Grampian Share Discussion Threads

[wannabee] 02/7/2001 11:24

Don't know about level 2, but I like the look of the 100000 and 30000 buys just reported, to add to the almost 100% buys executed today (I think there was just one sell earlier on). The obvious question is .......

[cwa1] 02/7/2001 10:23

Anybody out there got Level 2 info. out there that they are willing to post a screen snapshot of to let us all have an idea of how the market makers are placed and to see what,if anything,the order queue is like.
Please and thanks!

[wannabee] 02/7/2001 08:49

JRB - Things may not be that bad - there's always a chance of a Nuclear attack which would put us all out of our misery!.

Whichever realistic scenario I use, I see an outcome of +6% to +50% from here. I think that all offers currently undrvalue both businesses (doesn't mean anything better will come along though). EWM is being sold too cheaply, imho, and certainly doesn't reflect the recovery in retail stocks during the last year. The freehold properties must be worth a bomb if developed properly on any under-performing sites.

The logistics business seems to be moving to rail and into Europe - those are two very positive factors for a green Labour/European government, and trading is reported to be very good.

My prediction is for Alchemay to come back with a final 110p offer, which will be accepted (and that undervalues the businesses, of course, otherwise they wouldn't be interested).

[cwa1] 02/7/2001 08:28

Link to Scotsman comment this am...

[peter shone] 02/7/2001 00:40

JRB - bought at a higher price then?

I disagree entirely about the remainder of the company, the new drive towards rail transport shows IMHO that the Malcolm group is rapidly moving away from the old tipper truck days and inot European distribution, a much happier place to be.

As for accepting the offer, you must be 'aving a larff' . Alchemy will not get support unless they offer 120p minimum, upping their bid by such a paltry amount is as ridiculous as suggesting the board should take it.

I agree the sale of EWM seems to be at a knockdown price, but frankly I don't care much. My average price is below the current price, and I can only see the sale being positive for the share value in the short term.

[peter shone] 02/7/2001 00:29

£1 a share. Hmm. I think the total return if the EWM sale goes ahead will be nearer 115 or so, so unless the offer rises somewhat I wouldn't be voting in favour.

[peter shone] 02/7/2001 00:17

Lots of background on the other thread (Grampian 90pence) but seems the title is a little out of date.
This article today in the scotsman keeps it all up in the air...

Alchemy's second move on Grampian

ALCHEMY Partners, the venture capitalist, has made a renewed takeover approach to Grampian Holdings in a move that could scupper the Glasgow-based company’s agreed deal to sell its Edinburgh Woollen Mill retail business.

Alchemy is willing to pay £1 a share for Grampian, valuing the company at £116m, providing it can secure a recommendation from the board.

Corporate finance sources in Scotland say London-based Alchemy, which tabled an unsuccessful, 95p-a-share indicative offer six months ago, made its second approach in a letter delivered to chairman Sir Donald MacKay last Wednesday - the day before the group announced the sale of EWM.

Jon Moulton, Alchemy’s managing partner, was on a business trip to the US last week but the letter was signed on his behalf and declared that the private equity firm was in a position to move swiftly to complete a deal, subject to due diligence. Neither Alchemy nor Grampian would comment yesterday. But the revelation that the firm is still prepared to launch a bid is certain to re-ignite the controversy over the Glasgow group’s strategy for unlocking shareholder value.

At Friday’s annual general meeting, the Grampian board came in for repeated attack from a group of private investors, including Bill Hughes, the former chairman, and John Elliot, the former finance director of EWM.

Hughes described the £49m sale of EWM to private equity firm Rutland Fund Management as "diabolical" while Elliot, the leader of a shareholder protest group, challenged the strategy of selling EWM to leave Grampian focused on its WH Malcolm transport subsidiary.

The rebel shareholders include the Stevenson family, who had built up EWM before it was acquired by Grampian five years ago. David Stevenson remains a director of Grampian but is thought to have privately opposed the disposal for several months despite the main board presenting a united front on its strategy.

The private shareholders, who account for some 18% of the company, believe that improved trading at EWM’s 278 stores over the past few months should have commanded a higher sale price. Grampian is also selling a clutch of sites with development potential to an undisclosed property company for a further £13m. It is also planning to return £45m of the overall proceeds to shareholders although investors such as Elliot are worried that they would suffer onerous capital gains tax liabilities unless they are given a loan note alternative.

