A rights issue? BICC might even start a trend

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The Independent Online
The recent fashion has been for companies to hand back capital to shareholders rather than ask them for more - not that investors in BICC have seen much evidence of the trend lately. It is fitting, therefore, that the cables group should be one of the first to reverse the process with yesterday's call on shareholders to stump up pounds 170m by way of a two- for-11 rights issue.

A rights issue? Now there's a novelty. With the exception of Brian Souter at Stagecoach, who could probably raise money right now to put the Maxwells back in business such is his rating, it is hard to recall a single big capital-raising exercise this year.

That might seem odd since the institutions are flush with cash (some more so than others) and there has never been a better or cheaper time to issue paper, what with the Footsie hovering just below 4,000.

But it probably owes something to the new financial rectitude the investment community has imposed on prodigal businessmen. Not so long ago rights issues were more often than not devices to shore up the balance sheets of failing companies. Just think of how many times Trafalgar House tapped the markets until the Scandinavians finally put shareholders out of their misery. These days investors want to know how their money will be used before they part with it.

In the case of BICC, where the old Westland warhorse Alan Jones has been at the controls since early last year, the plan is to use the cash mainly to grow its optical fibres business and expand in the Asia-Pacific region where growth rates and infrastructure development mean it is still possible to make decent money out of traditional high-voltage power cables. The remainder will be used as seedcorn for privately financed infrastructure projects, supposing the Government's Private Finance Initiative ever comes of age. That does not seem an unreasonable use of shareholders' money. Along with BICC, they have been through the mill in the past two years, the shares underperforming the market by one-third.

Investors are now counting on Mr Jones to come up with the goods. Unlike the power cables business, where BICC lost its shirt and nowhere more so than in Germany, fibre-optics are the shape of things to come. If Labour gets in and BT delivers on its promise to cable up every school and library in the land to the superhighway, there will be plenty of business at home. Elsewhere in the world the growth in entertainment and business data services should make for healthy demand for BICC's fibre-optics.

The punt on the PFI is more speculative but the amount being spent here - pounds 40m - is not exactly enormous.

In any event, it is undoubtedly a better bet than throwing more cash at the contracting businesses of Balfour Beatty.

The market has thus far given Mr Jones the benefit of the doubt as he has enthusiastically set about reconstructing BICC and jettisoning its unwanted parts. Judging by the way its shares held steady yesterday, BICC's rights issue has also been warmly received.

The intriguing question is whether it is the start of a trend.

Pensions industry left scratching its head

Pensions are an enormously important area which most people do not understand, so the instinctive reaction to an inquiry by the Office of Fair Trading must be to welcome it.

After all, what could be more appropriate on the day of a momentous development in the Maxwell saga than to have the OFT take a look at how to stamp out abuses in the pensions industry.

But on a closer look at the announcement, it becomes harder and harder to understand what John Bridgeman, the director-general of fair trading, is up to. Indeed, the pensions industry was scratching its head and wondering whether the affair was nothing more than a make-work project for the OFT.

The inquiry is ostensibly into the personal pensions industry. But the announcement from the OFT goes on to elaborate a series of issues to be looked at that begin to sound more like material for a Royal Commission than for a quick investigation by the competition watchdog.

For a start, the OFT is to look at benefits and drawbacks of pension provision and regulation on a worldwide scale, in Australia, Chile, Singapore, Ireland, the Netherlands, the USA and Canada, perhaps reflecting the fact that it has hired an itinerant Churchill scholar from Australia to help in the inquiry.

The OFT is also interested in money purchase pension schemes as well as straightforward personal pensions. But it is hard to see how it can conduct a satisfactory inquiry into this complex area without taking on a far broader remit, since many companies now offer hybrid schemes that include money purchase and traditional final salary elements.

The oddest element of it all is that the OFT is planning to look at the regulation of pensions selling. Not only is the Pensions Act due to come into force next year, bringing wholesale changes in the way funds are administered and overseen, but the Securities and Investments Board has spent several years chasing the pensions mis-selling issue.

It is in the middle of a long, drawn-out campaign to force compensation out of the insurance industry, which has taken ages to cough up. One theory is that the OFT's intervention is a backdoor punishment of SIB and the industry for the slow pace of compensation.

The real purpose of the inquiry will not be clear until the terms of reference are published. But on the evidence of what has been said so far, it is hard to see why the OFT is so interested in an area already crawling with City regulators, which spend pounds 100m a year between them on overseeing pensions and other financial services.

Possible takeover keeps Zeneca high

Bid speculation and the Zeneca pharmaceuticals group seem to be irredeemably linked to one another. Barely a week passes without another flurry of activity. While most of it proves ill-founded, the stock market would not have bid up the shares as far as it has were it not convinced that eventually Zeneca is indeed going to be bid for.

We already know that there's a little bit of fire beneath the smoke. Wellcome was second choice for Glaxo's Sir Richard Sykes. He first approached Zeneca, but was sent away with a flea in his ear. Make no mistake about it, however, he still harbours designs. And if there were a foreign bid for Zeneca, playing the national card might just allow him to get away with it - complete hegemony of the British pharmaceuticals industry.

Maybe he's now going to get his chance. Following yesterday's fresh surge in Zeneca's share price to 1,590p, the German chemicals and drugs group Bayer said reports it may bid were "pure speculation". A spokesman went on to confirm that talks had indeed taken place. Whether anyone has the money, or the stomach, to bid at the present stratospheric share price is another thing.

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