OUTLOOK: Rank solution looks too complicated

The market is right to grumble about the £620m price tag put on the fifth of Rank Xerox that Rank finally got round to selling yesterday. If nothing else it means that Rank looks unlikely to be one of the year's big bid targets.

The £1.55bn implied valuation of its 49 per cent holding is significantly short of the £2bn the market thinks it is worth. Even if it is pushing things too far to say that Rank has sold its birthright - the hugely successful partnership was initially forged in 1956 - the worry that it is pulling out just as the copier company is taking off seem well-founded.

Furthermore, there are significant concerns about the way Rank is accounting for its reduced stake. By creating a shell company whose sole asset is 49 per cent of Rank Xerox, Rank can continue to equity account the whole stake. On the face of it, it looks clever. Rank gets the benefit of the interest on the cash as well. Nor is there a capital gains tax bill. Making an already awkward arrangement yet more complex hardly looks like a good long-term solution, however.

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