Until today’s revelation of Alchemy’s renewed efforts to bid for the entire group, it was expected that MacKay and finance director David McGibbon would succeed in pushing the EWM sale through. The company’s advisers at blue chip stockbroker Cazenove and investment bank Deutsche Bank were confident last week that the strategy would win enough support from the major institutional shareholders to overturn any opposition to the deal from private investors at the extraordinary general meeting, due in the middle of July.

Though the company refused to comment on Alchemy’s second approach, it is expected that the board will reject it this week. But Elliot said: "If there was a bid for the group at a price that was reasonable, given the track record of the shares, I would be a reluctant seller."



Doug Morrison, City Editor
Sunday, 1st July 2001
Scotland on Sunday

[jrb] 02/7/2001 00:16

Well, I think that is rather good news, and that shareholders should start now putting pressure on the board to consider the offer and accept it.

EWM, the 'non-core' activity, is in fact the biggest and best part of the group. The price it is being sold for appears to take no account of the considerable recovery that it and other mid-market retailers have experienced in the last few months. Look at the the recent share price performance of House of Fraser, Alexon, and Arcadia if you want comparisons.

With EWM gone, we shall be left with a second-rate transport company run by and for the Malcolm family, whose past record leaves a great deal to be desired. The dividend will certainly be slashed, and history suggests that the next move will be yet another profit warning. I have no doubt at all that we should all be better off with 100p a share now. It is simply laughable to think of the rump of Grampian, run by the Malcolms, as a dynamic shareholder-friendly growth company. Let's see if we can put it out of its misery now.

[peter shone] 01/7/2001 18:26

JRB,

Largely I agree with you... with a few exceptions.

Firstly let me clarify my position on the shares, I tend to be a 'special situations' type of investor, my interest rarely lies in well run steadily growing companies, more often in badly run asset rich companies which may offer value if broken up or on occasion upon recovery. Hence Grampian. I care ni fig ni fart what they are doing two years from now, I'll be long gone from them either way.

As for what happens next in GRMP, I care not as long as I make a profit. Whatever happens next I suspect I will.

The options appear to be:
1. Alchemy's bid is considered by the board, possibly accepted. +25%
2. Alchemy's bid is consdiered by the board, the consideration draws out a rival bidder (Rutland?) and an auction ensues. Who knows the result. Min +30%
3. The Rutland bid for EWM is successful and the board returns £45m via a special divi, equating to roughly 38p a share. Then it all depends on the valuation of the remaining group. Somewhere between 40 and 70p a share? Worst case would be coming out level once the dust has settled, best + ~40%?
4. Share repurchase following Rutland sale. You list a couple of poor examples, I was involved in one for J Mowlem, I bought the shares at 83p, sold half in the repurchase auction at 120, sold the other half a while later at 160. They're now 210. THey're a better company than Grampian, but repurchases following disposals aren't always bad...
5. Everything falls through, no sale goes ahead to anyone. EWM and WHM seem to be trading positively according to the board, results confirm or deny and we all live happily ever after as the share price recovers. Min 25% gain?

Can you see a serious downside to any of the options? The worst is I come out even, the best is a 40% or so gain. I'd take that.

[retchtub] 01/7/2001 18:02

hi peter-shone

must aqdmit i am sitting here with a nice smile on my face,did mention a few weeks back that alchemy could come back in .

if the analysts are saying grampian is worth 105-110 for the whole,then let the board talk to them,with that price in mind + a 10% premium which would take the price to 120 ish, think all parties would be happy with that ,as the group is tradeing strongly in the first half, i dont mind either way i think it will end up the same any way ,but nice to pocket the profit earlier,
lets see what happens tomorrow,good couple of last days i thought,
we are more in the picture now .
regards......... chow

[8 ball] 01/7/2001 16:50

JRB
Thank you for your post, you have made some good points.
Yes EWM could become more profitable if was run better.
We have a store on the outskirts of my town, the majority of the turnover comes from the passing tourist trade.
The staffing levels are high.

I also work for a supplier of giftware to ewm, and surprisingly each store does its own purchasing, Most large retailers have started to source from the far east, much to our cost.

JRB do you think alchemy would sell off the non retail parts?

Thanks again for discusion and good gardening.

p.s. the bit about tax come from

[jrb] 01/7/2001 15:46

Peter: no, I bought at 82p, about the current price. If that's meant as a jibe, I'm not sure how it helps your argument. I might just as well ask whether you are a member of the Malcolm family.

Assuming that you are not, I wonder whether you realised, before the announcement of the recent 'earnings enhancing acquisition', that your directors were running a private transport company whose sole customer (97% of sales) was Grampian, the public company of which you are such a large and supportive shareholder? Did you realise that they were already planning to sell the assets of this private company to Grampian for appraised value plus a substantial payoff for 'goodwill' (the goodwill of the sole customer, Grampian)? I certainly did not, but it was this announcement that made it clear to me what kind of a private club I had become a minority member of. Are you aware of any other arrangements the directors may have made that could raise questions of possible conflicts of interest?

It may well be, of course, that if the board entered into serious negotiations with a view to agreeing a bid, they could get a better price than 100p from Alchemy or from someone else. Unless they do negotiate, we shall never know.

Meanwhile, I think you are being a bit optimistic about the price for which they are actually planning to sell EWM. Let me draw your attention to the text of the announcement. EWM is being sold 'on a debt free and cash free basis' for £49m. The properties are being sold for £13m. That makes £62m gross. But what does 'debt free and cash free' actually mean? I suggest it means that EWM has debts which Grampian has to pay off before it can sell it for this price, or the properties may be mortgaged. An indication of the actual amount of cash to be generated by this sale is given further down in the announcement, where it is said that 'net debt of £31.8m will become net cash of ... £23.5m'. This suggests that the net cash value of the sale is not £62m, but £55.3m.

£55.3m is 58% of the current market capitalisation of Grampian. Last year EWM made 65% of Grampian's sales and 62% of its profits. Mid-market retailers are currently booming, while logistics companies are struggling. I simply cannot share your view that this is a great deal for shareholders. Nor does the market: the share price fell on the day of the announcement.

Let me also draw your attention to what is said about the return of cash to shareholders: 'the board will consider with its advisers the most appropriate manner of returning cash to Shareholders'. This may of course result in a special dividend of 38p per share. Equally, it may simply mean that the company will spend £45m buying back its own shares. In the latter case, a number of recent examples (notably Tomkins) suggest that the buyback will do nothing for the price of the remaining shares and will simply strengthen the control of those family members who do not sell.

8 ball: of course Alchemy think they can make money by managing the business better than the present board. Many people would agree that this might not be difficult. That is not an argument for sticking with the present board.

As for the Stevenson family, I don't know when they sold to Grampian, but I doubt whether they will have much tax to pay, if any. Grampian is a badly managed company and its shares have been falling for years: they were over 160p in 1997. Tax is certainly not an issue in my own case: it is always preferable to make a profit and pay tax on it than sit for years with an underperforming investment.

If anyone has an address for John Elliot, named in the Scotsman as leader of a shareholder protest group, it would be helpful if they would post it here. He will certainly have my support.

Dear me, why am I wasting my Sunday chewing the fat with you fellows? Time for a spell in the garden, I think.

[8 ball] 01/7/2001 14:05

I tend to agree with peter,there is more value for the shareholders if the sale of EWM goes through.
I might change my mind if alchemy come in at £1.25.
What are there plans for the group if the bid is succesfull.
They may want to split the group, but were unwilling to meet the asking price for EWM.
I feel there motive is to make a quick killing at our expence.
The protestors are just upset at the tax they will be liable to pay from the windfall.
The stevenson family should have considered this when they sold.

[cwa1] 01/7/2001 10:05

Retchtub
Here's an even more recent link that I think you'll agree is well worth a look!



Basically it's suggesting that Alchemy may come back with a renewed bid of about £1.00 per share,cash.
Still think that's less than the cos. actually worth but most people,me included,would probably want to snap it up.
Thoughts guys and gals?

