View from City Road: A gem of an idea from Charter

SOONER or later Charter Consolidated had to do something about its image as a cash-rich, passive holding company.

In particular it had to address the question of its 38.4 per cent stake in Johnson Matthey, which chips in about one-third of Charter's pounds 70m-plus annual pre-tax profits but no operational cash flow beyond a likely pounds 7m net dividend this year.

The sprawling Oppenheimer family interests - which, through close relative Rustenburg Platinum, have an exclusive marketing contract with JM and, through Minorco, are the largest shareholders in Charter - are seen to be in need of cash.

The problems for the Oppenheimers are low precious metal prices and a big bill round at De Beers, another family concern, to support the diamond market.

Analysts were quick yesterday to speculate that current negotiations to sell Charter's stake in JM, worth pounds 350m, could kill two birds with one stone.

On this view Charter would buy out Minorco's 36 per cent stake in itself for around pounds 250m. The cash would be passed up to De Beers as Minorco bought out the diamond producer's holding in itself.

The implications for Charter of a buy- back of the Minorco stake are quite significant. By putting the JM cash on deposit Charter would dilute its earnings, on Nomura's forecast of pounds 80.5m pre-tax in the year to March 1994, by 5 per cent.

But purchase of the Minorco stake, although reducing pre-tax profits to pounds 59.5m, would boost earnings by 10 per cent.

Thoughts of this kind, and the prospect of a pounds 230m or 220p-a-share book profit on the JM stake sale, helped the Charter share price 14p higher to 663p.

Such speculation may be too neat. Charter could use the sale proceeds, added to its pounds 150m cash pile, to make a substantial acquisition either in its own field of managed businesses or in a related area.

But while Charter, after market outperformance over the past year, stands on a market rating, the standing of JM, where David Davies is chairman, would look less assured following the sale of Charter's stake to supposedly friendly buyers - Rustenburg has been tipped to take 29.9 per cent.

For JM it would be business as usual, but in the absence of immediate bid hopes a multiple standing at a one-third premium to the market, after a 19p fall to 494p, may be hard to sustain given distinctly average short-term earnings prospects.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
Sport
Bafetibis Gomis of Swansea City is stretchered off at White Hart Lane
football
News
Jerry Seinfeld Comedians in Cars Getting Coffee
peopleSitcom star urges men to be more supportive of women than ever
Life and Style
Living for the moment: Julianne Moore playing Alzheimer’s sufferer Alice
health
News
Jay Z
businessJay-Z's bid for Spotify rival could be blocked
Sport
Louis van Gaal is watching a different Manchester United and Wenger can still spring a surprise
News
The spider makes its break for freedom
VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
Arts and Entertainment
books
News
people
Sport
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle v United player ratings
Life and Style
love + sex
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot