No Pain No Gain: Years of dedication and patience are rewarded after a bumpy ride
Saturday 18 January 2003
The no pain, no gain portfolio has enjoyed a relatively cheerful degree of corporate action since it was born nearly four years ago. Two of its three long-standing Footsie shares have generated take-over excitement. There was the bruising free-for-all when Punch Taverns and Whitbread indulged in an uproarious battle for the Allied Domecq pub chain. And, in its endeavours to become a global beer player, Scottish & Newcastle splashed out £1.2bn for the Hartwall brewing group, taking it into the Russian market.
But, reflecting my preference for the stock market's undercard, much of the activity has been pretty small stuff – like the construction group Galliford taking over its rival, Try, or Burtonwood Brewery buying a near 100-strong pub chain. Only on one occasion has a constituent been on the receiving end of a bid. Montana, an aspiring restaurant group, was the target. It was swallowed, in what turned out to be a profitable exercise for the portfolio, by Hartford, now largely a bars group but then nursing ambitions to become a major force in London's ever revolving eating-out business.
Now, however, we are in the big time. Safeway, my third long-standing Footsie share – my other Footsie stock, Six Continents, arrived late last year – has at long last collected the bid every City man (and his dog) realised was probably inevitable. It was one of my first recruits, joining the portfolio in April 1999. I alighted on the supermarket chain because of its (then) recovery potential and the perennial chance of takeover action. It duly delivered on the trading front.
My 1999 bid candidates were Wal-Mart, the US retail behemoth that subsequently descended on Asda, and Royal Ahold, a Dutch group. Now Safeway is the prize in a three-way battle. Wal-Mart has, like J Sainsbury, declared its interest in bidding, provoked into action by Safeway's acceptance of a cheapskate offer from the Wm Morrison supermarket chain.
I am, of course, pleased my long-term dedication to Safeway has been rewarded. It has been a bumpy ride, requiring considerable patience. Indeed, if I had adopted a stop-loss formula, the shares would have long ago been kicked out of the portfolio. I paid 248.5p; the price subsequently fell to below 160p, then went above 400p as the chief operating officer, the Argentinian Carlos Criado-Perez, an ex-Wal-Mart executive, inspired an impressive trading recovery.
But in the past six months or so the shares have lost ground. Although it appeared to me that the Criado-Perez magic was still producing results, Safeway was subjected to an intense City whispering campaign. Talk abounded that its revival was running out of steam and margins were being squeezed. It was wide of the mark. Still, with the shares weak it is perhaps not surprising that the chairman, David Webster, decided to open the bidding process by negotiating the Morrison offer.
However, I am not at all impressed by the terms of the all-share bid. It seems the Yorkshiremen at Morrison are attempting to extend their cut-price policy to the stock market. Quite clearly, monopoly considerations permitting, Safeway is worth much more than Morrison has put on the table. However, as Mr Webster no doubt intended, its bid has forced Sainsbury and Wal-Mart into action.
But shareholders may be unwise to merely sit back and watch the fun. In the present frenzied supermarket climate Safeway should command more than 300p a share – perhaps nearer 400p. But the company may not fall to the highest bidder. Political influences could prompt one of those absurd compromises that would leave everybody relatively happy except the poor, much-maligned shareholder. Morrison's adventure raises few, if any, monopoly considerations; Wal-Mart and Sainsbury know they have a monopoly fight on their hands.
There is still the chance of another bidder entering the fray. After all, Safeway probably represents the last chance of a supermarket carve-up in this country and a Continental group or even a venture capitalist could still be interested in barging in, particularly as Safeway is still underpriced.
On present form it seems unlikely that any of the three current protagonists will enjoy a complete victory. Morrison does not face monopoly problems but it is likely to be so heavily outgunned that its best hope is a dignified retreat. Perhaps it will collect a portfolio of stores as a consolation prize. For Safeway is finished. It is likely to be broken up, with Asda, Sainsbury and, perhaps, even Tesco, taking on its outlets.
The high level of uncertainty makes it unlikely I will wait until it is decided which brands occupy which Safeway shelf space. I will be happy to settle for a reasonable profit. Indeed, a level comfortably above 300p will be enough to tempt the no pain, no gain portfolio into selling.
Mark Dampier: How to get an income now that savings are past the 'use by' date
Thousands of UK investors could lose out following collapse of Secured Energy Bonds
Bargain Hunter: Fly off for a winter break in France or Portugal for well under £100
Millions in line for compensation after being sold unnecessary credit card cover
Weekly Money: Round-up of the personal finance stories you may have missed 26-30 January
- 1 Three-year-old boy shoots pregnant mother and father in New Mexico
- 2 Stephen Fry explains what he would say if he was 'confronted by God'
- 3 Jewish community urged to boycott Cornwall village after residents vote for 'Hitlers Walk' sign to be reinstated
- 4 Benedict Cumberbatch's Alan Turing gay-rights campaign snubbed by Prince William and Kate Middleton
- 5 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Stephen Fry explains what he would say if he was 'confronted by God'
The open loathing between Barack Obama and Benjamin Netanyahu just got worse
9 reasons Greece's experiment with the radical left is doomed to failure
President Putin is a dangerous psychopath - reason is not going to work with him
Have we reached 'peak food'? Shortages loom as global production rates slow
Britain's widening poverty gap should be causing outrage at the start of the election campaign
iJobs Money & Business
£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...
£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
Day In a Page
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion