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Nothing Ventured

Douglas Fraser | 11:02 UK time, Saturday, 22 August 2009

Imagine what Americans might say if Google or Apple were to be bought over and their headquarters moved elsewhere.

There might be similar concern in London if that happened to Diageo or Tesco.

These are big companies. Their corporate power, their strategic economic significance and their headquarters' spending power matters to the countries where they're based.

These are the companies with stock market capitalisation in New York and London that puts them around 10th or 11th place in corporate size.

So you might think that if a company of similar significance in the Scottish economy were on the verge of takeover, there might be at least some concern about the implications for Scotland.

That's what's happening with Venture Production. It is a company now entering the end game of its takeover tussle with Centrica, even if the deadline has been moved back two weeks from Friday 28 August.

The energy utility, parent company of British Gas and Scottish Gas, has been circling the Aberdeen-based, North Sea oil and gas specialist, and is now closing in on investors.

On Friday, the European Commission announced it is clearing the takeover. And although Centrica has scaled back its estimate of the voting power so far secured, the direction of travel looks clear.

Centrica needs 50% of share voting power. It already has 40% of shares, but because of dilution through convertible bonds and share options, the real voting power currently stands close to 35%.

Venture's chief executive Mike Wagstaff has this week announced reasonably buoyant half-year results, with production moving comfortably ahead and good prospects on several appraisal wells.

He remained at work in Aberdeen rather than heading south to talk to analysts - the message apparently that it's business as usual "until it isn't".

The chief executive reckons the 拢1.2bn price Centrica put on Venture (at 845 pence per share) undervalues it. The bulk of that value is in its North Sea oil and gas assets. But he says that fails to put any value on its expertise.

Wagstaff's trying to persuade shareholders they should hold on for something better, hinting at the potential for his own acquisition spree, and he's deploying numbers helpful to the cause.

Since the takeover bid was launched, the FTSE 250 has risen 19%, similar-scale oil companies have moved ahead 21% and the forward oil price for July 2011 is up 13%. The current oil price adds a fourth helpful figure: Brent crude went over $74 on Friday.

Why has this imminent loss of a company that registers around 10th or 11th position in Scotland for its market capitalisation gone so little noticed? Because it's in the offshore sector, and seen as apart from the economic mainstream?

Or could it be because Scots are so used to losing headquarters as companies grow and are taken over - Scottish Power, Scottish & Newcastle and HBOS being the obvious recent examples - that this has ceased to cause much comment?

Talk of "economic nationalism" at the time of the Scottish Power takeover by Iberdrola has been replaced with a cosy relationship between the nationalist government in Edinburgh and the Spanish bosses. We're hearing less about the "spivs and speculators" who were accused by the First Minister of undermining HBOS last year and driving it into the arms of Lloyds TSB.

What is currently causing plenty comment, of course, is Scotland's relationship with Libya, and there's a link there. As I noted in a blog posted earlier this week, Libya is seen as a growing trading ally for Europe in helping it to diversify gas supplies.

While Russia maintains its current clout, gas prices are at Moscow's mercy. And it's because of the insecurity of that Russian supply that utilities, such as Centrica, want to secure supplies for their customers.

It's reckoned that acquisition of Venture would push its dependence on contracts with suppliers comfortably below 50%.

And while the Scottish saltire flag is flown in Tripoli, causing considerable controversy, this takeover would see it hauled down from another headquarters in Aberdeen - with no controversy at all.

Comments

  • Comment number 1.

    We have been royally shafted once more, the quicker the oil runs out the better.

    Scotland has a commodity in abundance that's going to be very valuable in years to come. Due to the characteristics of this commodity, it will be near on impossible to steal especially when there is no oil.

    Hopefully we will be independent by then................(sooner rather than later will do for me)

  • Comment number 2.

    And the sooner you are independent the better. Maybe we'll see an end to the constant whining about how hard done to you are.

    (sooner rather than later will do for me) definitely

  • Comment number 3.

    poundsterling, You may not be passionate about your country's future, (why would you be ;).... but your whining about what you like to call whining does you no credit...

    The point I'd like to make on the article is that it does grieve me to see the control of large companies leaving Scotland (and the UK), but that is the free market system we are slaves to! Not many countries are as cavalier about important wealth generating companies, as the UK .. Where the now badly discredited free market dogma is followed slavishly. Ministers are not usually slow to trumpet the takeover of a British asset by questionable foreign friends as 'Great for Britain' . 'an investment' even ..

