Investment: Hillsdown split could unlock some value

IT IS make your mind up time up time for investors in Hillsdown Holdings. The lacklustre food conglomerate holds its break-up shareholder meeting today, and shares in the three separately quoted businesses start trading on Monday.

Hillsdown's timing has proved to be appalling, with the market at a year's low and confidence fragile at best. But that aside, there could be value to be extracted from this complicated break-up process. The demerger will give existing shareholders one share in each of the new businesses, Terranova Foods and Fairview Homes, and two in the Hillsdown rump which will include names such as Chivers jams and Typhoo tea.

With Hillsdown's share price down to just 106p, off another 2p yesterday, analysts' estimates suggest there could be value to be unlocked.

Terranova Foods and Fairview are estimated to be worth a combined 60p per share against the old Hillsdown price, and another 45-50p per share is expected to be returned to shareholders after the pounds 600m disposal programme. Hence investors could be getting shares in the Hillsdown rump for virtually nothing.

Each division has its attractions. The Terranova chilled foods business, which makes convenience foods, salads and sandwiches for supermarkets,operates in growth markets and is seen as a takeover target. Unigate was interested in this division when it tabled its aborted pounds 1.6bn bid for Hillsdown. However, the inclusion of the troubled poultry business is something of a poison pill.

Fairview Homes, which specialises in houses for first-time buyers, primarily on brown-field sites within the M25, is being demerged at a time when most house-builders are attracting single-figure multiples. This is harsh on Fairview, which is a good business with the highest operating margins in the sector.

So, existing Hillsdown shareholders should hold on. For new investors, Fairview, in particular, could be worth a look.