Banking on it
PORTFOLIO JOHN BULL
As a shareholder in National and Grindlays Bank, 1 find the link with the First National City Bank (of New York) which the board is proposing reasonably satisfactory. If my approval is less than 100 per cent whole- hearted, it is because I suspect that a full-scale takeover of the company—say, from Lloyds Bank which is in any case raising its stake in the equity from 25 per cent to 41 per cent—would have produced a much higher price for my shares.
The best point of the scheme is that the bank's resources stand to be increased by some £221 million without outside shareholders be- ing called upon for a single penny. First National City has agreed to pay f191 million for new shares and new capital loan stock. The result will be that its stake of both the enlarged equity and loan stock will be 40 per cent. Lloyds is increasing its holding partly by buying National Provincial Bank out and partly by subscribing for new shares. Here is a second advantage. The close tie with one of the largest international banks in the world should increase the quality of National and Grindlays' business quite markedly.
Thus shareholders find themselves in a bigger bank, with enhanced resources, some gearing (from the loan stock) and better connections. What does it all mean for the share price? One can start with the fact that First National and Lloyds have both agreed to pay 70s a share for their new shares. One can add to that the board's estimates that profits for 1968 will be slightly higher than those for 1967. And the dividend is to be increased from 13+ per cent to marginally less than 14 per cent. The market's reaction was to take the shares up to 85s and then back to 75s where the dividend yield is 3.7 per cent. Returns on comparable shares include BOLSA (2.9 per cent), Barclays DCO (3.1 per cent), Chartered Bank (3.7 per cent), Stan- dard Bank (3.9 per cent). National and Grindlay's share price is, therefore, firmly based and I shall maintain my holding for the time being.
I am also in receipt of a full-scale bid for my holding of AB Picture from Electric and Musi-
Valuation at 17 December, 1968 First portfolio
100 Empire Stores at 76s £380 125 Phoenix Assurance at 39s 6d £247 £2,000 War Loan at £44 .. £880 330 Witan at 26s 6d £437 250 E. Scragg at 45s 6d £569 100 National and Grindlays Bank at 75s £375 500 Clarkson (Engineers) at 18s 3d .. £456 60 Rio Tinto Zinc at 146s £438 1,000 Associated British Foods at
Ils 111d . £597 1,000 Jamaica Public Services at 5s 6,ld £278 250 Associated British Picture at 62s 6d £781 100 Lyons 'A' at 83s 1415 Cash with local authority at 7 per cent £1,236 £7,089 Deduct: expenses £184 Total £6,905 Second portfolio 600 Pillar Holdings at 17s Old ..
15 Kaiser Steel at £36 8s .. 250 Lonrho at 41s 9d 100 British Petroleum at 138s 6d 300 Vosper at 24s 6d 1.000 Allied Breweries at 22s 7ld Cash in hand .. £5,687 Deduct: expenses £163 Total £5,524 .. £512 • £546 .. £522 . • £693 .. £367 .. £1,131 ▪ f1,916
cal Industries. The board of AB Picture has greeted this development with displeasure. Although EMI already has a 25 per cent stake in AB Picture, relations between the two com- panies are poor. The AB Picture ob- jections to merging with nu are first the terms, which are considered distinctly ungenerous, and certainly not as good as those EMI has recently offered other companies; second, the industrial logic, which looks suspects—unless you think that even in the entertainments field there is a particular virtue in size. And third, of course, AB Picture's cinema sites.
Obviously I shall do nothing with my holding for the time being while I wait to see what the AB Picture board can produce. Meanwhile, the formal offer document from EMI is pretty im- pressive. The outstanding aspect is the com- pany's profits projection for this year. EMI says that its unaudited results for the first four months of the current year show a 26.8 per cent increase in profits (and a 34 per cent in turnover). Some of this increase is naturally accounted for by two new acquisitions, Black-. pool Tower Company and Audio Devices. All the same the 'old' group has managed a 15 per cent improvement in profits. And for the year as a whole, EMI is now forecasting a 19.8 per• cent increase in pre-tax profits and 'if present. trends continue, this increase could well be materially greater.' The immediate effect of this bullish statement was to put the shares 9d better and with EMI at 56s 9d, the offer for AB Pic- ture is worth 63s 9d. This looks like a battle out of which AB Picture shareholders are bound to do well.
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