I was enjoying a quiet breakfast in a Dundee hotel last week — on a visit to the impressive new V&A museum — when a call came through from my broker with news of an agreed £560m bid for events and exhibitions company Tarsus, the second largest holding in my portfolio.
I had always expected Tarsus to be taken over one day, but more likely a few years hence. The last time one of my major vessels had come into port was when Delcam, the software company, was acquired in 2014. At 425p a share, the Tarsus proceeds should potentially be double Delcam’s payout and, fortunately, this time they arise tax free in my Isa.
I first bought into Tarsus in 2015 at 215p, buying on 36 more occasions at prices up to 311p, and have written about them many times. The surprise was that the bid was from a private equity source — Charterhouse — rather than a trade buyer. It plans to put more resources behind Tarsus and act as a sector consolidator.
However, all may not go entirely to plan. Although Charterhouse has approximately 40 per cent of the equity signed up, no doubt some of the institutional holders included in that figure will have escape clauses in the event of a higher bid.
With its 160 exhibitions worldwide, including the major Dubai Airshow, and a valuable growing presence in China, Tarsus would be a very attractive acquisition for a number of players in the sector who have big cheque books. So while 425p is a good price, it may not be at the “knockout” level. We shall see how things develop — meanwhile I remain firmly aboard.
Back in London, it was a pleasure to stroll along the river Thames towpath a few hundred yards from my home, to the Richmond headquarters of Vitec, a broadcast and photo equipment provider. I had been a shareholder previously, buying at 160p in November 2008 and selling in July 2010 at 408p. It is now around 1150p, having peaked at 1430p last year.
Long-term investors like myself are always looking for established businesses in growth sectors at sensible entry valuations. After visiting Stephen Bird, chief executive, and his team, I concluded that Vitec was such a company and added to a recently acquired holding.
At Vitec I found two “firsts”: a chief executive who from time-to-time rows to work and a UK-listed company with a manufacturing unit in Costa Rica. The group employs 1,800 people in 13 countries.
A recently released update confirmed trading was in line with expectations; it also announced a significant investment in its imaging solutions divisions, specifically to recruit a global team to transform its digital competitiveness and support its ambition in the sector.
Looking ahead, further growth is to be expected with 2020 likely to benefit from the summer Olympics and the US presidential elections. I believe Vitec warrants a rather higher rating than a price/earnings ratio of 13 with a 3 per cent dividend yield — definitely a long-term lock-away.
Turning to other holdings, after some travails last year over accounting issues and a consequent write-off, Air Partner finally produced its first set of accounts under new auditors. Hopefully we will see confidence and credibility gradually restored, encouraged by significant share purchases by new chairman Ed Warner, plus two other directors.
My much undervalued property share Daejan received some unwelcome publicity for not having any female directors. Frankly, with their shares at £56 — approximately half the net asset value — I would think it makes sense to take Daejan private.
At the midway price between current and net asset value, say £80, everyone would be happy and the controlling families would be spared further castigation over the diversity issue.
John Lee is an active private investor and author of ‘How to Make a Million — Slowly’. He is a shareholder in all the companies indicated.
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