Goldman Sachs 'faces 40m pounds loss' on Hanson's ICI stake

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The Independent Online
GOLDMAN Sachs, the United States investment bank, is facing losses of more than pounds 40m on the 2.8 per cent Imperial Chemical Industries stake it bought from Hanson at the top of the bull market two months ago, according to well-informed stock market sources.

Goldman purchased the 20 million shares at pounds 14.10 each as the stock market peaked in early May, in the belief it would be able to place the shares with ease among its institutional clients. According to market sources, Goldman was unable to find buyers for more than 5 million shares. It then bought a further 7 million in an attempt to buoy up the ICI price and is saddled with a holding of rather more than the initial 2.8 per cent stake.

The shares have collapsed to pounds 11.74. Goldman is said to have abandoned all hope of placing the shares for the foreseeable future. Goldman's ICI loss is believed to be one of the largest on a single transaction since Kleinwort Benson took a pounds 35m hit two years ago on a similar deal in Premier shares. In that case the episode led to the resignation of KB Securities' managing director, Charlie Hue- Williams.

Goldman refused to comment on the size of the loss but insisted that the episode was causing less concern within the firm than outside. Competitors were exaggerating the size of the problem, one source said.

The source said: 'You'd have to believe we were morons not to have hedged this deal. Of course you can't totally hedge a transaction like this but within the context of Goldman Sachs, this is no big deal. If you are world leaders in transactions like this, as we are, then you are bound to suffer the occasional loss.'

The source claimed that the deal, which involved a capital outlay for Goldman of pounds 282m, was approved 'at the highest possible level' within the partnership and that no heads would roll over the episode.

Hanson is said to be taking considerable satisfaction privately at Goldman's misfortune. It has made the conglomerate's timing in selling the shares seem near perfect.

Lord Hanson, the chairman, has also claimed that Goldman was the driving force behind a concerted campaign to undermine his company last summer. According to one source, he sees the Goldman loss as sweet revenge.

Goldman has received a poor press over the last nine months. First it was controversially involved in the Maxwell affair, where its role in allegedly helping to support the MCC share price is still under investigation by the Serious Fraud Office.

The US investment firm was also widely blamed for misreading the likely level of US demand for shares in GPA in the failed recent attempt to float the aircraft leasing company.

(Photograph omitted)

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