This sale is pre-agreed and has the support of Sir Henry Angest the controlling shareholder of ARBB.
The sale will realise £148m for ARBB net of costs, and the residual shareholding (18.9%) valued on the same basis would be worth a further £85m. Total valuation £233m with recognition of the fact that the STB shareholding was sold at a 10.7% discount to the prevailing price on the date of the announcement and such a discount may not be required on further sales. So £233m - £242m
The other two parts of ARBB are the merchant banking arm Arbuthnott Latham and the head office. As I have said before head office costs at ARBB are high. In part because the management has been keener to get initiatives driven forward than to drive the costs of the initiatives into the unit. This I think is very sensible.
AL has been for the last few years a very middling merchant bank and for my valuations I have largely offset the head office and AL. For a few years this was probably overgenerous to AL but in the last few years AL has grown and delivered some profits. I have seen credible valuations between £18m and £60m for AL. But currently I add little to the overall ARBB valuation as it is (a) far from clear to me what Head Office costs will be like going forward now STB is no longer majority owned (b) Since first announcing that a share sale was likely I have seen that AL staff have been spending the firms money on a client day clay pigeon shooting, at the Chelsea Flower show, at the BMW PGA for a number of days, at England - Wales rugby, at a sporting greats dinner, on a James Hunt dinner and related racing package, at least one cricket match and last night at some filmakers dinner. AL is not a huge firm so it is hard for me to see how they are both drinking, shooting, eating, watching and spending the firms money in a sensible enough way to ensure that business will be bigger and more profitable next year.
I am therefore maintaining my valuation at 1654p and will be considering a sell within 5% of this. I do raise for the readers consideration that Edison research have come out with a valuation of 1900p so DYOR.