While you were doing your Christmas shopping, an old-fashioned takeover contest was being fought out in an obscure corner of the stock market. The target was MP Evans Group, one of the very few plantation companies left listed in London. The outcome shows that there are bargains to be found and that some institutional shareholders, at least, will take the long view over the quick buck.
Evans is a 147-year-old grower of palm oil, mostly in Indonesia. Before the bid, the share price was not so much undisturbed as sleeping soundly on the Aim junior market. At about 420p, it had gone nowhere in five years. The bid at 640p, a pound above any price reached in the past, served to expose the hidden value. When the bidder, Kuala Lumpur Kepong, raised the offer to 740p a share, or £425m, it should have been game over.
Instead, the (very) long-serving board was jolted into action. It raised $100m by selling the asset that contributed a quarter of earnings — promising a 10p special dividend from the proceeds — and a less tight-fisted approach to future payouts. The higher bid from KLK attracted only 13 per cent acceptances and has now lapsed. Evans shares, galvanised to 700p at one point, have lapsed too, but only to 630p, or nearly 50 per cent above the somnambulant price where KLK spotted a bargain.
Aberdeen Asset Management, JPMorgan and Alcatel, with 30 per cent of the shares between them, have taken the long view. The management is forced to pay more attention to the shareholders in future and brokers FinnCap remain bulls of the stock with a target price of 815p. They should all be suitably grateful to KLK, which gets nothing but lawyers’ bills.
Opportunity knocks
Mervyn King has never been a fan of the single currency. Political glue holds it together despite the misery it continues to inflict on a whole generation in southern Europe. Germany is the obvious winner, yet the following is from Lord King on the BBC on Boxing Day.
“Germany has such a large trade surplus because of its greater competitiveness that it can’t invest that anywhere in the world where it can be guaranteed to get its money back. As soon as the German taxpayers see that their money is literally being thrown away, they will ask serious questions as to whether they want to remain.”
Those taxpayers could always suggest dollars but that is hardly the point. The payments from Germany to her southern neighbours are called loans by the European Central Bank but only the accounting treatment distinguishes them from gifts, and gifts that give pleasure to neither side. The EU’s only response is to keep giving, keeping the recipient suitably miserable and hoping the donor doesn’t notice.
Faced with an existential problem like that, and a broken immigration policy, it’s no wonder that the EU views Brexit as a minor irritant. Lord King, on the other hand, sees it as a “real opportunity” for Britain. Indeed it is, and let us hope his forecasting is better than it was, too.
It’s really radioactive
The news from the nuclear industry continues to be grim. The possibility that the cost of building nuclear power stations might bankrupt a business the size of Toshiba is shocking but it might not surprise, say, the former finance director of EDF. He quit because he could see financial disaster: adding the commitment to build Hinkley Point to the company’s existing (non-operative) nuclear projects could overwhelm the balance sheet.
While solar, wind and wave power costs are falling, nuclear is getting dearer. The cost of complying with ever-rising safety standards is outrunning the gains from scale or technology, and there is no prospect of commercial viability. The argument for building Hinkley Point is already reduced to provision of “base load” electricity, despite the likelihood of credible demand control measures before the station starts up.
The warning from Toshiba is a harbinger of doom but, if 2017 turns out to be the year that massive nuclear power stations are finally consigned to the past, Hinkley Point among them, the company’s travails will not have been entirely in vain.
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