A bold move from Wassall

CITY TALK
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The Independent Online
WASSALL, the engineering conglomerate, announced it would transform itself into a quoted venture capital-cum-leveraged buy-out fund. Boss Chris Miller said he knew of not a single example of a similar quoted fund anywhere else in the world. Despite market scepticism - the shares fell 39p to 328.5p - why shouldn't he enjoy the freedom to try out his cunning plan?

That said, it must be asked; why aren't there any equivalents? One possible reason is the vast remuneration that venture capitalists can earn. The reason they stay private is that there would be uproar if their wages and bonuses were exposed.

Fine - but that shouldn't prevent Wassall having a go, especially if its wages stay within the bounds of common sense and don't erode returns on equity. Perhaps that is one reason why the directors plan to cut their salaries by up to 30 per cent and cancel their bonus scheme.

The last point against the proposed makeover is timing. Ask an LBO specialist in the City about business at present, and there is an anxious pause before the admission that things are quiet. Sure, there have been some mega- deals, the pounds 860m IPC buy-out one of the most recent. (Don't mention that the underwriters have had trouble selling down some of the debt.)

Margins are tighter, big pay-backs are more elusive. Mr Miller looks to be entering the market just after it has hits its peak.

Another blow to the great football investment game has been scored by Newcastle United, after allegations of sleaze against the vice-chairman Douglas Hall and chairman Freddie Shepherd. A cynic might say: "That's football," but the prospects for the sector's efforts to establish itself as a credible investment bet are fast diminishing - rightly so, if one of the most ambitious clubs can inflict this sort of damage on itself.

Finally, the debate over passive smoking looks set to rumble on for a long time yet. BAT Industries unit Brown & Williamson has said a court case in Indiana proves that passive smoking is harmless and does not cause lung cancer. A jury voted unanimously that smoking could not be blamed for a victim of lung cancer. Although a small crumb of comfort for the tobacco lobby, the longer-term pressures on the industry remain much as before. Like it or not, the nannyisation of Western governments is sure to see further declines in smoking.

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