The Investment Column: Inventive demerger gives BTG a lift

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The Independent Online
IN DECIDING to spin off Torotrak, its revolutionary transmission system, BTG is following a highly profitable tradition. Previously, privatised companies as diverse as National Grid and British Aerospace have done wonders for shareholders by demerging promising, but separate, businesses on to the stock market.

Torotrak highlights the value BTG can squeeze out of technologies. A business on which the group has spent pounds 12m over 10 years will float with a value of close to pounds 400m after raising pounds 50m of new money. Given that the system is already being worked on by 12 of the world's leading car makers, there is plenty of future promise for shareholders.

But what is the rest of BTG worth? It will be left with more than 1,000 other technologies or inventions, including a host of biotech treatments already on the books of drug giants such as SmithKline and Zeneca. Not to mention a revolutionary artificial hip-cup, disposable contact lenses and an electronic bar-coding system. New revenue is rocketing and BTG should make a profit early in the next century.

Still, valuing this collection of inventions is tough. Kleinwort Benson, BTG's broker, reckons the existing portfolio is worth anything from pounds 300m to pounds 2bn, and Torotrak accounts for 55 per cent of the total. It is a wide range, but as yesterday's 34p share-price rise to 736.5p suggested, the demerger lifts the probable value of the portfolio. And the shares still look a better bet than other biotech and "future value" companies. Hold tight for the next millennium.

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