London Merchant Securities is to split its property and investment arms in response to long-standing pressure from shareholders to rationalise its businesses.
Rump LMS will retain a property portfolio that includes the BT Angel Centre in Islington and a sizeable development on City Road in London. The investment arm will be spun off into a separately listed vehicle to be called Investco.
Cazenove, LMS brokers, said in a note on Wednesday that the split in reported net asset values would be approximately 190p to 60p in favour of the property arm.
LMS is largely the creation of Lord Max Rayne who was one of the most prominent property developers of his generation. Lord Rayne took a controlling stake in LMS in 1958 and was chairman and chief executive of the group until 2000.
But LMS shares are widely viewed as having suffered from the unusual mix of businesses.
“It is an unbundling, a clarification … We are separating the investment business from the property business because the investment business can now stand its own, “ Robert Rayne, LMS chief executive and Lord Rayne’s son, said yesterday.
“The property company can also raise capital and cash from the money markets in a way that it could not before,” he said.
The demerger announced on Wednesday is the latest in a series of rationalisation measures. Earlier this year LMS disposed of its US property portfolio and established San Francisco Equity Partners to hold its US venture capital and private equity interests.
Last year it also took a £33m stake in Inflexion, an Aim-listed private equity investment group.
James Wilson, who has a history in private equity will become chief executive of Investco, while Mr Rayne will remain as chief executive of LMS.
Separately LMS on Wednesday announced net income in the six months to end-September of £31.2m, up from £8.7m a year earlier. Revenue rose 24 per cent to £97.5m.
LMS shares were marked down by over 4 per cent on the day to close at 235½p. They have however risen strongly since October.
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