The Lemon Fool

One thing I noticed in the 2022 AGM paperwork is resolution 19 which is to ask the relevant authorities to allow the limit for Cazyer family's combined stake (under which they aren't forced make a takeover bid) to increase to 49.9% (from 48.9%).

It's not a big change, but it signifies the intention to make more share buybacks.

SalvorHardin wrote:One thing I noticed in the 2022 AGM paperwork is resolution 19 which is to ask the relevant authorities to allow the limit for Cazyer family's combined stake (under which they aren't forced make a takeover bid) to increase to 49.9% (from 48.9%).

It's not a big change, but it signifies the intention to make more share buybacks.

I had not noticed that but it surely makes sense because of the huge ongoing discount to NAV. It also benefits us continuing shareholders of course whether or not it makes much difference to the discount. Buying a pound for 75 pence is always a good buy.

I should imagine that they will have consulted with the authorities before putting that resolution forward even if it is subject to their approval.

Dod

SalvorHardin wrote:One thing I noticed in the 2022 AGM paperwork is resolution 19 which is to ask the relevant authorities to allow the limit for Cazyer family's combined stake (under which they aren't forced make a takeover bid) to increase to 49.9% (from 48.9%).

It's not a big change, but it signifies the intention to make more share buybacks.

Are you sure this is new or just a renewal of the waiver granted in previous years? On page 92 of the Annual Report we are told that the waiver granted at the last AGM was to allow the Concert Party to increase its voting rights but that these were not to exceed 49.9%. This waiver expires on 21 October 2022 or, if earlier, at the conclusion of the next AGM.

Dod

Dod101 wrote:Are you sure this is new or just a renewal of the waiver granted in previous years? On page 92 of the Annual Report we are told that the waiver granted at the last AGM was to allow the Concert Party to increase its voting rights but that these were not to exceed 49.9%. This waiver expires on 21 October 2022 or, if earlier, at the conclusion of the next AGM.

I'm not sure if it is new or not

https://otp.investis.com/clients/uk/cal ... id=1603509

Unaudited net asset value and update.

Best wishes,

Steve

Steveam wrote:https://otp.investis.com/clients/uk/caledonia/rns/regulatory-story.aspx?cid=2554&newsid=1603509

Unaudited net asset value and update.

Best wishes,

Steve

Thanks. These updates do not really mean a lot I guess but it is interesting that they have finally exited A G Barr because they had held it for a very long time. It was I think the last of the historical holdings they have held for upwards of the 25 years or so that I have held Caledonia, in fact I think it is 30 years.

Nice dividend coming up next month!

Dod

Steveam wrote:https://otp.investis.com/clients/uk/caledonia/rns/regulatory-story.aspx?cid=2554&newsid=1603509

Unaudited net asset value and update.

Best wishes,

Steve

As is often the case Caledonia's share price reaction to a moderately good revaluation is frustratingly flat. Most of the private equity funds were revalued to March 31st from December 31st, you'd assume this would have been a drag on declared NAV given how markets have performed, yet it added £60m. You've now gotten rid of some of the uncertainty for revaluation of more illiquid assets yet the discount to NAV is now roughly 31% (June 30th NAV +2% for the movement in equity markets since) rather than 24% at the end of May.

If it wasn't for my belief in efficient markets I'd wonder whether those who sold today misread the news release and factsheet not realising the June 30th NAV already takes into account payment of August's dividend!

Well that was a nice chunk of dividend from Caledonia today.

I have been increasing my holding recently because it is a well run IT and I can't really see the logic of the market valuing it at such a discount simply because the Cayzer family (which is probably quite a large group of people) owns 48%. Perhaps they think the idiot son might take over running it and screw it up?

airbus330 wrote:Well that was a nice chunk of dividend from Caledonia today.

But wasn't there a corresponding 9% drop in the share price in a single day a few weeks ago on the XD date?

So now I have to pay income tax on this dividend whilst, if I want to maintain my position in Caledonia then I would have to reinvest that dividend into more shares. Meanwhile markets have moved up since the XD date so I have effectively been made to be out of the market whilst they were going up.

So I for one am not happy about these large disgorgements of cash.

Lootman wrote:

airbus330 wrote:Well that was a nice chunk of dividend from Caledonia today.

