Category Archives: Politics

UK Government CMA should allow Hytera-Sepura deal

The UK government via Greg Clark at BEIS and the Home Office has decided to get its CMA (Competitions and Markets Authority) t0 investigate this irrevocable deal in which the Chinese radio comms company Hytera is to buy Sepura in a cash offer at 20p/share for a relatively small amount of £74 million, which had an expected completion deadline but for such investigations already passed as of mid Q1 2017.

Hytera already supplies the UK government Ministry of Justice (HM Prisons) with its radio sets, so it must be trusted by the UK government.

Hytera is not an SOE (Chinese State Owned Enterprise) and has no Chinese government investment.

Hytera has traded since 1993 in the radio systems segment.

The German authorities also looked at this deal and allowed it to pass in early Q1 2017 (deal too small to be considered and not a security issue).

Its takeover of Sepura plc, a UK radio systems firm, is in no way an issue of UK national security nor does it change market concentration, since Hytera and Sepura products are not currently overlapping (used in the same applications) though they are in the same general communications technology area. Rather it is a sensible strategic move which brings investment to the UK and Cambridge and enables Sepura workers and shareholders to move forward.

The possible UK government intervention threatens all this and if it does unexpectedly block this normal M&A it will have been a betrayal of trust causing untold damage to stakeholders.

Sepura is a UK headquartered business with 5% domestic trade and 95% export trade. This intervention is related only to the 5% of the business.

Sepura’s handsets are used by the UK police forces. These handsets use the TETRA technology. This is being phased out by the end of 2018. Therefore, after this takeover it is a matter of safely decommissioning the products, for which Sepura has extremely tight and regulated vetting. After this short period, the police forces will take on completely new ENS systems (new comms technology), and will have the opportunity safely again to contract these out via the entire market.

The CMA has, in allowing much larger and also security related deals to go ahead, made the parties accept undertakings as part of the deal.

It seems to CIR that the government would do least damage if it allowed Hytera to buy Sepura as per the deal agreed by shareholders and management of both companies in a friendly and co-operative environment.

In doing so, the UK government could put in undertakings for the companies to adhere to between the deal taking place and the end of 2018 when the incumbent Sepura technology is phased out of use.

In doing this, the UK government would have avoided betrayal of trust of all stakeholders in Sepura, its management, staff and shareholders, while acting to cover any (spurious in our view) security issues in the deal. The Sepura company can continue to trade via Hytera’s investments in a similar way and there is less risk to jobs (since Sepura needs the investment and Hytera is a something like a White Knight). Also, shareholders can obtain the cash for the business at the level expected, rather than lose half or all of their investments, which in many retail cases represent savings, pensions, trusts for family and so on. Blocking the deal would be highly disruptive to everyone involved with Sepura. The UK government would be acting in such a way as to negatively impact many of its core support in intervening in this case in this way.

We commend the CMA to move ahead with allowing the deal and making simple undertakings with the highly co-operative Sepura and Hytera businesses in the same way the UK government allowed the nuclear power deal to go through with Chinese involvement.

Political Discussion Focus in UK 2015 and beyond…

1. Choice, absence of coercion
a. Fair tax* = flat tax + donational, gamified “tax-me accounts”;
b. Less tax means less poverty and more for workers and business investment
c. …Reduces the loss of dignity for (benefit) recipients (what do they really need?) and the burden on forced givers

2. Absence of jealousy (at least in driving policy)
a. “I’ve no claim on you”
b. Focus on independently-defined real (sometimes called “absolute”) poverty

3. Government:
a. Focusses & is efficient, knows how to reduce itself through service design and digital technology;
b. Allows for self-reliance, family, all forms of community, philanthropy and that way is about real compassion & goodness (“nice?”); not the forced kind of giving via unwieldy state government (“nasty?”).

——

*Simplify the tax code greatly and release hundreds of thousands or more of civil servants back into the private sector wilds, paying taxes and pulling with other taxpayers, making it easier for everyone. Collect the tax by a uniform, simple  flat rate and supplement with monies paid by those who feel that government is good way to redistribute funds. (Many of course will not, because it generally may not be the best way…but significant amounts could be raised digitally and by making this public and competitive (but by choice) among those who can.)

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