UK Edition
When Questor wrote in 2021, in connection with our holding Blancco Technology, that “there is a slim chance of some transformative M&A [mergers and acquisitions activity]”, this wasn’t quite what we had in mind.
We were referring to a fund manager’s hopes that the software business, first tipped for our Inheritance Tax Portfolio in December 2020, might buy or merge with companies that would enable it to exploit more of the various stages in the life cycle of data as companies generate, use and ultimately delete it.
At the time Blancco was a leader in the secure, environmentally friendly deletion of data but had not made inroads into the other markets.
But instead of making such potentially profitable acquisitions (and we must acknowledge, of course, that many takeovers do not pan out as hoped), Blancco is itself being bought.
A specially formed bidding company called White Bidco, ultimately owned by Francisco Partners Funds, an American private equity firm that specialises in technology, has offered 223p a share or about £175m for Blancco.
The board has recommended that shareholders accept the offer and has received undertakings from investors who represent almost half of the shares that they will vote in favour.
If, as seems likely, the transaction proceeds, it is expected to complete in the fourth quarter.
The offer of 223p, to be paid entirely in cash as opposed to shares in the acquirer, represents a premium of 24.6pc to the 179p at which the shares closed on Aug 1, the day before the offer was announced.
However, the capital gain for our readers is only 10.4pc because we tipped the shares at 202p.
Like most technology shares, they had suffered in the years since our tip as rising interest rates caused radical changes in investors’ behaviour. The company does not pay a dividend, so there is no income to boost our total return.
The bidder appears to share our positive view of Blancco’s prospects.
“Bidco believes Blancco is poised to capitalise on durable market tailwinds driven by a heightened focus on sustainability and e-waste reduction,” it said when its offer was announced.
One former investor tells Questor: “My usual frustration with takeovers is that while the short-term gain is nice you make far more money from owning a stock and letting it compound over the long term. I think this is a classic case of that.”
We can only lament the unavoidable departure of a promising stock for portfolio and the fact that any future returns will be for other investors to enjoy.
To maintain the IHT exemption, aim to invest the exact proceeds from Blancco into another stock that looks likely to qualify for the tax break and keep records to prove that you have done so.
Questor says: hold
Ticker: BLTG
Share price at close: 225p
Update: Fulcrum Utility Services
We must admit that this stock has been a disaster.
Since we added it to the IHT Portfolio in 2019 at 45.35p the shares have collapsed to just 0.3p, a fall of 99.4pc.
Now the company plans to add insult to injury by cancelling its shares’ Aim quotation.
This means that shareholders face having to choose between two poisons: selling their shares while they can still do so easily but crystallising that horrific loss, or holding on in the hope of recovery in the knowledge that selling will be costly and difficult or perhaps plain impossible.
It’s hardly much consolation that the shares’ loss of their Aim quote will not affect their eligibility for “business relief”, the official name for the IHT exemption: Aim shares are, from a legal perspective, already “unlisted”.
A recommendation from this column will seem pointless in view of the almost total loss of shareholders’ money since our tip. Unless large sums were invested there is every chance that even the stockbroker’s dealing fee would exceed the shares’ value.
Should you wish to hold on, the company will offer a route to dealing in its shares for at least a year after the cancellation of their Aim quote via an intermediary, which you can contact via your own broker, that will seek to connect sellers with any potential buyers. There can be no certainty that buyers will exist, however.
As Questor is not geared to involvement in unquoted shares, our formal recommendation will be to sell.
Questor says: sell
Ticker: FCRM
Share price at close: 0.25p
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