Grey market dealing bodes well for Marconi's second coming

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The Independent Online

Shares in the restructured Marconi look set for a promising debut on Monday when they start trading for the first time in their new form as the company's market value edged higher yesterday in unofficial dealings.

At the start of last week, the grey market price for the new Marconi shares was about 40p – valuing the business at £400m. But by the end of the week, the price had moved up to 50p to 55p with some traders quoting 60p – giving the company a £600m market capitalisation.

Shares in Marconi plc delisted yesterday while shares in the restructured business, called Marconi Corporation plc, will start trading for the first time on Monday.

The telecoms equipment maker's financial restructuring was approved by UK and US courts earlier this week – a move that will see shareholders in Marconi plc end up owning just 0.5 per cent of the new Marconi Corporation, with Mike Parton, as chief executive, still at the helm.

They will get one new Corporation share for every 559 Marconi plc shares they own as well as one warrant, for every 56 shares they own, although they are worth nothing unless the stock hits 150p.

Marconi, which carried out a debt-for-equity swap that will see banks and bondholders own 99.5 per cent of the restructured group, will start life with about £600m in cash and about £800m of debt.

Since the banks and bondholders are not thought to be long-term holders of their shares, dealers were expecting a huge amount of trade on Monday.

One dealer said: "There'll be huge volume. They [the banks and bondholders] are not natural holders of the stock. We reckon around half the company's shares could change hands on Monday." There will be 1 billion Marconi Corporation shares in issue.

Dealers also said that many of the banks and bondholders who wanted to sell stock had already lined up buyers.

Analysts at Credit Suisse First Boston, said: "Current bondholders will likely be selling the equity they receive. Most holders can sell the equity even at 50p and make a profit on their overall holding."

The spread-betting firm Financial Spreads was quoting a closing price of 44p to 46p for the shares on Monday – up from about 38p to 40p at the start of last week.

But analysts reckon the company could be worth much more. Per Lindberg, an analyst at Dresdner Kleinwort Wasserstein who famously said the stock could be worth 0p to 10p when it was trading at more than 50p, thought Marconi could command a value of £700m to £800m.

The CSFB analysts reckoned the business could attract a £650m to £750m market value while analysts at Cazenove thought fair value was 60p a share or £600m.