Responsible Capitalism at its Best as Renishaw Removes ‘For Sale’ Sign | Economic news

British companies are often accused of selling too quickly and the City – which brings together those who need capital with those who provide it – of promoting short-termism.

Wednesday, however, provided a heartwarming example of a large British company simply refusing to flog itself to the highest bidder.

Renishaw, the precision engineering and healthcare technology company that was until recently a member of the FTSE 100, has announced that it is no longer looking for a buyer.

The reason is one that should be applauded by anyone who believes in responsible capitalism.

Renishaw has a wide range of interests in engineering and technology. Photo: AP

In March, Renishaw’s co-founders – executive chairman Sir David McMurtry and his non-executive deputy, John Deer – put their stake in the company up for sale.

However, as the pair – 80 and 83 respectively – own a combined total of 53% of Renishaw, this required the initiation of a formal sale process.

At the time, the announcement had taken Renishaw’s shares 18% to an all-time high, propelling it into the Footsie.

But the pair have made it clear that they won’t sell to just anyone.

The duo said at the time: “As founders of Renishaw, we understand the importance of Renishaw’s culture, our place in the communities in which we operate, our commitment to research and development and the loyalty of our staff, our suppliers and the customers we serve; together, they have been the foundation of our success for almost 50 years.

“Together with the Board of Directors, we therefore strive to ensure that we find the right new owner for our business – one who respects and will continue to nurture these important attributes.”

This was an explicit warning to any potential buyer looking to buy Renishaw and then split it up or cut its research and development budget – which, at 18% of sales, is unusually high for a UK company – to stay at the gap.

This corresponded to the skepticism Sir David had expressed in the past towards the City of London.

In 2010, following the global financial crisis, he told his local newspaper, the Gloucester Citizen: “They [the City] play and save a lot of money. It is shortsighted trading. They can take a lot of money out of the economy and that’s offensive. “

And he told the Daily Telegraph in 2013: “The problem is that in this country, engineers are not valued as a profession, like in Germany.

Sir David McMurty
Sir David McMurty is the Executive Chairman of Renishaw

“When your son comes to you and says ‘What should I do, daddy?’ in Germany, it’s “go into engineering”, here it’s “go into the city”.

“The top of the pile that we desperately need is being diverted to a wealth consuming activity rather than a wealth creating activity. The City does not create wealth. It does away with it.”

Yet the conditions set by Sir David and Mr. Deer set the bar high.

John Deer.  Photo: Renishaw
John Deer. Photo: Renishaw

Finding a buyer with the roughly £ 5 billion needed to buy Renishaw, who was also willing to continue running the business in the same way, was always going to be a tall order.

Private equity buyers have been more or less sidelined as the government’s recent move strengthening of take-back rules, ostensibly to deter Chinese buyers from making further forays into UK industry, also raised the risk that any foreign takeover of Renishaw could, through the company’s work in certain sensitive areas, be blocked for reasons national security.

These concerns have proven to be justified.

Bloomberg revealed in May that a number of potential commercial buyers, including Siemens in Germany, Hexagon in Sweden and Schneider Electric, the French company which has a majority stake in UK engineering software group Aveva, had all cast at a glance but were deterred by the price.

And on Wednesday, the sales process was completely halted.

Sir David and Mr. Deer said: “At the start of this process we made it clear that with the Board of Directors we were focused on finding the right new owner for our business.

“While the formal sales process did not result in a new owner for Renishaw, we are confident it ensured a thorough and rigorous process that allowed us to assess a wide range of potential buyers.

“We remain fully committed to Renishaw and have indicated to the Board of Directors that we do not intend to sell our shares in the market for the foreseeable future.

Renishaw.  Photo: AP
Renishaw. Photo: AP

“We continue to enjoy good health and as we look to the future of our holdings in due course, we intend to follow an orderly process that continues to take into account the interests of all stakeholders.”

The news did not surprise the City.

Berenberg Bank analysts told clients: “Despite receiving several proposals, requests for evaluation and management, for example the maintenance of manufacturing jobs in the UK and high levels of research and development , were always going to be obstacles for a potential buyer, especially a listed buyer. “

The saga shows how Dublin-born Sir David and Mr. Deer like to do things differently at Renishaw, which is based in Wotton-under-Edge on the edge of the Cotswolds and employs over 4,000 people worldwide, including some 2,700 in the United Kingdom. .

The two met in the early 1970s while working for Rolls-Royce in Bristol which at the time was working on the Concorde project.

    Rolls-Royce aircraft engine
Sir David and Mr. Deer met while working at Rolls-Royce

Sir David, who at the time was Deputy Chief Engine Design Officer and Deputy Chief Designer, was asked to come up with a way to design a tool capable of measuring to within a few micrometers (a micrometer is a thousandth of a millimeter) , the width of a pipeline used in the engine.

He told the Masters of Manufacturing publication in 2008: “It took me the whole weekend – many hours and almost a divorce.”

The solution he designed, an electric tactile probe, was the intellectual property that underpinned Renishaw’s eventual creation.

The company, which thousands of engineers from the United States to Japan traveled to pay homage to, made the two men rich.

Sir David’s state-of-the-art eco-house in North Nibley, near Dursley in Gloucestershire, even featured in a 2009 episode of the BBC’s Sherlock series as the home of fictional villain Charles Augustus Magnussen, played by Lars Mikkelsen.

Sir David, who donated the fees he received to charity, later admitted that he rarely lived in the house because his wife considered her too showy.

What now for the company?

Analysts from investment bank Peel Hunt told clients: “Renishaw is a superb company and a very attractive asset with exciting long-term prospects, in our opinion.

This does not mean that stocks, down 1% at some point today, might not come under short-term pressure due to a lack of clarity on what Sir David and Mr Deer will ultimately do with. their holdings in the company.

Not that the pair, or their employees, will be too bothered by this.

They are all long term, not short term.