Outlook: Caledonia holds back the tide, but it may be a losing game

JD Wetherspoon; Asil Nadir; Longevity
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The Independent Online

The Squabble over the future of Caledonia Investments used to be just a family affair, but now it is spilling out to other shareholders too. Both Hermes and Schroders, two of the City's biggest fund managers, yesterday threw their weight behind proposals to liquidate the £700m trust. The dissidents, advised by Sir John Craven, former chairman of Lonmin and Morgan Grenfell, also claim to have found a way of reducing, or possibly even avoiding completely, the hefty capital gains tax liability members of the Cayzer family would incur on liquidation, which has to date been one of the biggest obstacles to their proposals.

There's much at stake. The discount to net assets Caledonia shares trade at has been much reduced since the company converted to investment trust status last January. Yet at 20 per cent, it is still high enough to make the proposals worthy of serious consideration. Nearly 50 per cent of Caledonia is still owned by the Cayzer family, mainly through a family trust, the Cayzer Trust. As long as this trust continues to block the proposals, they can stand little chance of success.

The dissidents say the way in which their money is being managed is archaic and inefficient, and it is certainly the case that if you were today seeking to invest a family fortune, in Cayzers' case originally made in shipping, you wouldn't do it in this manner. Yet, perhaps strangely, Caledonia has over the years been a remarkably successful investment house, which has included some excellent assets. One is a major shareholding in Close Brothers, one of the City's most successful mini-investment banks. Another is a 20 per cent shareholding in the Bahamas based hotel and leisure group, Kerzner International. There have been some duffers too, but overall, Caledonia has outperformed quite significantly.

The dissidents and their backers think they could invest the money better themselves. They may find it more difficult than they think. Caledonia has evolved a distinctive style which involves taking major equity positions and then backing these judgements with long-term management support. No other City investment firm does it in quite the same way.

It's a shame, but in the end the modernisers will probably win. Money speaks, and eventually too many members of the family will want their money back to do with it what they please. As things stand, they cannot get it out at anything like its true worth. The irony is that stripped of the Cayzer Trust, Caledonia might be able to survive. Properly marketed, there would be plenty of support among retail investors for such a company. Unfortunately, the wants and needs of a steadily growing Cayzer diaspora make liquidation the most likely end game.

JD Wetherspoon

JD Wetherspoon, Tim Martin's pubs group, is a value for money business. There's nowhere else in Britain, boasts Mr Martin, where you can get pissed for less. The formula plainly works because today the chain amounts to 638 pubs turning over more than £730m a year. But for how much longer?

Mr Martin says he's being swamped by a rising tide of taxes and red tape. If things carry on the way there are, there soon won't be any point in running pubs. People will simply drink at home instead. So he's scaling back his expansion plans to match. Meanwhile, like-for-like sales growth seems to be slowing too. For August, it was just 3.5 per cent, against 4.1 per cent for the year as a whole. Mr Martin blames the hot weather, which you might have thought would have them spilling out on to the streets. Apparently not.

The sad truth is that JD Wetherspoon is going ex-growth. The share price has been saying it for more than a year now, and finally it's beginning to come through in the figures. After a long period of breakneck expansion, Mr Martin has hit the law of diminishing returns. He can blame the Government and the weather all he likes, and up to a point he's right. The more the Government adds to the costs of employing people and owning retail premises, the less economic Mr Martin's line of business becomes.

Yet might not the idea of stripped down, music-free pubs selling cheapo beer by the gallon also be reaching its sell-by date? I've reached a stage of life when I don't much go to pubs anyway, but I wouldn't be seen dead in a Wetherspoon's. OK, so I'm not exactly Mr Martin's target market, but I suspect the snobbery of my view is beginning to trickle down into parts of society which are. Ship 'em in, shag.

Asil Nadir

Asil Nadir, the disgraced Turkish Cypriot businessman, always did make good copy, so after a summer of wall to wall Hutton, his sudden reappearance complete with declaration that he'll be returning to these shores to clear his name, has been like manna from heaven. Perhaps unfortunately, the chances of him coming back are about zero, and the chances of him clearing his name are even less.

Not in a month of Sundays will the Serious Fraud Office agree a deal that would allow Mr Nadir to return to Britain and remain at liberty while awaiting trial. If Mr Nadir came back, he'd immediately be arrested and locked up. Given that he's already absconded once, no judge would grant him bail.

Mr Nadir apparently hopes to do a deal, but the SFO would be mad to agree one after the precedent of Andrew Regan, where the accused was eventually persuaded to return to face trial, but only on the charge of theft, not on the lesser one of corruption, which is the one the SFO really wanted to pursue. In the end Mr Regan was acquitted and the SFO was left with egg all over its face.

Mr Nadir did everyone a huge favour when he did his runner. The public purse was saved the cost of bringing him to trial, and the SFO the embarrassment of another failed prosecution. Best of all, a carbuncle on the face of British business was removed, with Mr Nadir's rip-off techniques exported back to the country from whence he came.

From start to finish, Polly Peck, Mr Nadir's fruit, veg and electronics combine - well that's what he said it did anyway - was the most ghastly fraud. The oddest thing about it was that everyone knew the company to be a can of worms yet it wasn't until the tax authorities moved in that the balloon finally went up. Mr Nadir seems to believe he can get the charges against him struck out on grounds of abuse of process. He's tried that tack before. Unsurprisingly the judge refused to hear the application, if only because Mr Nadir wouldn't appear in person.

Mr Nadir says that this time he will be there. Somehow I doubt it. No, Mr Nadir won't be returning. However uncomfortable things have become for him in Northern Cyprus, it's got to beat a Brixton prison cell.

Longevity

I'm Increasingly irritated by the received wisdom, which I read all over the place these days, that Europe's got no future because it is ageing more rapidly than anywhere else. For one thing, it's actually not true. The most aged population on earth 30 years from now is expected to be China, because of past government policy to deter population growth, yet nobody doubts China's growth potential.

Furthermore there is no rule that automatically links aging societies with declining innovation and productivity growth. To the contrary, greater longevity may actually be a stimulus to growth. Labour shortage has historically driven societies to ever greater levels of technological innovation, so that men can be replaced by machines. That may well turn out to be the case with ageing populations. Greater longevity poses plenty of challenges for Europe and elsewhere, but it is ridiculous to think it spells a future of long-term decline.

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