Maybe IWG, the serviced office company that used to be called Regus, should give its tenants free beer or throw a few cheese-tasting parties. The gimmicky stuff has worked wonders for WeWork. The fashionable US company is supposedly worth $20bn in privately owned form, even though it is loss-making. By contrast, IWG, a quoted UK firm that has been around for 30 years and is substantially larger, makes profits. Yet it cannot land a buyer willing to pay the much smaller sum of £2.8bn-ish. IWG on Monday said it had ended takeover talks with three private equity suitors, meaning it has had unsuccessful negotiations with six would-be bidders in short order. “None of the interested parties is currently capable of delivering an executable transaction at a recommendable price,” IWG said. Its shares fell 20%. Mark Dixon, the founder and 25% owner of IWG, naturally did not say what a “recommendable” price might be. But if he has been distracted by the mania around WeWork, he should let go. The valuation of the US company is bizarre and surely could not be sustained on the public markets. Harder-headed investors would want more than WeWork’s boasts about how it is reinventing workplaces as “dynamic environments for creativity, focus and connection”. In the end, it is in the humdrum business of providing short-term office space on flexible terms. That’s also IWG’s market. The fact that no would-be bidder has been prepared to pay a silly takeover price should send a message across the Atlantic. Yes, IWG is suffering a few headaches in the UK and pre-tax profits fell by a third to £54.3m at the half-year stage. But, on any normal measure, it should still be worth more than WeWork. The moral of the non-bids for IWG is surely that the sceptics are right and that WeWork is overvalued. The chancellor, Philip Hammond, reports the FT, has privately told City bosses to expect a French assault on the UK’s financial services industry after Brexit. UK bank bosses had reached roughly the same conclusion themselves. First, bankers say the contrast is stark between German and French appetites to grab some of the City’s business. German politicians simply aren’t interested. Deutsche Bank is regarded as a national embarrassment and its troubles have deadened any desire to house international investment banks in Frankfurt. By contrast, the French establishment, even before the arrival of President Macron, is affronted that French banks such as Société Générale have placed their main trading floors in London. Hammond’s reported worry that regulation will be used by France to force business out of London is also familiar. Paris fought fiercely to become the new home of the European Banking Authority and got its wish. It may see a chance to rewrite rules that it regards as having been written in London to favour the home team. In other words, Hammond’s analysis of the French threat to the City will not be controversial. But it would be more enlightening to hear his plan for tackling the parallel risk that Brexit-inspired upsets will allow New York to collect business from London, the traditional rival. Most UK bankers take the view that Wall Street represents the real danger, especially for financial activity that could take place anywhere in the world. UK politicians barely bother to talk about the New York challenge. They should. Hungry Wall Street banks are just as formidable as French administrators – probably more so. The board of John Laing Infrastructure Fund is terribly pleased with itself for agreeing a takeover bid at 142.5p a share, or £1.4bn. The price is “an attractive premium to the undisturbed share price,” says the chairman, David MacLellan. Well, yes, that’s true in the sense that the offer is pitched at almost 24% above the share price before the joint bidders, Dalmore Capital and Equitix Investment Management, came calling last month. Come on, though, there are other ways to judge value. JLIF’s shares stood at 139p last September and City analysts estimate that the true net asset value – a key number for infrastructure funds – is about 130p. Viewed through those lenses, the takeover premium is miserable. JLIF’s board seems scared stiff of Labour’s plans to nationalise PFI assets, which compromise a large chunk of the portfolio. But the shadow chancellor John McDonnell’s ambitions are understandably vague at this stage, so it’s surely premature for JLIF to run for the hills. Some shareholders are reportedly unhappy with the lowball bid. You can’t blame them. Their board has surrendered meekly.
Trendy loss-making co-working start-up WeWork is supposedly worth $20bn while the much larger 30-year-old IWG, which does make a profit, is valued at £2.8bn ($3.6bn) and can’t land a buyer. Despite a drop in pre-tax profits to £54.3m over the first half, on any normal measure IWG should be worth more than WeWork, and the fact that a series of potential buyers have walked away, unprepared to pay a silly price, should send a message to WeWork that is it overvalued.