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.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 2 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 3 Paul Scholes: Manchester United need five experienced players who can turn round a desperate situation
- 4 Nicki Minaj 'Anaconda': Singer finally releases predictable video
- 5 James Foley 'beheading': Met police warn public watching murder video could be criminal offence
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Crisis? What crisis? A visiting US doctor gives the NHS a rave review
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Scottish Independence Referendum: Salmond described as 'arrogant, ambitious and dishonest' by Scottish women
iJobs Money & Business
Highly Competitive Salary: Austen Lloyd: CITY - HIGHEST QUALITY INTERNATIONAL ...
£500 - £600 per day: Orgtel: Relationship Manager, London, Banking, Accountant...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
£40000 - £55000 per annum: Harrington Starr: A Global Financial Service Organi...
Day In a Page
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
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony