Private Investor: That Viridian takeover? I really hate it
Saturday 14 October 2006
The news came a little too late last week for me to digest it fully, but I have now come to a considered verdict on the takeover of Viridian by a private equity group. I hate it.
For me - and I would hope for other long-term shareholders in the business that was once named Northern Ireland Electricity plc - it means surrendering yet another nice little earning asset in our portfolios to the ravages of the private equity gangs.
A more spectacular example was the takeover of BAA by a consortium led by the Spanish construction group Ferrovial. There again, we shareholders were offered what seemed like a decent premium to give up our company.
It sounds OK, collecting money like that, where you don't even have to pay any dealing charges, but to me it raises a question. If the private equity companies, venture capitalists, hedge funds and the rest think they can make some extra returns from those assets, why can't the existing managements, drawing on the resources of one of the great capital markets of the world, do the same?
I don't wish to sound ungrateful. Viridian shares were privatised in 1993 at 220p each. Last week's offer was pitched at 1,325p for each share. You shouldn't complain about a return like that, should you? It represents some £1.62bn of funds from Arcapita, a Bahrain-based group formerly called First Islamic Bank (funny how both predator and victim changed their company names to something meaningless and silly).
Even for more recent investors - and I have been buying into Viridian in the last year as well - the bid represents a very useful 23 per cent premium to the closing share price before the announcement, and a 37 per cent premium to the average price for the six months prior to that.
So why did these Bahrainis venture so far away - to the Giant's Causeway, indeed - to make a little money? Asim Zafar has the answers. He is a director of Arcapita, and he explained to us that the group was attracted by the stable cashflow of Viridian and by the potential for growth as the energy market in Ireland and Northern Ireland is opened up to competition.
I would add to this the prospect of a considerable peace dividend in the province too, as it catches up with the very high recent growth rates of its neighbours in the south. No matter what the politicians do now about the peace process, it seems very unlikely that things are going to go back to where they were during the grimmest years of the Troubles. It might be stalemate in Ulster at the moment, and a bit unstable, but it's still peace (provided you're not unlucky enough to get kneecapped for selling dope in the wrong neighbourhood. However, I'm straying from my own neighbourhood here, so I'll leave it there).
Anyway, you see my point about how the Arabs (and investment tiddlers like me) can spot why Viridian is a good long-term investment, but the existing management and the bigger shareholders seemingly blanch at the prospect of generating returns that would see the shares move up to 1,325p each of their own accord.
Maybe it's just the private investment groups going and paying too much for these assets (Anglian Water was another that fell this week), but they can't all be wrong all the time. It's clearly the case that the large institutional investors and the band of small punters who still bother with investing directly or indirectly in equities just haven't got the power to keep the stock market and company share prices at realistic levels.
They haven't got the money, that is, because no one trusts anything but bricks and mortar these days. The markets, in other words, are cheap, and the people who can spot this are private funds that have huge walls of money behind them.
None of this is the counsel of despair, however; far from it. There are at least two things one can do in these circumstances. First, identify the few remaining assets - usually utilities - which haven't been bought, and pile in there. Second, start getting into the few venture-capital vehicles that are available to the public, of which the most notable is 3i. Once known as Investors In Industry, it was privately owned by the UK clearing banks, who sold their stakes to the public in 1987.
3i has just reported an encouraging set of results. Buy now, before it too goes private again.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 This 'woman calls police to order pizza' story isn't going where you're expecting
- 2 Axe wielding man shot dead after attacking four New York policemen on busy street
- 3 Watch what happened when food critics were unknowingly served McDonald's
- 4 Jimmy Carr's Oscar Pistorius joke goes a bit too far at the Q Awards
- 5 Ottawa shootings: Bruce MacKinnon's cartoon is the perfect tribute to soldier Nathan Cirillo
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Attacks on 'Ukip Calypso' show how skewed people’s priorities are
Poppy Appeal 2014: This is why I won't be wearing a red poppy this year
iJobs Money & Business
£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...
£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
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
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