Trafalgar gets in battle trim

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The Independent Online
TRAFALGAR HOUSE and its advisers will spend the weekend working on a valuation of the business in a bid to persuade shareholders to reject the tender offer from Hongkong Land, the property holding company of the Jardine Matheson group.

Trafalgar, whose interests range from the Ritz Hotel and the QE2 cruise liner to John Brown engineering and housebuilding, is hoping to produce a circular for shareholders on Tuesday.

The group will try to demonstrate that the 85p a share offered by Hongkong Land does not reflect the value of the business, and will explain the group's strategy - possibly including progress on the disposal of the hotel chain.

The key to the valuation is the engineering and construction business, which has no assets but produces a strong income stream. In the year to last September it made pounds 82.3m operating profit on sales of pounds 2.6bn.

Smith New Court, the broker, has calculated that the group is worth about 109p a share, of which 76p relates to the contracting business. But there are indications that Trafalgar believes the value should be closer to 150p a share.

It is unlikely that the circular will include a profit or dividend forecast. The group's year ended on Wednesday and brokers expect profits of about pounds 100m before tax, down from pounds 122.4m last time, before provisions and write-downs.

Trafalgar's shares closed 4p lower at 85.5p. Hong Kong investors appeared unenthusiastic about Hongkong Land's move and its shares closed down 60 cents at HKdollars 13.20 on the news.

It owns more than half the colony's central business district but has said it is keen to look at opportunities throughout the world.

The signs are, however, that it is less interested in Trafalgar's property portfolio than in its contracting business and in improving its management. Sources close to the group pointed to Kwik Save, the discount retail chain 25 per cent owned by the Jardine group, whose management now dominates the board.