Lonrho taking a bit of beating

by Travis Johnson, Stock Gumshoe | June 26, 2012 4:47 pm

Lonrho shares have been hurt even more than the overall market — in part that’s due to the fact that the spinoff of the aviation division (was Fly540, will be FastJet) to Rubicon (RUBI in London) has not provided a short-term bump. Rubicon is down considerably from the 4.8 pence deal price, so Lonrho’s holdings in Rubicon have fallen considerably in value (by 40% or so).

I still think getting aviation investment off their plate and focusing on their core businesses — infrastructure and agribusiness — is the right move, and will pay off. I have been concerned that as majority holder of Rubicon they might continue pouring money into it to fund development of the airline, but from a recent quote in a press release that seems unlikely. Here’s what they said:

“Lonrho announced earlier today that it plans to list its aviation division in a separate Plc in conjunction with Sir Stelios Haji-Ioannou and easyGroup. As Lonrho does not intend to invest further in the aviation sector, over time it will become a more passive, arm’s length, shareholder in the aviation business.”

Music to my ears. They’re focusing on oil services infrastructure and other infrastructure, and on their growing agribusiness divisions — including John Deere dealerships and logistics for export, like the fish they’re selling to Costco and the fruit they sell to EU supermarkets. I think that “we won’t pour more money into the airline” bit is a key reason to buy now — the other divisions are much more predictable and are generally profitable even if they might not grow as fast.


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