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
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

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

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected