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DEMERGERS
| Stick to the knitting "reshape the group to concentrate on" |
| In rapid growth, it is difficult to manage it within a portfolio |
| To fend off unwanted bids |
| Unlock shareholder value - the whole of Racal Electronics was valued at
£2.9 billion, yet its 80% stake in Racal Telecommunications was worth nearly £3
billion. Release rather than create shareholder value |
| More efficient than selling the business and reinvest the cash or
dividend |
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The impact of subsequent activity makes it very difficult to assess:
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acquisitions and disposals
-
scrip issues
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dividend issues
-
share buybacks
|
| ICI and Zeneca had a combined value of £13.86m post merger, 53% more
than before the demerger |
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Costs
and Risks
|
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| ECC - Camas demerger cost £4 million, with estimated additional annual
costs of £1 million for being independent |
|
Increased foreign currency exposure |
| Reduced ability to arbitrage interest rates |
| Reduced equity ratings and consequent credit rating changes |
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