Salvesen sell-off plan

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The Independent Online
Christian Salvesen, the Scotland-based distribution and services group, will tomorrow unveil its long-awaited plan to float its Aggreko power supply business and pay shareholders a special dividend when it announces its first-half results.

The plan is the first stage of Salvesen's efforts to realise more shareholder value for the business since it rebuffed a pounds 1.18bn takeover approach from Hays, another distribution group, in August. Since the bid failed to materialise, Salvesen shares have fallen from a high of 366p to close on Friday at 324p.

Sources close to the company said this weekend that Chris Masters, Salvesen's chief executive, will only reveal the general terms of the demerger, along with the intention to pay a special dividend. However, it is understood that the demerger would value Aggreko at around pounds 400m.

At the same time, the company is forecast to disclose interim profits in the range of pounds 48m to pounds 49m, up from pounds 45m in the first six months of 1995. Aggreko profits will account for around half of this figure, from turnover of about pounds 90m, thanks in part to some unexpected contract gains in Sri Lanka and Mexico.

Analysts welcomed the move to demerge Aggreko but voiced concern over the size of the special dividend. "I don't think the company's long-term interest is served if it borrows money to pay off the shareholders," said one.

Others feel Salvesen should look at more sell-offs. "The Aggreko demerger will make sense if the market accords a higher rating than Salvesen's to its shares," said Charles Pick, distributors analyst at Panmure Gordon. "But it begs the question: what other service businesses within the group don't mesh?"