Derek Pain: Cheers to a quick-fire profit with the Capital Pub Company
No Pain, No Gain
Saturday 30 July 2011
It is always a pleasure to book a profit, particularly a handsome, quick-fire one. In six months the no pain, no gain portfolio has almost doubled its money on its investment in the Capital Pub Company. Although the cash has still to arrive, bidder Greene King has stormed in to grab control, even before posting its offer, which means the rewards are as good as in the bag. In effect it is a done deal.
Some shareholders have sold in the stock market, reasoning, no doubt, that they may as well get their hands on the money as quickly as possible rather than wait for the protracted takeover process to be completed. They have sacrificed a few coppers per share. The portfolio intends to sit tight until it gets Greene King's cheque. Indeed, it is in no rush to unload.
Such a laid-back approach reflects the simple fact that I do not have a replacement immediately to hand. A number of shares are on my shortlist but I have yet to make a final decision. Compounding my lack of urgency is that I am a rather superstitious old feller and I don't like to tempt fate by reducing the number of constituents to "unlucky 13". I realise in this high-tech age such an attitude is rather stupid but I cannot avoid the thought that us investors have enough uncertainties to contend with and it is best to take every precaution possible.
The portfolio arrived at Capital early this year, paying 120p a share. The Greene King offer is 235p, capitalising the company, started 11 years ago as a business expansion scheme venture, at £70m. My decision to descend on Capital, which has 35 outlets, stemmed not from takeover hopes, although it was obvious such a possibility existed, but from indications it was a well-run company exploiting, as a niche player, the London pubs scene. Although the pub industry is suffering acute embarrassment on a national level, more upmarket establishments in and around London are enjoying excellent trade.
Not surprising then that Fuller, Smith & Turner, London's last remaining old-style brewer, saw the attractions of Capital's chain. But Fuller was outgunned by Greene King which had earlier splashed out £53.3m for the 14-strong outlets of an unquoted concern called Realpubs.
Whether Greene King's 235p shot is a full price is debatable. Capital possibly represents the last quality chance for any bidder to increase its London presence. Fuller's 200p indicative offer never stood a chance but there was stock market talk that at least 250p, possibly more, would have been more appropriate. Still Capital's board accepted Greene King's overtures and, perhaps rather sadly, an interesting little venture is being swallowed and will disappear.
I had wondered whether Marston's, Greene King's rival, would chase the Capital prize. But that portfolio member is quite heavily borrowed and has an extensive programme of building new pubs to occupy its attention. In the past few weeks a number of stockbrokers have chorused their praise for the Brakspear and Pedigree brewing and pubs group. One of them, Credit Suisse, has given the shares an "outperform" rating with a 131p target price. Numis is also keen and advocates a 130p target.
Another constituent making corporate news is Patsystems, providing such esoteric facilities as computerised derivative trading platforms. It is acquiring a US group with equities and options trading software, called Mixit, for cash and shares. Cost is a maximum of £17.6m with a £12.6m down payment. An Irish group, ION Trading, will, no doubt, scrutinise this takeover. It has a stake of more than 29 per cent, which will be diluted by the deal. Still this transatlantic expansion looks a shrewd excursion, which will increase the group's range and provide opportunities for cross selling.
Another constituent, Hargreaves Services, the coal to transport group, has at last won local authority approval for its Tower coal development in Wales. Permission is subject to certain, as yet unexplained, conditions. However, Hargreaves says once the final hurdles are cleared it will not take too long to get the project up and running. Negotiations have certainly been protracted but Hargreaves believes its Welsh development will provide some seven millions tonnes of coal over six years.
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