Castle Acquisitions - A Sleeping Beauty?

An unusual one this one.

Market cap 5.67m at 35 pounds a share and with 157,573 shares in issue

These were demerged from Lonrho Africa recently. The RNS which gives all the details is here:

http://www.uk-wire.com/cgi-bin/articles/200502210700138109I.html

Basically the company consists of about 1.5m in cash and the John Holt pension fund.

The John Holt pension fund has a surplus of about 20m in it and Lonrho were trying for ages to get their hands on the cash but without success as the trustees were given a lot of power deliberately.

A compromise deal was reached with the trustess eventually that included buying annuities for all the remaining pensioners and then allowing Castle to add new members to the scheme to utilise the surplus.

This presumably means that Castle will look for a reverse takeover of a company with a significant pension fund deficit and one way or another add these pensioners to use up the surplus and reduce their own deficit.

In the demerger document LAF say:

The surplus in the UK Scheme will fluctuate over time allowing for the changes in investment market conditions. The assets of the UK Scheme are invested in corporate bonds, gilts and annuities to match the benefit entitlements for members. The surplus in the UK Scheme is also affected by suspending future employer contributions.

The investment profile is very conservative and I would think being all in fixed income it could be expected to yield perhaps 5% over time or 1m per year.

Other risks to the scheme such as increasing longevity will I think have been substantially reduced by the purchase of annuities for all the remaining members, thereby transferring this risk to the annuity provider.

I think Castle will be looking for a company which is otherwise viable but hamstrung by having to make payments into a large pension fund deficit. I also think they may be able to do a deal which is on favourable terms to CAQ shareholders since the sort of companies i'm thinking of are unlikely to have many options to raise this sort of cash.

A couple I can think of which may be suitable are Dawson International and Pittards.

Peter Gyllenhammar and Hambros are already substantial shareholders, but GPG and David Cicurel's Starlight investments have recently bought stakes.

Anyway it's an interesting situation, The value is as yet unknown but I think could prove to be significantly more than the current market cap, it just depends on getting the deal right.

Is anybody interested in these? Do I even understand it properly?

Arthur