A former chancellor said London had become a ‘less attractive place to list’ as ministers were urged to speed up market reforms following Arm’s decision to float in the US.
The Cambridge chip designer’s decision to choose Wall Street over the City for its £50billion takeover bid has prompted soul-searching in the City and Westminster.
It was described as a “kick in the teeth” by one analyst while Philip Hammond – chancellor when Arm was sold to Japan’s SoftBank in 2016 – said: “London has become a less attractive place to list and this is largely due to listing criteria and the lack of deep capital reserves in London.
Julia Hoggett, chief executive of the London Stock Exchange, urged ministers to step up the pace of reform. “This announcement demonstrates the need for the UK to make rapid progress on its regulatory and market reform agenda, including addressing the amount of risk capital available to drive growth,” she said.
“We are working with regulators, government and wider market participants to ensure that UK capital markets provide the best possible funding environment for UK and global businesses.”
Cloudy: Arm’s decision to choose Wall Street over the City for his £50billion takeover bid prompted soul-searching in the City and Westminster
Anthony Browne, the MP for South Cambridgeshire whose constituency includes Arm’s seat, said the decision was a ‘death blow’ and expressed fears over jobs and research – although Arm said he was expanding its presence in the UK and would open a site in Bristol.
The decision to list in New York came as London-listed building materials giant CRH also decided to seek a listing in New York.
Rishi Sunak met with Arm boss Rene Haas last month to bring the company back to London, where it was listed for 18 years before being acquired by SoftBank.
Britain’s Financial Conduct Authority is said to be willing to bend the rules to persuade Arm, whose technology underpins the global smartphone industry, to return to the UK. But Arm said, “Softbank and Arm have determined that pursuing a US-only Arm listing in 2023 is the best way forward.”
He said he would continue to create jobs in the UK, insisting he was “proud of his British heritage”. It “also intends to consider a subsequent UK listing in due course”.
The government said: “We continue to attract some of the most innovative and important companies in the world and note Arm’s commitment to expanding its presence in the UK, driving growth, jobs and investment. .”
But Tory MP Browne said: ‘It’s a blow. The problem with offshore listing is that where the investors are, jobs and research often follow. The government has done its best to get Arm listed in the UK, but money talks: even the UK government can’t resist the powerful gravitational pull of US stock markets.
Victoria Scholar, at Interactive Investor, said: “Arm’s abandonment of London is another kick in the teeth for the attractiveness of the Square Mile to international investors.”
Bankers will miss the windfall of fees
Arm’s decision robs the city’s investment bankers of tens of millions of pounds.
After a battered 2022 in the Square Mile and Wall Street, a London float would have boosted fees at a time when global investors are wary of Britain.
Mark Freebairn, a partner at recruitment firm Odgers Berndtson, said companies were discouraged in London by “beyond aggressive” scrutiny and regulation.
Pearson aims for change on Wall Street
Educational publisher Pearson said it couldn’t rule out a move to Wall Street, raising alarm that London could lose another business.
The FTSE 100 company derives more than 60% of its revenue from the United States and has expanded its courses in North America. Sally Johnson, Chief Financial Officer, said: “We don’t have any plans at this time, but where it all makes sense for our stakeholder groups, we are of course considering it.”
It came after British chip designer Arm said it would be listed in New York, not London. Plumber Ferguson moved his main roster to New York last year, saying North America was now his natural home.
Pearson said: “We are proud of our FTSE heritage and we have a very supportive and long-standing shareholder base through our listing here in London.” He said sales climbed 5% to £3.8bn last year, while profits jumped 11% to £456m, shattering analysts’ expectations.
… but Melrose supports City
Melrose presented the official plans for the exceptional £3.9billion float of GKN’s automotive arm in London.
The FTSE 100 turnaround specialist said Dowlais would join the stock market as the “first UK-listed car company” next month. Melrose, which buys struggling industrial companies, upgrades them and resells them, bought GKN for £8.1billion in 2018.
It separates from its automotive business, which will be called Dowlais, a nod to the Welsh village that was home to one of GKN’s founders.
Dowlais, which has more than 24,000 employees, manufactures parts for electric, gasoline and diesel cars. One in five cars in the UK have parts they make. RBC Capital Markets analysts have valued the spin-off at £3.9 billion.
Boss Liam Butterworth is on track to earn up to £5.3million a year at the helm of the business. Melrose will retain a 3% interest.
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