Saudis must push back Aramco's flotation or risk looking desperate

Financial markets are reliably terrible at reading big geopolitical developments, so do not read too much into the initial 20% jump in the oil price after the weekend attack on Saudi Arabia’s oil infrastructure. The list of unknowns is long. Saudi officials may not know how long it will take to restore full production and it’s not in their interests to offer full clarity at an early stage. As for any US-led military response against Iran, it may be preceded by several rounds of brinkmanship.

Thinktank Capital Economics offered a gloriously wide range of forecasts for the oil price for the rest of the year. A quick resumption of Saudi production would restore $60 (£48) a barrel; and a full-blown US-Iran conflict would see it soar to $150. That’s honest, but not obviously helpful.

Only one outcome seems reasonably clear: Saudi Arabia’s planned public listing of Aramco cannot go ahead on schedule.

Most of the key facts about the state-owned oil company were already obscure, not least whether the Saudis were aiming for a valuation of $2tn or would accept $1.5tn or less. A higher oil price, had it occurred for other reasons, might have encouraged the higher figure. But a drone attack on a key refinery is different. It can no longer be filed in the prospectus as a remote “risk factor”; international investors will demand time to see how events develop.

There were signs on Monday that Saudi officials are already considering a delay to a flotation which was set to happen on the local stock market in November, and to be followed by an international offer next year. That timetable needs a re-write. Even the Saudi regime must see that pressing on in the current climate would look desperate.

Lady Cobham was right to resist a miserable deal

Lady Cobham, daughter in law of the founder, did her best to stir up patriotic feelings among the fund managers who control Dorset-based defence group Cobham, but her efforts failed. The £4bn takeover offer from US private equity Advent International was approved by shareholders on Monday with a thumping majority of 93%.

It is still possible, in theory, that the government could block the deal on security grounds, but do not hold your breath. Cobham is a relatively small supplier to the Ministry of Defence and it would require an earthquake for UK politicians to object to American ownership. BAE Systems, a protected species in Westminster, is big in the US, remember.

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Political realities should not, however, obscure the fact that Lady Cobham was basically right: the takeover terms were shockingly poor.

Most boards of FTSE 250 companies, it is true, have to take seriously a cash bid at 34% premium to the old share price but there are occasions when they’re allowed to resist. This should have been one.

Cobham owns excellent hi-tech kit, such as hoses and conical drogues for refuelling jet fights. Its balance sheet, via two £500m rights issues in 2016 and 2017, was repaired after a string of profit warnings a few years ago. And trading has improved. There was a strong case for Cobham to appeal to its investors for loyalty. At least have a go. Timidity made Monday’s outcome almost inevitable.

Advent has a better reputation as a long-term investor than some private equity houses, but its core mission is much the same. The aim will be to flip Cobham, in whole or in pieces, within five years. And the opportunity has arisen, in part, because mid-sized UK companies are out of the spotlight amid the fog of Brexit. A miserable deal.

Aldi’s profits drop along with its UK influence

Sales up 11%, profits down by almost a fifth. In the world of Aldi, where a decade counts as the short-term, the disconnect is not a reason to rethink expansion plans. UK boss Giles Hurley set out plans to increase the portfolio from 840 to 1,200 by 2025, with an emphasis this time on smaller local stores within the M25.

Yet Aldi UK’s fall in profits for 2018 also suggests the old-guard are learning to live with the discounters (Lidl being the other big one). Asda, deprived of its anti-competitive merger with Sainsbury’s, is having to fight harder on price. Tesco, with its “farm” brands, has had some success with copycat tactics.

Clive Black of Shore Capital thinks German limited assortment supermarkets “have been through the zenith of their influence in the UK,” a judgment that sounds correct. Aldi and Lidl aren’t going away, but they don’t cause the same terror in rivals’ boardrooms these days. If Tesco et al had woken up 15 years ago, they could have avoided a lot of pain.