Abigail with attitude: A tale of two London flotations

By:
Abigail Hofman
Published on:

Against this confusing backdrop, life goes on. A friend who is a senior banker in Asia reports that during a brief visit to London he arranged to meet one of his best clients, an Indian tycoon, at Claridge’s Hotel for tea. Suddenly, the wife of the tycoon jumped up and started embracing what appeared to be an elderly gentleman. "How are you?" she exclaimed. "What are you doing now? We’ve missed you."

The man was Bob Diamond, the former chief executive of Barclays Bank. Diamond, who was brutally ejected from the UK bank in the summer of 2012, has now started his own ‘blind vehicle’, Atlas Mara. Atlas Mara is a cash shell that floated on the London Stock Exchange in December 2013. Diamond has joined forces with Ashish Thakkar, the 32-year old head of Mara Group, a conglomerate with businesses in over 15 African countries. Arnold Ekpe, the former chief executive of Africa’s Ecobank, will chair the group.

Atlas Mara raised $325 million of initial capital from investors and, according to the prospectus, will focus on "acquiring a company or business in the financial services sector with all or a substantial portion of its operations in Africa".

The cash shell resembles similar acquisition vehicles launched in 2010 and 2011 by financier Nathaniel Rothschild to buy mining and oil assets. One of these ventures, Bumi, went spectacularly wrong and most investors ended up losing money. The other endeavour – Genel – where Rothschild partnered with Tony ‘I want my life back’ Hayward, is doing a little better. Investors have seen an approximate 5% return since Genel was created some two years ago.

The problem with such blind vehicles is that an investor has a lot of risk and the mirage of high returns, but no guarantees. Some commentators have pointed out that retail investors who hop along for the Atlas Mara ride might be heavily diluted. If the price of the ordinary shares rises 15% from the issue price (and assuming an acquisition has been made), Diamond and Thakkar will get 20% of the annual market capitalization increase, payable in shares. Warrants given to the investors who bought at the IPO can also be converted into shares. And finally, Atlas Mara could finance its deals with shares.

Some will recall that John Walsh worked for Bob Diamond. It’s ironic that both men floated their companies at the same time, and that Walsh’s was more highly-valued
Some will recall that John Walsh worked for Bob Diamond. It’s ironic that both men floated their companies at the same time, and that Walsh’s was more highly-valued
Nevertheless, frontier markets are hot and Africa is seen as brimming with potential. Diamond has many admirers and, for a man of 62, still has a lot to prove. He is, no doubt, keen to show that those who contributed to his downfall – which means most of the British establishment, starting with the former governor of the Bank of England – made a big mistake. Today, money is cheap, banks are keen to lend and there is a hefty whiff of risk-taking in the air. Atlas Mara is an opportunity suited to the current climate. I will watch developments with interest.

The flotation of pallet-maker RM2 was perhaps more conventional. The company, which floated in January 2014 on the AIM market in London, achieved a valuation of approximately £300 million.

I have been following the RM2 story for a while because the chief executive is John Walsh, the former head of global capital markets at Credit Suisse. Walsh left finance and formed RM2 in 2007. The company has developed the BlockPal pallet, which is made of a glass-fibre-and resin composite, and targets the supply chain for fast-moving consumer goods such as food ingredients, pharmaceuticals and packaging. This proprietary product challenges the traditional wood or plastic pallets for durability.

Investors are excited about RM2 because several respected businessmen are associated with it: Sir Stuart Rose (ex Marks & Spencer), Paul Walsh (ex Diageo) and Amaury de Seze (ex Volvo Europe) are all nonexecutive directors. My mole muttered: "It’s one of those punts where you could either triple your money or lose it all. The concept depends on whether companies will adopt this new type of pallet. Only time will tell."

I have always liked John Walsh and I very much hope he succeeds in his new venture. Some readers will recall that he used to work for Bob Diamond at Credit Suisse. Isn’t it slightly ironic that both men floated their companies on the London market within a few weeks of each other? And that the company of the more junior man (at least in the investment banking hierarchy), John Walsh, was the more highly valued on its IPO date?