The mystery is why Lord Rothermere, a cut above your regular buyout baron, wishes to take Daily Mail and General Trust private. He and his family already own all the voting shares in DMGT, on top of 30% of the quoted and non-voting “A” shares, so it’s not as if he suffers under the shackles of the corporate governance police. DMGT has been able to invest – very successfully – for 30 years outside the newspaper business and in directions conventional stock market companies might struggle to explain.
The puzzle was not one Rothermere, DMGT’s chairman, tried to explain. The stock exchange announcement offered no reasons why Rothermere Continuation Limited (RCL), the Bermuda-registered holding company, has chosen this moment to say it may try to go fully private.
All one can say is that stars have aligned in the sense that two big events are happening simultaneously. DGMT has had a cash approach for RMS, the insurance risk-modelling business it has owned since 1998, that it says could yield a special dividend for shareholders worth 610p a share when combined with cash DMGT has on hand. Meanwhile Cazoo, the second-hand car dealer and the group’s other major non-newspaper asset, is about to get a £5bn listing in New York; DMGT’s 16% stake will be distributed among its own shareholders.
So a rejig was happening anyway. Buying out “rump DMGT” – the newspapers, an exhibitions business, a property information unit and a small venture capital operation – for £810m can therefore be presented as a tidying-up exercise. RCL’s total economic interest in DMGT is 36%, so it can fund the exercise by recycling its slice of the special divi and converting a few Cazoo shares into cash.
The critical question, though, is whether £810m, or 251p a share, is a fair price for the rump. The unspoken invitation to outside shareholders is to lie back and think of the riches created by the insurance business and Cazoo and not ask too many awkward questions. After all, total proceeds, including Cazoo shares worth 420p-ish, could be about £12.80, a lot better than last Friday’s DMGT share price of £10.40.
But a fat headline premium, as we’ve seen elsewhere recently, is not always a reliable guide to real value. A sum for the rump does not look generous when you consider that earnings at the Mail titles and the exhibitions business are in recovery mode from the pandemic.
DMGT’s independent directors are “minded” to recommend 251p but outside shareholders, who may get some form of vote, should demand to see their workings. Warm feelings about the insurance disposal and the Cazoo IPO do not remove the need for a transparent valuation of the rest of DMGT. Resistance may be futile in the end – but at least make Rothermere work for a deal that has a strong whiff of opportunism.
Nordstrom buys unknown stake in former Arcadia brands
What spoilsports they are at Asos: they had a chance to make Sir Philip Green’s blood boil and they flunked it. Or, at least, one assumes the online fashion firm has made a tidy turn on its little side deal with Nordstrom, the US department store group that is taking a minority stake in the Topshop, Topman, Miss Selfridge and activewear HIIT brands.
Asos bought the brands for £265m after the collapse of Green’s Arcadia empire and one suspects the implied valuation under the Nordstrom arrangement is rather higher. Asos isn’t saying; nor it is revealing the size of the minority stake. But one assumes it wouldn’t be selling even a sliver unless the terms were good. Green never got far in the US. Asos looks far better equipped to do so.
Virgin Galactic comes down to earth with a bump
Virgin Galactic’s shareholders, like Sir Richard Branson, have had an experience of weightlessness and discovered it doesn’t last long. The share price had soared in recents weeks as the boss said he would beat Jeff Bezos in the race to fly 50 miles above New Mexico, but the thump on return to earth was a potential need to raise another $500m of equity to get to commercial launch next year. Galactic’s shares were down 14% in early US trading on Monday.
It was a reminder that the business model is not straightforward. Initial tickets for a 90-minute flight were sold at $250,000 a pop and Galactic is trying to talk prices higher. Once the initial batch of enthusiasts have had their ride, are there really enough bored multimillionaires in the world to sustain a business that is already valued at $10bn?