Outlook: Racal's third reincarnation

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The Independent Online
Racal Electronics may not bear the name of Sir Ernest Harrison but it ought to. He has been synonymous with its evolution over the last 47 years and there seems to be no end to the amount of shareholder value that the wily old bird thinks he can wring out of the business before hanging up his boots.

At the age of 71 he is about to preside over the group's third re-incarnation in less than a decade. The first rebirth came in 1991 when he demerged the cellular telephone business Vodafone (having floated a minority stake three years earlier) while simultaneously beating off a hostile bid from Nigel Rudd of Williams Holdings. The second came with the demerger of the Chubb locks business a year later. Now Racal Electronics, as the shrunken empire is known, is re-inventing itself again by floating off the business telecoms arm and selling data communications.

Shareholders can hardly grumble at the first two demergers. Vodafone has tripled in value since demerger while Chubb went for three times the price when Sir Nigel returned with his knighthood and an agreed bid this year. Optimists think Racal Telecom might be worth pounds 1bn if Energis can float for pounds 850m. But a more realistic price might be nearer pounds 600m given that telecoms companies and public listings do not make happy bedfellows.

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