GUS to enfranchise 98% of share capital: Wolfson family may lose control and group break up

GREAT Universal Stores yesterday tried to shed its image as the dinosaur of the retail sector when it unveiled plans to give full voting rights to the holders of its 'A' shares.

The move marks the end of a structure that has ensured control of the group has remained with the Wolfson family, which founded it during the First World War. Speculation that the 'A' shares - which account for 97.7 per cent of the group's capital but have no votes - would be enfranchised has been growing since the death of Sir Isaac Wolfson, GUS's creator and president, who was notorious for his caution.

GUS said the decision was made because it 'had regard for the evident wishes of the company's shareholders and the market, and is also conscious of the impetus towards globalisation of securities markets and EC views on the subject'.

But analysts suggested the move could mark an attempt by Lord Wolfson of Marylebone, who is now 65, to realise more value from the business before he stands down as chairman.

'I am still inclined to think this is the first step to a break-up of the company,' said John Chataway, of Carr Kitcat and Aitken. 'It is likely that Lord Wolfson wants to crystallise the value of the group and enhance its value for the Wolfson foundation' - the charitable trust that he chairs and which holds more than half the 'A' shares. Others speculated that it was paving the way for a takeover - both by and of the group.

Mr Chataway estimated the break-up value of GUS could be as high as pounds 23.80 a share, more than pounds 4 ahead of its price yesterday and valuing the whole company at almost pounds 6bn.

Richard Pugh, deputy chairman, dismissed such speculation. 'None of those stories are true. There is no ulterior motive, it is a straightforward operation.'

Holders of the ordinary shares are being given four new ordinary shares for every five they already hold as compensation for the loss of control. That will leave them with 3.9 per cent of the group. Apart from the Wolfson foundation, other holders include Prudential, with 8.8 per cent, and St James Capital - the vehicle of Lord Rothschild - which has been buying aggressively lately and now holds 7.1 per cent.

The ordinaries rose from pounds 33.38 to pounds 34.38, equal to pounds 19.10 after enfranchisement, while the 'A' shares rose 110p to pounds 18.75. The group intends to launch a three-for-one scrip issue after the enfranchisement to increase the marketability of the shares.

GUS has developed a reputation for secrecy and excessive caution, heightened by the fact that it has accumulated a pounds 1.45bn cash pile that has traditionally been kept on deposit. The enfranchisement proposal was only one of a series of indications that it could be trying to change that image.

In previous years, it has given little information about the performance of the group, whose businesses range from catalogues such as Kays and Great Universal, through the Burberrys and Scotch House retail chains to banking and car loans. A few years ago, it even failed to return analysts' calls.

In yesterday's results announcement, however, it revealed the contribution that interest on its pounds 1.45bn cash pile makes to each division and divisional directors were available to discuss performance.

It has also appointed four non-executive directors to join Sir Philip Harris on the board. These include Lord Wolfson of Sunningdale, the chairman's cousin, and Victor Blank, chairman and chief executive of Charterhouse Bank. They will form an audit committee and a remuneration committee - another two firsts for the group.

GUS also reported that it had managed to increase profits for the 45th consecutive year. They rose from pounds 443.6m to pounds 475m before tax. The dividend was increased 10 per cent to 44p, via a 30.25p (27.25p) final as earnings rose from 118.8p to 128.2p.

Lower interest rates meant earnings on its cash pile rose just pounds 4.2m to pounds 117.2m, although it generated pounds 258m of cash during the year. Mr Pugh said there were 'no current plans' for acquisitions. 'But for the longer term, we are looking for investments.' They had to be in areas the group understood and have good management in place, he added.

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