Newspaper article THE JOURNAL RECORD

B.A.T Shareholders Seek Profitable Restructuring

Newspaper article THE JOURNAL RECORD

B.A.T Shareholders Seek Profitable Restructuring

Article excerpt

BOSTON -- Kansas City Southern Industries took a signal from shareholders when it opted to split its railroad and mutual funds groups.

Now, shareholders at another hybrid company, Britain's B.A.T Industries, are calling on management to separate the company's tobacco and financial services units.

The reasoning behind both reorganizations is the same. Investors believe the blended companies would be worth more if they traded as two separate units. "We would like to see B.A.T spin off its financial services business," said David Manning, fund manager at London's Foreign & Colonial Management, which owns more than 25 million B.A.T shares. "There isn't a logic behind keeping the tobacco and financial services units together." A decision to separate the two would cause a 25-to-40 percent rally in the company's stock, Manning said. B.A.T shares, which closed 6 pence lower at 524.5, rose 15 percent in the past 12 months. By contrast, the FT-SE 100 Index -- the benchmark for U.K. stocks -- gained more than 28 percent in the same period. To date, B.A.T's management has given no indication it's ready to propose splitting the company. B.A.T's chairman, Lord Cairns, addressed the issue in April at the annual shareholders meeting. "I can assure you that our minds are open and there are no sacred cows," Cairns said. When the company is confident that a change "in our corporate structure would improve the prospects for our two business streams and create better value for our shareholders, then we wouldn't hesitate to propose it." B.A.T Industries entered the financial services business in 1984 when it purchased the U.K. insurer Eagle Star. A year later, B.A.T acquired another insurer, Allied Dunbar. Today, B.A.T's financial services unit, British American Financial Services, also owns the U.S. insurer Farmers Group, and in 1994, the company formed a money management unit, Threadneedle Investment Management. Threadneedle recently started marketing retail funds to individual investors in the United Kingdom. Together, the financial services units accounted for almost 40 percent of B.A.T's profits last year, the company said. …

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