Lonrho Plc - A Successful Investment

When investing works


I have written a number of articles previously on the subject of the African focused conglomerate, Lonrho Plc.

After an initial purchase, followed by a sharp decline in price from 11.12 pence to 4.5 pence I reviewed my investment, concluded that it was a sound one, and bought more. In all, I invested £1,000 into the company, about 15,000 shares. The main reason that I decided to buy more shares after such a dramatic fall in price was (as I had written previously) due to the proven growth in the company and strong and growing balance sheet. 

I am very pleased to announce that on Monday 15th of May it was announces that a Swiss Company will take Lonrho plc private. It was agreed that every investor will have their shares bought out at 10.25 pence each. This is a huge premium considering that the company share price closed at about 5.5 pence per share the previous day. Clearly, they see a lot of growth potential in the company, just as I did. The following day (Tuesday 16th May) I received the following email from by online broker:

Dear Investor,

Corporate Action - Lonrho - Scheme of Arrangement

The board of Lonrho and the board of FS Africa have announced that they have reached agreement on the terms of a recommended cash offer by FS Africa for the entire issued and to be issued share capital of Lonrho. The transaction is to be effected by means of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006.

Prior to the scheme becoming effective, a request will be made to the London Stock Exchange to cancel trading in Lonrho shares on its market for listed securities on the first business day following the effective date and the UK Listing Authority will be requested to cancel the listing of the Lonrho shares from the Official List on the first business day following the effective date.

Terms:

10.25 pence in cash per share.

On the above you are due to be credited with £1,704.88.

Please note that there is also a corporate action handling fee of £10 to be levied on to the above proceeds.

The dates for the scheme have not been announced yet.

What has this investment taught me?


Firstly, I must admit that I first discovered this share on a tip from a friend. I would never want to imply that this was a great investment based on that recommendation. In fact, had I simply bought the first set of shares and left them, I would have lost money on this investment. This is because I bought the first lot at 11.12 pence, whereas we investors are being bought out at 10.25 pence. It was my re-evaluation of Lonrho Plc that encouraged me to buy more shares at the very low price of 4.5 pence that made this a 70% profit investment over two years.

I was encouraged to invest more, based on the companies growing revenues year on year, it's knowledge of the marketplace - based on it's 100 year history, its involvement in Africa; an area of future growth, and its strengthening balance sheet.

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4 comments

Marc said...

Fairly good analytical article, always enjoy reading such texts - a great help when investing.

Mr. Moneybanks said...

Thanks for the support Marc.

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