order to lead a CEO recruitment process, and it seems unlikely that Schwimmer will want to stay in the job for much longer than a decade. LSEG declined to comment on leadership succession issues.
More pertinent in relation to Dame Elizabeth’s dual roles, though, is the question of potential conflicts of interest. Schroders is listed on the LSE and has commercial relationships with its parent company. As a shareholder in LSEG, it also exercises judgement over governance matters there, and as the recent LSEG annual meeting reinforced for another year, the company is no stranger to pay protests from its leading shareholders. Dame Elizabeth, of course, would play no role in any such decision at Schroders about companies in which it was invested.
Nevertheless, appearances matter, and this appointment looks messy – not least because of Schroders’ withdrawal from the LSE-led Capital Markets Industry Taskforce, as I reported yesterday.
Presumably, Dame Elizabeth’s LSEG appointment was signed off by the Schroders board, so her fellow directors don’t obviously appear to have raised a red flag. The fund manager is in the foothills of a much-needed turnaround under Richard Oldfield, who only took over as chief executive a few months ago. It’s surprising that that task alone isn’t sufficient to hold the attention of its chair.
Rosebank playbook should survive Trump’s tariff whims
If at first you don’t succeed, try, try again. Simon Peckham, the Melrose Industries veteran who is aiming to repeat his trusted playbook at Rosebank Industries, its successor, is obviously a believer in that mantra.
Having seen Rosebank’s initial attempt to buy Electrical Components International (ECI) from Cerberus Capital Management scuppered by tariff concerns in March, Peckham is back in the game.
Having rushed out a statement to the stock market before I even had chance to report the news (having enquired about it hours earlier), Rosebank confirmed that it had re-engaged in talks with Cerberus about a deal. The deal, it said, “would be funded through a combination of a fully underwritten equity issue of up to £1.2bn at £3-per-share through a placement and open offer and new debt facilities”.
“The company is currently in discussions with shareholders in respect of the fundraise and would expect to conclude shortly. All existing shareholders will have the opportunity to participate, together with potential new investors.”
Returning to the fray makes sense for Rosebank, given that its due diligence was already largely complete. The profile of ECI also sits squarely within the perimeter of Peckham and co’s usual playbook: an industrial asset with scope for operational improvement and value creation.
The risk of tariff uncertainty has not, of course, evaporated, however. As President Trump has vividly demonstrated this week in relation to steel tariffs, there remains ample scope for him to reshape swathes of global trade policy on a whim.
That uncertainty is unlikely to disappear soon, so if investors are comfortable with the track record of Rosebank’s team, its bet on ECI is unlikely to yield much in the way of nasty surprises.
Starling’s Engine move with Scotiabank to deliver profit boost
Profits down, Covid loan guarantee provisions up: there wasn’t much to admire in the annual results of Starling Bank, published last week.
Add to that a previously disclosed £29m fine from the Financial Conduct Authority for “shockingly lax” financial crime controls, and the superficial appearance is of a digital lender with a tough immediate future.
It’s not all bad news, though. Starling’s efforts to grow its technology arm, Engine, into a meaningful revenue and earnings driver for the group seem to be paying off.
I understand from insiders that Starling is close to unveiling its biggest banking-as-a-service deal to date, with Canada’s Scotiabank.
The contract, which is said to be heading for an imminent announcement, could generate revenues of £50m (although whether this is an annual or one-off figure is unclear, and a Starling Bank spokesman declined to comment).
It would be a meaningful agreement in the context of the company’s Engine arm, which already has similar – albeit smaller – deals in place with Salt Bank in Romania and AMP in Australia.
Scotiabank, which didn’t respond to a request for comment, would also be a notable addition to Engine’s client base because of its recent establishment of a North American subsidiary. Another agreement or two like this and Starling’s profitability this time next year should look much healthier.