    One day when we find that the wealth has been completely stripped from our country, and most of the taxes are collected by a few rich foreigners, maybe we'll wake up.

  • Comment number 4.

    Venture is not a Google or Microsoft and the takeover is not a foreign one. Only a united front can work out such energy challenges. We have already seen Venture hyping some of its assets and doing u-turn. What about the UK airports, water utilities etc. I would recommend to do an unbiased blog rather than looking at it from a Scottish angle.

  • Comment number 5.

    # 4 Forgive me but I must have wrongly assumed that those of us who contribute to these blogs were at least a little biased and wanted to see our point of view in the open. How otherwise could we convert those we believe to be in the wrong.

    I have seen a definition of bias as being a term used to describe a tendency or preference towards a particular perspective, ideology or result.

    One man`s bias is another man`s skewed view

  • Comment number 6.

    marinedeadline, i agree with what you're saying. Surely, as Scottish consumers we have to consider WHO we are paying for our energy bills:



    Interestingly, a rather different 'headquarters' opened last week in Aberdeeen, which may point the way to a better future..........

  • Comment number 7.

    Economic nationalism? France's President Sarkozy has long argued for economic governance in the EU; central banks should be answerable to politics. But this may not be feasible.

    Certainly Berlin is opposed, however Germany's Joschka Fischer [an EU leadership candidate] argues pragmatically that his country should stop opposing the very principle of economic governance and lead the way in fashioning it. A big problem to be resolved is getting everyone to sign up to new financial rules, and allowing audit.

    Next month's G20 meeting in Pittsburgh is a chance for Europe to present a united front. Will Scotland be allowed an official input to any deliberations beforehand?

  • Comment number 8.

    It is very interesting to note that Sovereign Wealth Funds in the Middle and Far East are using their countries national wealth to diversify into other areas of interest.

    This is so the one trick oil countries invest their national reserves in future assets that are not dependent on a Well running Dry.

    What about Scotland? - we don't have a national wealth fund so we can't diversify.

    We let Spanish, German and French Governments back Euro Companies, who buy our raw assets under the guise of retention of tartan fig leaf companies.

    That's European countries ensuring their future energy supplies by owning Scottish renewable assets.

    Once again we are serfs in a Land owned by foreign multi-nationals.

    Look at the Utility company make up South of the Border - all the utilities are owned by foreign interests.

    Even the National Grid is owned by foreign companies, Nuclear Power stations (will be foreign owned)

    We have retained Scottish Water as a public asset, but it is noticable the amount of comments that surface now and again claiming that privatisation is the only way forward.

    We need to own our own assets, we are part of an island and as such dependant on what gets shipped in.

    Wouldn't it be a crying shame if Scotland's potential was allowed to be pumped, carried and squandered over the next 100 years and not a Scots person get any benefit from it?

  • Comment number 9.

    Recent nationalisations were of course Northern Rock, Bradford & Bingley and big shares in the Royal Bank of Scotland and HBOS-Lloyds TSB. The dire state of the economy now has raised the spectre of UK default on its international debts, never mind borrowing even more to buy many big companies.

    We might have to beg the IMF again.

    Said PM Callaghan in 1976, 鈥淲e used to think that you could just spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you, in all candour, that that option no longer exists; and that insofar as it ever did exist, it only worked by injecting bigger doses of inflation into the economy followed by higher levels of unemployment as the next step. That is the history of the past twenty years.鈥

    Next month's G20 meeting in Pittsburgh is a chance for Europe to present a united front. Will Scotland be allowed an official input to any deliberations beforehand?

  • Comment number 10.

    Is Iberdrola not a Basque Company?

  • Comment number 11.

    "Next month's G20 meeting in Pittsburgh is a chance for Europe to present a united front. Will Scotland be allowed an official input to any deliberations beforehand?" [see #9]

    Blimey, that was quick. 'EU Observer' reports today that EU leaders are to gather on 17 September for an extra summit to decide Europe's position ahead of global talks at Pittsburgh on financial reform.

    Just the remaining matter now: the agenda. Will Scotland be allowed an official input? Some countries are averse to the international audit of their finances - the IMF reckons the global cost of the recent financial financial crisis is $12 trillion.

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