TheChek News Flow

Confirmation from Garda World that it was considering an approach for G4S [LON:GFS] earlier this month makes the UK security services provider the latest London-listed stock to have attracted buyout interest while in the process of completing a major asset separation.

G4S said at the end of 2018 it would separate and explore divestment options, including a spin-off, for its Cash Solutions business. It’s a pattern which has been repeated with a few slight variations in recent years.

Shire’s buyout by Takeda [TYO:4502] bears the closest parallels with G4S. Its takeover was preceded by Shire management’s decision to spin off its neuroscience business to shareholders following a prolonged period of share price weakness.

GKN is another business which was bought out alongside talk of a spin-off. The engineering conglomerate unsuccessfully attempted to fend off buyout interest by offering to divest its automotive unit to industry peer Dana [NYSE:DAN] via a demerger-type structure, in return for a shareholder rejection of a takeover.

Listed below are the five London-listed companies with the worst stock price performance since announcement of a demerger, taken from Dealreporter’s Spin-off universe.

Shares in SSE have struggled since the spin-off of its household energy and services business in Great Britain and combination with npower was proposed back in November 2017. The share price decline is firstly due to the collapse of talks with Joint Venture (JV) partner npower, and secondly because of adverse regulatory developments affecting the business.

Stock price declines of around 13% since the initial announcement might perhaps put the takeover spotlight on SSE and an attractive portfolio of assets outside of its retail business.

Shares in real estate investment trust (REIT) Capital & Counties are down 19% since it announced in May 2018 it would consider a spin-off of its Covent Garden property assets.

And its decision to pursue a demerger has not helped its sector-relative performance either: the business failed to achieve the median total shareholder return of its peer group in the three years to end-2019, according to its annual report.

Capco’s poor performance since its demerger announcement, an attractive portfolio of London property, a concentrated shareholder base and deep discount to book value are all factors which might attract an opportunistic bid.

Catering concessions operator Autogrill’s shares are down 15.0% since it said in June 2018 that it would look to separate its food and beverage business in Italy from the remainder of the group. Autogrill has toyed with a number of different options since 2013: first a separation of HMS Host, its North American business, then a split across its highway and airport operations, before settling on an Italy, rest-of-the-world structure.

Industrial conglomerate Thyssenkrupp is the worst performer among ongoing demerger situations tracked by Dealreporter, down by around 40% since confirming it was considering a split in September 2018. Thyssenkrupp’s plan is to separate its engineering and steel businesses, as well as forming a steel JV with Tata Steel [BOM:TATA]. Activist investor Cevian has been a long-term shareholder in Thyssenkrupp while Elliott Management and Harris Associates have invested more recently.

Telecom Italia shares are down 28.6% since it said in March last year it would legally separate its wholesale network assets. Options being explored for the unit revolve around a tie-up with network infrastructure rival Open Fibre, owned by utility Enel [BIT:ENEL] and the Italian state. Elliott Management owns 9% of Telecom Italia and Vivendi [EPA:VIV] has 24%, while Italian state-backed Cassa Depositi e Prestiti owns 5%.