Derek Pain: Patsystems sell-off has left me counting some heavy losses

No Pain, No Gain

Takeover bids, real and rumoured, are providing a little excitement for the no pain, no gain portfolio. Unfortunately, worthwhile rewards are conspicuous by their absence, although I have not given up hope of eventually realising a reasonable gain from this activity.

Two constituents are involved. For Patsystems it is all over bar the shouting, with a bid having collected acceptances for more than 90 per cent of the capital. But at TEG, the other member under surveillance, the action has just started and could result in a profit.

However, the portfolio has lost heavily on its Patsystems investment. It paid 24p a share; the take out price is a mere 14p. Mind you, it is debatable whether the derivatives software supplier is now worth much more. It was for much of last year, as the company appeared to be trading well with the shares near 20p.

In the summer Patsystems splashed out £12.6m acquiring a US equities and options software business. Fortunately for the Americans, much of the consideration was paid in cash, not shares.

It was in October that Patsystems intimated it had encountered trading problems as, in these straitened times, customers reduced demand for cutting-edge technology. Then the collapse of US broker MF Global, and difficulties at other securities houses, compounded its problems.

As I discussed in November, a strike from ION Trading, an Irish-based company, was a distinct possibility. ION had been a persistent buyer of Patsystems shares, maintaining a presence not far below the bid-triggering 30 per cent holding.

The offer appeared a few days before Christmas. It did not bring much seasonal joy to the portfolio or, I suspect, most other shareholders. But with ION's stake standing at 27.9 per cent, and directors and others accepting, the offer always stood a strong chance of succeeding.

I had hoped for a degree of resistance from shareholders that would, perhaps, have forced improved terms. After all, Patsystems, with its derivative operations, represents a nice fit for ION which specialises in bond software. But it was not to be. With Patsystems' AIM presence due to disappear and ION talking about acquiring any outstanding shares, the portfolio has belatedly and reluctantly accepted.

Still, I believe TEG will be more rewarding. The group, providing technology for disposing of organic waste, was recruited in November at 8p a share. As I write, the price is around 8.5p, having nudged 10p.

A strategic review prompted Keir, the construction and property group, and a company called Bridges Ventures, to make exploratory inquiries that "may or may not" lead to a bid.

In case any other company is interested in acquiring the group, TEG has now, in effect, put up the for sale sign, but is keen to stress that other deals, such as parties taking stakes in some of its operations, are also possibilities.

Stockbroker Brewin Dolphin recently suggested the shares are undervalued and put a 22p target price on them.

Two other constituents have produced trading updates. Marston's, the brewing and pub group, rolled out a cheerful report, but Animalcare, recruited with TEG, offered more cautious tidings.

Famed for such traditional beers as Pedigree and Brakspear, Marston's revealed it enjoyed "strong" trading over Christmas and the New Year. And covering a 16-week period, its managed house sales were up 5 per cent and the franchised and tenanted estate recorded a 3 per cent increase.

The brewing side also did well. Animalcare, supplying veterinary medicines, indicated that its half-year results may be disappointing – with turnover down 10 per cent – but believes full-year figures will match expectations.

Avation is the other constituent in action; it has leased two more aircraft to Australian airline Skywest.

The Animalcare statement pushed the shares below the portfolio's buying price, whilst Marston's is marginally in the money. Avation is showing a reasonable profit at 105.5p against 83.5p when recruited.

The departure of Patsystems has reduced the portfolio's strength to 13, a number I like to avoid. I will, therefore, be adding to my little collection of shares and hope to return to the 15 mark before my next quarterly review, due next month.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate
    Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

    'The economic collapse has happened. What is at risk now is democracy...'

    If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
    The science of swearing: What lies behind the use of four-letter words?

    The science of swearing

    What lies behind the use of four-letter words?
    The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

    The Real Stories of Migrant Britain

    Clive fled from Zimbabwe - now it won’t have him back
    Africa on the menu: Three foodie friends want to popularise dishes from the continent

    Africa on the menu

    Three foodie friends want to popularise dishes from the hot new continent
    Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

    Who will fill Donna Karan's boots?

    The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
    10 best statement lightbulbs

    10 best statement lightbulbs

    Dare to bare with some out-of-the-ordinary illumination
    Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

    Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

    Briton pumped up for dream meeting with world No 1
    Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

    Nick Bollettieri's Wimbledon Files

    It's time for big John Isner to produce the goods to go with his thumping serve
    Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

    Dustin Brown

    Who is the German player that knocked Nadal out of Wimbeldon 2015?
    Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

    Damien Martyn: 'England are fired up again, just like in 2005...'

    Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test