• Trusting the Tories!


    Yesterday’s article (http://www.british-gazette.co.uk/2018/01/29/1-158234-pence/) has had some redactions made to it, this being the removal of the name of the investment trust into which the money from the Lloyds Bank shares were invested.

    The nature of yesterday’s article was partially political but with a strong personal content. Today’s article which is a follow on from yesterday’s is entirely political! As can be deduced from the above image!
    NB: Some British Gazette readers may be of the opinion that the above image is a tad rude. It is. However, the British Gazette in it’s robust comment follows in the tradition of the pamphleteers of the 18th Century and by comparison, the above is rather tame!
    Yesterday’s article was essentially a speculation about the takeover of the Lloyds Banking Group by a huge US bank such as Bank of America. Such takeovers when they happen have a significant political content inasmuch as the politicians are involved insofar as the anti-trust/competition authorities/laws/regulations are concerned. At this level this is inevitable.

    What this means is that political considerations will ALWAYS figure prominently. The consequences for the politicians are generally to be found in positive/negative reactions by the electorate. A classic that is surely now quoted in textbooks is the takeover of Cadburys in January 2010 by Kraft Foods who bought the firm for £8.40 a share. Kraft reneged on most of it’s commitments. See the Indy’s 2016 report: http://www.independent.co.uk/voices/cadburys-chocolate-fairtrade-fair-trade-mark-farmers-kraft-american-brand-abandoned-promise-a7445826.html
    Happily for the Tories, this took place under a Labour government!

    However, it MUST be pointed out that Lloyds Banking Group is not Cadburys and Bank of America is not Kraft! Sadly, it is inevitable that the directors of Kraft will over time cut costs by transferring production and other functions from the UK to cheaper locations in Europe. Suffice it to say, Kraft do not carry on this way in the USA. This is because Kraft is a US firm and US politicians will see that it does not!

    Now of course, Labour politicians were furious (and rightly so) with Kraft! They were however powerless to stop Kraft from taking over Cadburys and forcing Kraft to make good on their promises. This is because we live in a world dominated by international trade agreements and regulations, a prominent example of which is the oft referred to WTO!

    It must be remembered that politicians (from ALL parties) will judge such takeovers from the standpoint of “what is in it for them” – and we do NOT mean backhanders!
    IOW: How will it pan out politically for them!
    It is in this light we must examine the potential of a takeover bid occurring for Lloyds. As for the timing of a bid, we would repeat what we stated in yesterday’s article:

    “We would even go so far as to say that there is little likelihood of such a takeover occurring in UK FY 2018/2019 because wince those putting forward and those agreeing to the putting forward of such would not do so before Thursday 29th August, 2019 which is the deadline by which PPI claims have to be submitted.”

    We would go so far as to suggest however that behind the closed doors of Conservative Central Office there would be those hoping that such a bid would take place but on the basis that it was a CASH bid.

    This is because such a bid would result in a huge boost to the domestic UK economy.

    Many British Gazette readers will be wearily familiar with the classic British election cycle; that a general election is preceded by a give-a-way budget in an attempt to bribe the electorate with their own money!

    A takeover of Lloyds by BoA however would be a case of an attempt to bribe the electorate with US money!

    Allow is to illustrate the size and therefore political significance of such a takeover.

    Today Lloyds has been trading slightly down on yesterday at 70.54p (Bid) 70.56p (Ask). These figures are of course constantly changing. By the second. At this valuation Lloyds has a market capitalisation of £50,739,560,000 and there are 71,920,000,000 shares in issue. In other word’s the Market Capitalisation of a quoted company is a multiple of the current traded share price and the number of shares issued.

    It is to be noted that this is a theoretical construct for if an entity (corporate or individual) wished to purchase all the shares of a quoted company (a takeover bid) this must by regulation be made public and the result is always an increase in the share price. Therefore the MC figure quoted from day to day is not one that would come about.

    If in September 2019 or after such as BoA launch a takeover bid for Lloyds and it is successful, we would suggest that the share price of the takeover will be around £1.40 a share. In other words, DOUBLE what it has been trading at today!

    What this means is the realised MC would be a massive £101,479,120,000! If this were a CASH offer then this would mean that £101,479,120,000 would be injected into the UK economy from outside! Now let us address the economic consequences of same. This first thing to look at is the number of shareholders! In the case of the Lloyds Banking Group, the Lloyds shareholder base expanded enormously when the numbers of HBOS shareholders were added to the much smaller number of Lloyds shareholders following the government sponsored merger of the two following the financial crisis.

    Most of the shareholders of Lloyds are in fact ordinary members of the British Public with between 200 and 2,000 shares thus they would receive cheques through the post between £280 and £2,800. Many such folk will go out and spend these sums. For the politicians and economists this will have EXACTLY the same effect as a give-away budget!

    What politicians are concerned about is job losses. Would there be job losses were the publicly quoted Lloyds Banking Group to become an unquoted wholly owned subsidiary of Bank of America?

    Undoubtedly yes! However, these job losses would be small in number and confined to a particular area. This is in the shareholder services section. You see, with 71,920,000,000 shares in issue, Lloyds shareholders number in their millions! Consequentially Lloyds need a large and well staffed department to deal satisfactorily with all the aspects of having so many shareholders. This in effect would be a MAJOR cost saving for Lloyds for it’s shareholders would be reduced in number from millions down to one!
    It is likely that Conservative Central Office will be hoping for such a takeover in the period they will have marked out as the run up to the next General Election.

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