All shipshape at Mersey, Forth and ABP
WATCH out, there's a VC about. In the Vietnam War, that was how the Americans warned of Viet Cong guerrillas. Nowadays VC stands for venture capitalist, and like the Viet Cong, there is no knowing where they will strike next.
CVC Private Equity sailed up the Mersey with a bid approach that sent Mersey Docks & Harbour shares to 926p last week, valuing the group at £720m.
There is talk of a bid at 950p, but this may not be the end of the story. Property group Peel Holdings has raised its stake to 9.25%.
Peel bought Glasgow's Clydeport last year and also owns the Manchester Ship Canal. If it counterbids, Mersey could fetch more than £10 a share - a handsome profit on our tip last December at 670p.
The ports business is not one that that pulses with excitement. World trade is growing, but what travels by ship - steel, coal, timber and cars - has grown less quickly.
But port companies have terrific property assets and are transforming old warehouses into apartments, offices and shops. Solid assets, solid cash flow. No wonder VCs, called private equity firms these days, are salivating.
After the Mersey approach, Edinburgh's Forth Ports rose to 1229p, valuing it at £560m. Associated British Ports (465p), owner of 21 ports, is valued at £1.46bn.
Alastair Gunn, at broker Arbuthnot, says that if Mersey is taken out at north of £10m, a bidder using a similar yardstick could pay £18-plus for Forth and 558p for ABP.
Perhaps. Forth would hardly rise from £12 to £18 without a contest. But it could be worth £15, making it a buy. Gunn says: 'If Mersey goes, potentially they could all go.'
The joker in the pack is PD Ports, owner of Teesport and a large site in Hartlepool. Bought by the VC private equity brigade in 2000, it was sold to broker Collins Stewart, which geared it up with massive debt and floated it off in July at £1.
PD Ports soon fell to 76p, rallying to 95p this week. It is hard to believe that even the rampant VCs will return to devour it once more.
Nothing ventured
SCEPTICS of VCs might also steer clear of VCTs - venture capital trusts - set up to back fledgling companies. Their huge tax advantages are often frittered away.
Investing driven by tax reasons is hazardous. The tempting tax savings take your eye off the investment ball and what you save is gobbled up by hefty fees and poor performance. At least the Revenue takes only 40p in the pound.
The tax perks are real. You can invest £1 in a VCT and claim income tax relief at up to 40%. Dividends are tax free, selling your shares is free of gains tax. The trick is to find a good investment team.
The new Keydata AIM VCT (helpline 020 7710 6906) is run by small-company specialist Giles Hargreave and his team at stockbroker Hargreave Hale. Their unit trust Marlborough Special Situations has risen 30% over a year, 60& over three years and 212% over five.
Keydata AIM aims to raise up to £30m by November 30. The minimum investment is £3,000. Costs are on the high side at 2.7% a year plus a performance fee, if annual dividends top 6%. Launch costs cut your initial £1 a share to 95p. But Hargreave's track record should make it worthwhile.
