Demerger talk primes Thorn for statement

JOHN SHEPHERD

Speculation that Thorn EMI would announce demerger plans at Friday's annual shareholders meeting continued to rise yesterday, driving the share price up another 19p to pounds 13.77 - just 14p short of the all-time high.

Thorn is comprised mainly of three businesses - EMI music, rentals of televisions and video recorders, and HMV record shops. It is valued at more than pounds 5.9bn by the latest share price.

A spokesman for Thorn yesterday declined to comment on speculation or pre-empt any statement that might be made by Sir Colin Southgate, chairman, in his address to shareholders.

Thorn's directors have previously discussed demerger plans, but the rumours about a break-up are stronger than ever. "We're seeing such a build-up this time that it's looking much more likely," an industry source said. "The share price is telling us something is going to happen," added a leisure analyst.

Directors will attend the company's annual strategy meeting tomorrow and Thursday at Cliveden, the former stately home in Buckinghamshire of the Astors and more infamously the site of the Profumo scandal.

Leisure analysts are convinced that demerger proposals will be high on the agenda and discussed at length. They said that Sir Colin, who has whittled the company from a diverse, directionless agglomeration of 130 businesses to three since taking the helm a decade ago, will find the pressure to demerge increasingly harder to resist.

Thorn's shares have risen sharply on demerger speculation before annual meetings for the last couple of years. However, the current rumours first surfaced at Christmas, since when the share price has risen by 33 per cent - much faster than the rest of the stock market.

Despite the silence from Thorn yesterday, there is a growing belief among investors and analysts that Sir Colin will almost certainly make a formal statement on Friday. Some analysts believe he will outline proposals to break the business up, probably by offering the highly prized EMI music business to the highest bidder.

The prime difference between the rumours last year and this, one analyst said, was the fact that Thorn had reduced its likely tax bill on a break- up from more than pounds 150m to pounds 50m and a further drop in the next 12 months was possible.

Disney, the film company headed by Michael Eisner, is widely tipped as the main suitor for EMI, which became one of the five biggest music companies in the world when it took over Virgin music for pounds 593m in 1992. Analysts reckon EMI would be worth at least pounds 4.6bn, possibly considerably more in a world-wide auction among potential bidders.

Thorn's rental operations are valued at around pounds 1.5bn, and the HMV record shop business at about pounds 300m. Analysts do not believe a bid for the whole company is likely.

Investment Column, page 18