But wasn't there a corresponding 9% drop in the share price in a single day a few weeks ago on the XD date?

So now I have to pay income tax on this dividend whilst, if I want to maintain my position in Caledonia then I would have to reinvest that dividend into more shares. Meanwhile markets have moved up since the XD date so I have effectively been made to be out of the market whilst they were going up.

So I for one am not happy about these large disgorgements of cash.

Shhh. The HYP police will be coming for you with all this heresy.

Lootman wrote:

airbus330 wrote:Well that was a nice chunk of dividend from Caledonia today.

But wasn't there a corresponding 9% drop in the share price in a single day a few weeks ago on the XD date?

So now I have to pay income tax on this dividend whilst, if I want to maintain my position in Caledonia then I would have to reinvest that dividend into more shares. Meanwhile markets have moved up since the XD date so I have effectively been made to be out of the market whilst they were going up.

So I for one am not happy about these large disgorgements of cash.

wow thats a bit glass half empty after a 175p special div, plus 39% SP gain in the last 2 years and every chance that the Sp will close the NAV discount now that the management of the trust has improved. I'm afraid I can't help it if you keep CLDN outside of a tax free wrapper.

Lootman wrote:

airbus330 wrote:Well that was a nice chunk of dividend from Caledonia today.

But wasn't there a corresponding 9% drop in the share price in a single day a few weeks ago on the XD date?

So now I have to pay income tax on this dividend whilst, if I want to maintain my position in Caledonia then I would have to reinvest that dividend into more shares. Meanwhile markets have moved up since the XD date so I have effectively been made to be out of the market whilst they were going up.

So I for one am not happy about these large disgorgements of cash.

I agree with you on that one, but perhaps the Cayzer family needed some extra cash and the board wanted to keep them sweet? Hence the discount

scrumpyjack wrote:

Lootman wrote:

airbus330 wrote:Well that was a nice chunk of dividend from Caledonia today.

But wasn't there a corresponding 9% drop in the share price in a single day a few weeks ago on the XD date?

So now I have to pay income tax on this dividend whilst, if I want to maintain my position in Caledonia then I would have to reinvest that dividend into more shares. Meanwhile markets have moved up since the XD date so I have effectively been made to be out of the market whilst they were going up.

So I for one am not happy about these large disgorgements of cash.

I agree with you on that one, but perhaps the Cayzer family needed some extra cash and the board wanted to keep them sweet? Hence the discount

Yeah, Linsdell Train have been doing that of late as well. And of course that is another IT where we share ownership of the vehicle with the owners and general partners. Although that is also ostensibly a growth trust it has been paying out 4% or more in dividends annually. I also hold that in a taxable account.

airbus330 wrote: a bit glass half empty after a 175p special div, plus 39% SP gain in the last 2 years and every chance that the Sp will close the NAV discount now that the management of the trust has improved. I'm afraid I can't help it if you keep CLDN outside of a tax free wrapper.

I am not a mind-reader about which funds will dump unwelcome specials on me. If Caledonia was in my ISA then something else would be in my taxable account giving me involuntary tax events.

Even in a tax-free or tax-deferred account, I still might prefer to maintain my investment rather than be presented with a need to buy more shares in Caledonia or something else.

This will be an extra £600 in income tax for me which I would have preferred not to have paid. A further buyback of shares to reduce that collosal discount would have been better.

I am not complaining about the total return from Caledonia. I would not hold it if I thought it wasn't going to give me that. But there are other ITs that also follow their own quirky path, like Personal Assets and Capital Gearing, that would never do something that would give a nasty surprise to their taxable investors, knowing that most of them are higher-rate taxpayers.

Something to bear in mind is that Caledonia may soon be selling Seven Investment Management (7IM) for quite a bit more than its most recent valuation in the accounts of £174 million as of 31st March 2022 (and in the most recent factsheet).

Brooks Macdonald was rumoured last February as having offered £300 million for 7IM. Sky News reported in June that Caledonia were going to put 7IM up for sale in the autumn for £400 million.

