Companies in the news ... and how they were assessed
Alliance Trust: enter Rothschild
Help may be at hand for Alliance Trust – the beleaguered Dundee-based fund manager that made headlines last year when its chief executive, Katherine Garrett-cox, was dramatically ousted following a long-running shareholder dispute, said Kate Palmer in The Daily Telegraph. Jacob Rothschild’s RIT Capital Partners has confirmed that it is in talks to acquire the outfit – although it has yet to make a formal offer. The combined company would be worth around £5bn. One of the UK’S “oldest and largest investment trusts”, Alliance has had a turbulent time lately, owing to repeated attacks from activist investors lambasting its “lacklustre performance and corporate governance record”, said Chris Newlands and Arash Massoudi in the FT. Investors broadly welcomed Lord Rothschild’s interest, though some noted that RIT’S own performance has slipped of late; there are also worries that a tie-up with RIT – which is “dominated” by Rothschild, who is 80 and has “no obvious successor” – could eventually lead to further boardroom ructions. Nonetheless, restoring Alliance Trust to its former glory under the existing ownership would be a “Herculean task”, according to Amin Rajan of Create Research. “A merger is the least unpalatable option,” he said.
Bayer/monsanto: monster munch
The German pharma company Bayer seems really determined to acquire Monsanto, said Peter Evans in The Sunday Times. Last week, Bayer bid $122 a share for the firm, the world’s biggest supplier of GM seeds; it was the “biggest all-cash offer yet for a single company”, valuing the US giant at close to $66bn. The offer was rebuffed, but according to analysts at investment bank Jefferies, Bayer isn’t going to give up. They reckon CEO Werner Baumann will go as high as $140/share. “Monsanto looks to be a once-in-alifetime opportunity for Bayer,” they noted. “We expect it to go all the way.” If a deal is reached, it will be the latest in a series of big tie-ups between agricultural suppliers – a “feeding frenzy driven by a slide in crop prices and the imminent explosion in the global population”. But it should surely worry farmers and consumers that just a handful of companies now wield “huge power” in the agricultural sector, said Ben Marlow in The Sunday Telegraph. Baumann talks “in lofty terms” about wanting to solve “a global food crisis” – but he’s also a “highly ambitious chief executive desperate to make his mark in a new job”. That should ring alarm bells, not least with regulators. “Baumann’s monster may be best left in the corporate finance lab.”
Volkswagen: secondary support
“Secondary brands can be a godsend,” said Jack Torrance in Management Today. “Just ask RBS.” The bank’s reputation “is in the mud”, yet its Natwest subsidary “remains one of the nation’s most loved” (if love is possible for any bank). Another company enjoying similar benefits is Volkswagen. The German carmaker has had “a torrid time since admitting to installing cheat devices in its cars”. But its latest quarterly results are not as grim as you might imagine. True, pre-tax profits took a 20% dive, but the hit was mainly from the core VW division, where operating profits were down by more than 85%. Two other big VW brands, Škoda and Porsche, have been motoring, and even Audi “managed to keep things flat”. The lesson is clear: “if you’re planning on getting embroiled in a global scandal, be sure to invest in a few subsidiaries first”.