Eric Barkas
City Editor
LANGBAR INTERNATIONAL, the investment company, expects to seal a $200m property acquisition by the end of November.
The deal should have been the showpiece when Langbar reported interim results yesterday. In the event, the show was stolen by the company's first corporate acquisition – the more modest £2.6m in shares agreed for Real Affinity, the Bradford-based marketing company.
The Real Affinity deal was flagged up in Friday's Business Post. Stuart Pearson, who runs Langbar out of Leeds, has bigger fish to fry.
The property deal is likely to be in Portugal or Spain and will involve a 150-acre site including commercial and residential property, hotels and a golf course. There's a limit to what Mr Pearson can say, given that regulators have told him to get Real Affinity sorted before he can move on to the next announcement.
If you look at Langbar you need a degree in corporate finance, such is the complexity of the history.
It all began with Crown, an investment company incorporated in Bermuda for tax reasons. Crown had a lot of big plans but never did a big deal. Instead, it spent money chasing deals that never came off.
But it did have some cash. Mr Pearson, a former Baker Tilley accountant in Leeds, says he was invited on board, injected some of his own corporate boutique interests, and ended up as chief executive. He changed the name to Langbar.
The company's strategy is to invest in small businesses, help them to grow then spin them off. There are several current investments, of which Real Affinity is potentially the biggest.
Langbar is paying for the Bradford company in shares in a deal worth some £2.6m. Mr Pearson says Real Affinity management had lined up several potential acquisitions but was previously prevented from following through by the small size and even smaller share price of the company.
He says with Langbar's financial muscle he expects to make an acquisition within the next month which will double Real Affinity's size. A second purchase is pending before Christmas. Real Affinity floated on the Aim market in 2001, specialising in direct and web-based marketing.
Failure to integrate acquisitions and lack of financial controls sent it into the red. Full year results out yesterday showed the deficit to be £2m before tax but after exceptional costs of around £1m.
The headcount has been halved to 60. The head office is now a more modest building. Yet the company has a raft of impressive clients – almost all of them FTSE 100 or big international players like Tesco and VW/Audi.
Under Langbar, Real Affinity will de-list. Mr Pearson says he expects management to grow the business quickly. Then Langbar will spin it off back to the public domain.
"What we've really given it is the currency to go out and build this business."
So what of Langbar? It keeps its Bermuda registration as a legacy of Crown but the operations end is in Yorkshire. It has some £360m of cash, mainly inherited from Crown. Included in that is around £160m recently repatriated from Brazil. Crown raised share money there and had PFI contracts. There's another £190m still to be repatriated.
Hence the property deals. Brazil has long-standing relations with Portugal and, because of its proximity and influence, Spain. If Mr Pearson can't get the physical cash out, he'll get it by asset transfer to property. His plan is that Langbar will end up with a marketing company and a property company to spin off. Add to that a third company he won't talk about but on which he is is prepared to spend $250m of Brazil money.
In the end, the ambition is modest. Langbar shareholders will have shares in three companies and Langbar itself will revert to being Mr Pearson's little boutique.
Langbar's half year figures yesterday showed taxable profits of £18.2m. The comparative period showed £146.5m but was influenced by one-off contracts in South America bought and sold by Crown.
eric.barkas@ypn.co.uk