Please don’t call it a (drinks) can of worms. Never mind that the proposed £4.3bn takeover of Rexam by Ball of the US would give the combine 69 per cent of the market for soft drinks cans in Europe, the proponents keep saying they don’t expect too much grief from the regulators.
Now they’ve got some, as EU competition commissioner Margrethe Vestager launched a proper investigation, seeking an explanation as to why such a market share is anything other than an effective monopoly. Ms Vestager has more than soft drinks on her plate; she also has to pick the bones out of Hutchison Whampoa’s proposal to add O2 to its UK mobile business, 3.
So far, she’s talking a good game. She claims that prices tend to rise where the number of mobile competitors is cut from four to three, although it’s not obvious why a deal which would do just that in the UK should be decided in Brussels. The telecos complain that only the merged businesses can afford the massive cost of the next generation of investment, and are happily playing the “national champiuon ” card.
The canmakers, meanwhile, point to all those wonderful economies of scale available from putting competitors together. And look at our big, ugly customers, they add: the likes of Coca-Cola and Heineken are already much bigger than we are.
This is a familiar refrain, and is why the rules are there in the first place. Market dominance breeds complacency and contempt for the customer, while competition breeds innovation and lower prices. Ms Vestager has just thumped EDF for E1.4bn for getting illegal tax breaks. Next she must decide whether the cans can or the telephones connect. If she’s as serious about competition, then the answer should be no.
Dividends keep rolling in
Terribly risky things, shares. Prices can plummet, dividends can go down as well as up. Actually, they hardly go down at all. The banking crisis and BP’s disaster in the gulf of Mexico added up to a catastrophic combination for shareholders, as banks and oils had provided more than a third of the total dividends in the year before.
The shock that overwhelmed the banks was so unexpected (to them) that some were reduced to seeking state aid in between declaring their 2007 dividend and paying it. From the peak payment of £68.5bn in 2008,. distribution from all quoted UK companies wilted to £58.7bn two years later.
Both the banks and BP are still convalescing, but dividends elsewhere more than made up the shortfall, and by 2011 the £69.7bn total had already passed the 2008 peak. They have gone on rising ever since, and by 2014 they had almost doubled from the trough in just six years. This week Capita dividend monitor’s numbers show another record in the second quarter, up by 13.2 per cent.
This picture is somewhat confused by the payment of special dividends, which reached a record last year, and by changed timing of payments like Barclays’ £642m final. Cash-raising and new issues swell the size of total dividend payments, while buy-backs and takeovers reduce them. Neither does anything for the income from a portfolio. Nevertheless, the message is clear: a ten-year bond will give you a tiny return and your money back a decade hence. A sensible portfolio of UK shares will give you a higher starting yield, rising income and a growing asset.
Now that’s what I call an insurance policy
Good news: the price of the ultimate insurance policy is coming down. Indeed, it’s not much more than half the price it was at its peak. Once you’ve bought it, there’s nothing more to pay, and none of that endless renewal bumpf which somehow can’t find enough space to tell you what it cost last time. The ultimate insurance policy won’t pay out for trivial events like the house burning down or writing off the new motor. It’s not like that. It will be there if, literally, all else fails. It is, of course, gold – not a certificate or an account, but the actual heavy metal, preferably in handy chunks like, say, sovereigns, perhaps buried in the back garden…