View from City Road: Worth staying with Trafalgar

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TRAFALGAR HOUSE shareholders have long been saying in private that management changes are needed to shake up the group. Now they have been forced to decide whether to let Hongkong Land do it on their behalf.

Its statement with the tender offer was unequivocal. It wants board representation. And, although the offer is not conditional on that request being granted, it is unlikely to want to be a passive shareholder - whether or not it succeeds in increasing its stake to 29.9 per cent.

The question for shareholders, therefore, is what Hongkong Land can bring to the group. Its own results are impressive but have been helped by the rise in the territory's land values. Pre-tax profits have more than doubled in the past five years, while net assets have risen by more than a third. But managing five million square feet of investment property in Hong Kong is different from managing Trafalgar in a recession.

The jewel in Trafalgar's crown is undoubtedly construction, albeit tarnished by the recession. While Hongkong may be able to call on resources from the rest of the Jardine Matheson group - its own chairman, managing director and chief executive are Jardine's men - its experience in construction, paradoxically in a joint venture with Trafalgar, is small.

There is a chance that Hongkong's actions will flush out a rival bidder. Trafalgar's shares, which closed 4.5p above the 85p tender price, suggest the market thinks someone will pay more. Investors, who have seen the price fall to a low of 39p this year, may be tempted to take the cash now. But, with Hongkong's offer underpinning the price, it is worth staying aboard.