Goldman faces 37m pounds loss on ICI stake

Click to follow
The Independent Online
GOLDMAN SACHS, the US investment bank, is believed to have crystallised a loss of around pounds 12m and is facing further losses of more than pounds 25m from its purchase of more than 20 million shares in Imperial Chemical Industries.

Goldman, which may face legal action claiming pounds 40m transferred to it from Mirror Group Newspapers before Robert Maxwell's death, bought 20 million ICI shares from Hanson in May for pounds 14 a share, a total of pounds 280m. It placed around 5 million with institutional investors at the time, at a small profit, but bought an estimated 7 million shares in the market in the following weeks.

Senior market sources said yesterday that Goldman attempted to place the holding on Friday in New York and London. However, analysis of trading in London and New York by market experts has indicated that no more than 5 million share were sold by Goldman.

ICI's shares rose 14p to close at 1,163p on Friday. Assuming Goldman sold the shares at around pounds 11.60, its losses would have been pounds 12m.

The best estimate of Goldman's remaining holding in ICI is that it has around 10 million shares remaining on its books. ICI shares fell 2p to pounds 11.41 yesterday, indicating an unrealised loss of pounds 25.9m on the holding.

Goldman's total losses are expected to be close to pounds 40m, when carrying costs are taking into account. That is one of the largest losses on one transaction by a stockbroker in London, although Kleinwort Benson Securities lost pounds 35m when it bought a 29.9 per cent holding in Premier Consolidated in 1990.

Goldman would not comment on its holding in ICI yesterday, saying that it was not its policy to comment on individual shareholdings. However, sources within the company have said that it took out positions in the futures and options market to hedge the losses on the holding.

Goldman has a policy of taking large stakes in companies so that it may place the shares from a position of strength. The holdings do not usually come to light as, under the Companies Act, Stock Exchange market makers do not have to disclose holdings held on their market making book.

But holdings sometimes become known about. It has emerged that on 21 November 1990, Goldman held 25.2 million shares in Maxwell Communication Corporation equal to 3.87 per cent of MCC's equity. A Goldman official said last year that those shares were bought 'over a period of time in the normal course of market maker business'.

(Graph omitted)

Comments