View from City Road: A gem of an idea from Charter
Tuesday 19 January 1993
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.
- 1 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 2 Doctors remove 80 teeth from boy's jaw
- 3 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 5 Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing
Syrian teenager Usaid Barho reveals how he escaped from Isis using a suicide vest
Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
Millions of Britons struggling to feed themselves and facing malnourishment
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
Immigrants make UK racist, says Ukip councillor Trevor Shonk
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...