FINANCE AND INVESTMENT
By CUSTOS
LARGE-SCALE groupings in the heavy industries are now so much the order of the day that there can be no real surprise at the fusion of interests announced by Richard Thomas and Baldwins. From the industrial standpoint such a merger, which implies a way out of the impasse in the South Wales tinplate trade, as well as a pro- gressive programme of plant modernisation, must be judged wholly good. As a corollary the move must be interpreted, at any rate, from the long-term standpoint, as a " bull po.nt " for the share- holders of both companies. Before judgement can be given, how- ever, on the nearer-term aspects one needs to know something more of the financial basis on which the deal is to be carried through. All that has been disclosed up to rue present is that the fixed assets of Baldwins, including, presumably, the substantial investment in Guest Keen Baldwins' are to be sold to Richard Thomas On a share ex- change basis. It will be interesting to know how many Richard Thomas Ordinaries are to be allotted as the purchase price for the earning assets transferred. Meantime, there will be general approval for the inclusion in the scheme of the early repayment of Richard Thomas Prior Lien stock, which will automatically eliminate the Special Control exercised by the Bank of England.
CAPITAL STRUCTURE MODIFIED
In the City conjecture is now busy with the possibilities arising out of the financing of this large-scale rationalising move. So far as the repayment of the Prior Lien stock is concerned, it is worth notic- ing that holders of this stock, who comprise a bank consortium, have a double option exercisable up to March 31, 1945. They may either subscribe in cash for new Richard Thomas 6s. 8d. Ordinary shares at 13s. 4d. up to a limit of one-half of their holdings, or they may convert one-half of their holdings into new 6s. 8d. Ordinaries on the same terms. From the company's point of view the exercise o the second option would seem to be desirable, in that it woul provide the company with a substantial amount of cash on attractive terms, while reducing the Prior Lien stock awaiting repayment.
To cover the purchase of assets from Baldwins another large allocation of Richard Thomas Ordinaries" will be necessary, and thee will still be the problem of finding new money to cover plan modernisation, including, in all probability, the erection of a ne strip mill of the Ebbw Vale type. All in all, it seems a reasonabl guess that Richard Thomas's issued Ord-nary capital will be at leas doubled when the financing programme has been completed.
COPPER DIVIDEND SURPRISE
It has never been easy to forecast the vagaries of the Rhodes' copper share market. In recent years dividend decisions have bee full of surprises, the directors having reacted to policy consideration which have not been readily discernible to the outside public The latest announcements from the Chester Beatty group have bee no exception to this rule, Mufulira Copper Mines having resume distributions with 71 per cent only a few weeks after Roan Antelop decided so petit any payment. Net profit of Mufulira _ for di year to June 30th has fallen from £532,040 to £474,717 after provid ing L700,000, against L974,000, for taxation, and £2oo,000, again £130,000, for replacements. It is clear, therefore, that the decisio to resume dividends has not been prompted by any imprOvement earnings, but merely by policy influences. In August the immediat problem of reinforcing the liquid position was solved by the iss of L700,000 of 4+ per cent. Loan Stock, and one can only suppa that this, together with a more hopeful view of post-wai prospec engendered by the .recent discussions in Canada, has had the eff of loosening the purse strings.
In consequence of the Mufulira decision Rhodesian Selection Trus whose income is derived entirely from the substantial investment Mufulira shares, is itself able to declare a dividend of 81 per ccn while the Rhokana Corporation, which still holds 1,300,000 shares in Mufulira, will also derive a substantial benefit. Rhodesi Selection Trust sold 279,27o Mufulira shares at 55s. each to Rhodesi Anglo-American and Rio Tinto in September, 1943.
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