Insider: Takeovers and cash calls

Tullett's big-spending Phiz

It's been five months since interdealer broker Tullett Prebonconfirmed it was paying over £1.1 billion for rival ICAP's global voice broking business. The shares have been volatile since, but are a little better than they were when rumour of a deal first broke.

Of course, the acquisition still makes good sense. Industry profits are under pressure amid dwindling trading volumes and tougher regulation for clients like the big investment banks. Record levels of issuance of corporate and government bonds have also raised concerns about poor liquidity.

Shareholders have now given the tie-up the green light and, with the focus now on significant savings from the deal, they'll be rewarded with "steady" earnings growth of 10% per annum and a decent yield of about 5%, according to Numis Securities analyst Jonathan Goslin.

Those savings - about £80 million a year from the rationalisation of back office functions and falling broker pay, says Goslin - are tipped to help maintain double-digit earnings growth, even if market conditions remain challenging.

Goslin thinks Tullett shares are worth 450p. They haven't been that high since before the financial crisis, but chief executive is happy to take the bet. John 'Phiz' Phizackerley, who took over in September 2014 from highly-regarded and outspoken Terry Smith, has just paid 342p each for 132,200 shares, setting the former Nomura man back over £450,000.

Tribal instinct

Tribal provides technology to universities and seats of learning, mainly software to manage the student admin process, analyse performance and provide financial benchmarking. But business hasn't been so good, and a series of profits warnings wiped out about 90% of the firm's valuation in five horrific months from August last year.

In December, Tribal warned that sales momentum had continued to slow and contracts had shifted into 2016. Profits, therefore, would be substantially lower and net debt higher than expected. Thankfully, the banks were good to Tribal and it survived.

To tackle debt, the firm has sold its Synergy business - a supplier of software to children's services departments of local authorities - for over £20 million, and organised a fully-underwritten £21 million rights issue at 22p.

"Tribal's recent progress has been restricted by its high levels of debt," said boss Ian Bowles who only took over in February. "The proceeds of the disposal and rights issue will restore the group's balance sheet and enable the management team to take the business forward in its domestic and international markets."

And, while Tribal's new bosses would perhaps have liked to make their maiden share purchases in happier circumstances, their participation in this cash call has been both significant and profitable.

Bowles bought over 1.13 million shares at the issue price, costing £250,000, while chairman Richard Last and senior independent director Roger McDowell - both only joined Tribal in November - spent £500,000 each on rights issue shares.

Clearly, Bowles has a lot on his plate, but his strategic plan will be key to the success of Tribal's recovery. He must embrace this opportunity to impress.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.