"The defensive £1.9bn global multi-asset fund, backed by the Cayzer shipping family, is reported to have turned down a £300m bid for Seven Investment Management (7IM), its top holding."

https://www.theaic.co.uk/aic/news/citywire-news/caledonia-investments-rejects-ps300m-offer-for-7im-says-sky

"Sky News has learnt that London-listed Caledonia Investments, which has owned 7IM since 2015, is planning to kick off an auction of the business in the autumn. City sources said it was expected to seek a valuation of about £400m for the company."

https://news.sky.com/story/caledonia-prepares-400m-auction-of-investment-manager-7im-12635131

Say it was sold for £325 million, an increase of £151 million on the current valuation. That would increase the NAV by roughly 276p, more than enough to fuel another special dividend in 2023. Selling 7IM for £400 million increases NAV by 413p, which would lead me to break out the Thatchers Gold (not that I need much of an excuse anyway!).

SalvorHardin wrote:Say it was sold for £325 million, an increase of £151 million on the current valuation. That would increase the NAV by roughly 276p, more than enough to fuel another special dividend in 2023. Selling 7IM for £400 million increases NAV by 413p, which would lead me to break out the Thatchers Gold (not that I need much of an excuse anyway!).

I hadn't seen the news about the 7IM valuation / possible sale, but it makes the current discount look even more crazy and my recent increase in my CLDN holding rather lucky. I guess even if they don't sell it, they will raise the valuation. Since the Brewin Dolphin takeover asset managers have been in much demand.

The thing about Caledonia is that we outside investors have really got no say but I am happy to go along with the Cayzers. As has been said many times, they cannot conduct a very big share buyback because of the Concert Party's very large holding unless they want to trigger a privatisation. I certainly do not want that so I think the big discount will most likely remain. As a shareholder, I am very happy to share in the success of the investments held in Caledonia directly, as in today's nice special dividend, rather than through the share price. Today's special is admittedly taxable in my hands but paper profits whilst very acceptable cannot be used to bolster my cash reserves.

Anyway the Cayzer family decided they would like a big cash dividend and so they have one. We just go along with that.

Dod

Dod101 wrote:The thing about Caledonia is that we outside investors have really got no say but I am happy to go along with the Cayzers. As has been said many times, they cannot conduct a very big share buyback because of the Concert Party's very large holding unless they want to trigger a privatisation. I certainly do not want that so I think the big discount will most likely remain. As a shareholder, I am very happy to share in the success of the investments held in Caledonia directly, as in today's nice special dividend, rather than through the share price. Today's special is admittedly taxable in my hands but paper profits whilst very acceptable cannot be used to bolster my cash reserves.

Anyway the Cayzer family decided they would like a big cash dividend and so they have one. We just go along with that.

Yes, perhaps the real message is that for those ITs where you are in bed with the principals, then you are better off holding them in an ISA. Also any fund with a private equity element since they often like to return cash to shareholders after a deal completes.

In fact Melrose (which is not an IT but can be seen as a private equity vehicle rather than an engineering firm) and which I did very well out of, regularly disgorged itself when a deal closed. Although in that case I did hold it in my ISA so didn't get unpleasant tax surprises.

Lootman wrote:

Dod101 wrote:The thing about Caledonia is that we outside investors have really got no say but I am happy to go along with the Cayzers. As has been said many times, they cannot conduct a very big share buyback because of the Concert Party's very large holding unless they want to trigger a privatisation. I certainly do not want that so I think the big discount will most likely remain. As a shareholder, I am very happy to share in the success of the investments held in Caledonia directly, as in today's nice special dividend, rather than through the share price. Today's special is admittedly taxable in my hands but paper profits whilst very acceptable cannot be used to bolster my cash reserves.

Anyway the Cayzer family decided they would like a big cash dividend and so they have one. We just go along with that.

Yes, perhaps the real message is that for those ITs where you are in bed with the principals, then you are better off holding them in an ISA. Also any fund with a private equity element since they often like to return cash to shareholders after a deal completes.

In fact Melrose (which is not an IT but can be seen as a private equity vehicle rather than an engineering firm) and which I did very well out of, regularly disgorged itself when a deal closed. Although in that case I did hold it in my ISA so didn't get unpleasant tax surprises.

Yes. Ironically I have never held Caledonia in an ISA simply because the dividends are usually quite modest and I have no intention of ever selling it. But today's dividend wipes out more than the tax free £2000 in one go.

Dod

I am a big fan of this trust with a long term holding and the discount does not bother me a jot. It seldom disappoints on the downside and often surprises on the upside. I might go for a few more when the opportunity arises.