The Investment Column: Wassall

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The Independent Online
The Investment Column: Wassall

THE DIRECTORS of Wassall, the mini-conglomerate, freely admit they need to do a decent deal soon. They were outbid for Allied Carpets last week and for BICC, the cable company, earlier in the year.

While the failed bids cost pounds 1.5m in fees, the real damage has been Wassall's disappearance from the radar screens of many investment houses. The company claims it could have been the successful bidder in both cases with a little more luck. But it will need more than luck to regain investors' interest.

The company claims its distinctive ability is its expertise as a turnaround specialist. This is being exercised at Thorn Lighting, which is struggling with weak domestic and German markets and a smaller business in bottletops. Christopher Miller, Wassall's chief executive, says the group will have raised Thorn's margins from 6 to 8 per cent by year-end, aiming at a 10 per cent target in 2001.

Mr Miller says Thorn was a sitting duck for Wassall's ruthless attitude to efficiency and cost-cutting. Manufacturing and marketing operations were duplicated across countries, creating plenty of scope for integration and headcount reduction.

The question is whether there are many similarly under-exploited assets around, and whether Wassall can acquire them at the right price.

The investment case for the company says that Wassall's share price will soar when it announces the next deal, so buy now. Wassall hints, of course, that there could be a big deal round the corner - it has pounds 350m in the bank and could stretch to pounds 1bn with a little help from an investment fund. Mr Miller sees opportunities in engineering, distribution, construction and retailing.

The shares, up 1.5p at 250p yesterday, trade well-below Wassall's appraisal value per share of 377p, demonstrating the City's neglect. But while buying into Wassall is an act of faith now, the shares look good value.

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