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)

Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
News
Robyn Lawley
people
PROMOTED VIDEO
News
people
News
people
News
i100  ... he was into holy war way before it was on trend
Life and Style
lifeDon't get caught up on climaxing
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Arts and Entertainment
Harry Potter (Daniel Radcliffe), Hermione Granger (Emma Watson) and Ron Weasley (Rupert Grint)
newsBloomsbury unveils new covers for JK Rowling's wizarding series
News
scienceScientists try to explain the moon's funny shape
Sport
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
News
i100
Arts and Entertainment
As Loki in The Avengers (2012)
filmRead Tom Hiddleston's email to Joss Whedon on prospect of playing Loki
Voices
voices In defence of the charcoal-furred feline, by Felicity Morse
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

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star