CWA1

[retchtub] 30/6/2001 16:09

hi guys.

report in press to day ,refers to cazenove, broker to grmp saying
with out EWM and 38p cash return,valued at 78p per share ,some analysts valuing
grampian at 105-110p per share because of the proposed EWM disposal,
also some shareholders are worried that grmp would be more vulnerable to
takeover, i think private shareholders at meeting obviosly obtained there shares at a much higher price ,and the steavenson family obtained there
15% when they sold out EWM to grampian some years ago,

sat 30\6\01 www.theherald.co.uk
sat 30\6\01 www.thescotsman.co.uk
would like to hear any views on the articles please. ....chow

[retchtub] 29/6/2001 16:34

last thing to dayb x trade gone through 275,000 at 82.5
quite heavy buying to day
chow....

[retchtub] 29/6/2001 14:15

hi guys,
every thing about grampian is possotive,
i have a large quantity ,of shares in grmp i looked at the medium term
return,i first came in at 56p,and have added twice since,my average price is
65.5,post payout they will stand me in at 27.5p ,iam getting nearly 12%divi,twice what is being offerd ,high intertest ofshore,
when this all unravelsgrampians shares i believe will be 70p+ ,and i wont be a seller before that as regards the remaining company(malcolm),forget last years one off,look at the possotive ,tradeing is strong ,the recent aquisition of the malcolm family buissness is p.e. enhancing,divi will still be good,and the first half year finishes 31st july another divi in october.
i think the price will move up between now and the payout ,
markets are very tight at the moment ,but i believe sentiment will change ,later in the year
if any one can,show me a better home for my money please tell me if the share price does not move after the ex divi payment i will be a buyer of grampians shares,
on a final thought,whats the chance of a smallish logistics,transport company with rail facilitys,being gobbled up ,by bigger company when this is all sorted
quite good i would have thought.

just my own thoughts for you to reflect on .

regards...chow

[peter shone] 29/6/2001 12:27

So come on P, make a price prediction for post interims (due mid October?)...

I reckon ... Share price for GRMP (will they change epic codes?) of 65p, giving a total return of +34% against today's buy price.

[peladon] 29/6/2001 12:12

"All much too simple, both peladon and others."


Yes, I see what you mean.

:-)

[wannabee] 29/6/2001 10:32

Peter, I think the situation is pretty simple actually. Whatever GRMP's price before the 44p ex date, the price will be adjusted down, initially, by the 44p (+ GRMP's tax - In fact, is the 44p gross or net? If net, I suppose it'll cost GRMP something over 50p to payout 44p).
This will be the case because the market makers won't be analysing anything - they'll simply mark down by the gross payout, and then it'll be business as usual, with the price then moving roughly according to the subsequent trades.

I agree with your analysis that the remaining business looks very cheap, expecially as the capex will be reduced next year, and the directors have said effectively that business is going very well.

Anyone wishing to buy into Malcolm has a couple of choices - either to get in now, or wait till it goes ex the special dividend. The extra cost of getting in now is effectively the stamp duty on the 44p payout - i.e. about 0.22p per share (assuming commission is constant). My personal opinion is that the price will react before the xd date so that xd, Malcolm will be on a deserved rating, higher than that implied at the moment. Those waiting to save 0.22p by waiting for it to go xd will miss out on the rise, imo.

[peladon] 29/6/2001 08:18

After your last post, you think I'm going to disagree with anything you say???

65p would be dandy, but being pessimistic I'll go for 55p.

[peladon] 29/6/2001 00:35

Skirbell

Think you're right about it being undervalued.

However. If GRMP is worth, say, 81p including EWM (which is worth 38p), and it then sells EWM for the equivalent of 38p, there is no change in the value of the company (ignoring other issues for now). In theory, if it then returns 38p to shareholders, the price should fall by 38p. Of course, if the market thought EWM was worth more than 38p, the share price would be likely to fall, whereas if it thought 38p was a good deal, the share price might rise. And all this has been around, as d80gs says, for some time, so has been in the price to some extent.

The "other issues" might include that the disposal helps the company focus, the state of the market, costs, prospects for the new business etc. The share price has been rising partly due to anticipation of this news, because "value" has come back into fashion, because of the yield, and on speculation of a bid.

Hope this helps.

[skirbell] 29/6/2001 00:26

I may be being really naive, but if the price were to fall 38p from it's current level of about 82p, the PE ratio based on the last set of results would be a shade under 5. A fall to 60p would put the PE ratio at 6.6. At 60p, the company would be valued at £70m. I can accept the price falling to this level for a very short period but to remain there would significantly under value the company wouldn't it?

Thanks for all of your help and patience.