Troubled times for Euro-Sids

British Sid is not alone. His more sophisticated neighbours who invested in specialised investment trusts buying European privatisation stocks have also done badly, ending up with holdings which nobody wants in a sector which looks to be going nowhere.

The managers of Kepit, Kleinwort Benson's European Privatisation Trust, recognised the game was up a couple of weeks ago, and their pounds 500m fund launched in 1994 was dead in the water, trading at a 13.8 per cent discount to its net asset value. A reconstruction package to try to persuade Kepit's 79,000 shareholders to switch into other more dynamic Kleinwort funds has not proved particularly successful.

But the smell of blood in the water has attracted predators keen to liquidate Kepit, and release the asset value. Yesterday Henderson Touche Remnant's European Growth Trust (Treg) offered holders of Kepit shares and warrants a choice between an eventual cash exit which Treg values at 93.86p and 28.16p respectively, or a switch into Treg, which invests in European smaller companies, a sector which is still performing. Treg is valued at only pounds 170m but it trades at or above its asset value.

Kepit shares rose 2p to 91p and Treg shed 3p to 244p, but if the offer succeeds the Kepit portfolio will be liquidated and parcelled out. After costs Kepit shareholders can expect cash or Treg shares worth 5.5 per cent and warrant-holders 10.4 per cent above Tuesday's market price. Treg shareholders will get a 2.4 per cent uplift to asset values, as well as lower costs and increased marketability for their enlarged fund. A clean kill could also trigger more attacks in a sector ripe for rationalisation.