The Investment Column: Salvesen should have accepted bid

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The Independent Online
Here's a simple question. Would shareholders in Christian Salvesen be better off now if the logistics group had not rejected Hays' mooted cash bid 18 months ago? The answer is a resounding yes. A bid from Hays would have been worth at least pounds 1bn or 390p a share, ex-dividend.

Compare that with the current combined value of the demerged company - Salvesen, the rump distribution group, and Aggreko, the bigger power hire business.

Even after yesterday's 9p rise in Salvesen's shares to 103p and Aggreko's 5.5p rise to 164p, and including Salvesen's recent pounds 150m special payout, investors own shares worth 318p. And that is after a 15 per cent or so hike in the market since Hays' first showed interest.

Given his legacy, Chris Masters, Salvesen's ex-chief executive who fought off Hays and is now running Aggreko, must be amazed he has a job at all. What should investors do with their shares now? The hire market for power equipment is booming, particularly in the US, Aggreko's largest market, and there are opportunities in Asia.

Aggreko's shares have outperformed the market by around 5 per cent since demerger and are on a 15 per cent market premium next year. Lower than Hays', it is fair as Aggreko is smaller and growing more slowly. Investors should hold on. Salvesen is a harder call. Its food services business, 15 per cent of the total and hit by the poor pea harvest, is dire and should be sold. However, Swift, Salvesen's overnight delivery service is growing fast and margin pressures in food retailing distribution are easing.

The yield next year will be a good 6 per cent, and there is the chance of a bid. The unknown is chief Edward Roderick, ex-Hays, and markets are still tough. However with Salvesen on a 25 per cent market discount, hold.