Press | Crystal Amber Fund

Source: The Times Business Commentary
by Alistair Osborne, Chief Business Commentator

Atlas Holdings, a US firm, is set to print Bank of England banknotes after a tumultuous period for the British business De La Rue

Well, this should clinch a UK-US trade deal. An American company looks poised to be printing the Bank of England's banknotes. Yes, our plastic tenners with King Charlie's 'ead on them. What more could Donald Trump possibly want?

It's the result of De La Rue proving it hasn't entirely forgotten that it has a licence to print money. It's recommending a £263 million cash bid at 130p a share from the US private equity firm Atlas Holdings - enough to send the shares up 15 per cent to 128½p. And, of course, people could quibble. Isn't this the same outfit that, in 2011, turned down a 935p-a-share takeover tilt from France's Oberthur? Sadly, it is. Yet maybe a more relevant starting point is exactly two years ago, when the shares stood at just 40½p.

It was then that the shareholders, led by Crystal Amber's Richard Bernstein, ganged up to boot out the chairman Kevin Loosemore: a fellow who'd been living up to his name by losing more every day. Having arrived in October 2019 with the shares at 190p, he'd raised £100 million from investors at 110p in Covid-hit July 2020 - before spending his final 16 months presiding over four profit warnings, a looming debt covenant breach and a run-in with the group's auditors.

Danny La Rue would have done a better job, with Bernstein convinced that if investors hadn't acted the group was heading for kaput. In came a new chairman, Clive Whiley: a moment that has proved a buying opportunity (Crystal Amber doubled its stake to 16 per cent). He refocused chief executive Clive Vacher on operations, while coming to the view that De La Rue would be worth more broken up and sold.

The upshot? First, last October's £300 million cash deal with America's Crane NXT to offload the authentication wing: a business providing tax stamps and holograms to fight tobacco smuggling. And now the Atlas deal, at a 19 per cent premium, for the currency arm - what Whiley called the "final step".

Sure, it's not a done deal. The financier Edi Truell hasn't given up on a bid. But you can see why his latest effort, even if ostensibly priced at 132.17p per share, falls into what De La Rue called "a number of preliminary, conditional and indicative proposals". It's a securities exchange offer to swap De La Rue shares for unlisted loan notes in his Disruptive Capital and Pension SuperFund Capital entities - no rival to a cash bid.

Besides, Atlas has got hard "irrevocable" support from three big investors: Schroders, Richard Griffiths and Crystal Amber - over 29.1 per cent of the shares. They "remain binding in the event [of] a higher competing offer", so blocking any Truell bid via a scheme of arrangement requiring 75 per cent support. There was also talk Atlas would buy shares in the market.

Given the money coming in from Crane, Atlas looks likely to inherit a business with about £100 million net cash - once De La Rue has paid off its debts, now thought to be around £120 million, and cut its £68.9 million pension deficit by £30 million. That could look generous to Atlas, even allowing for it agreeing more deficit repair with the pension trustees. But banknote printing is cyclical and, as Atlas's Peter Bacon noted in an indictment of the public markets, a private De La Rue can be more "long term", not bound by "periodic public reporting".

True, the bid needs UK government approval. But blocking it is probably not the best way to land a trade deal from Trump.

Read Full Article

Source: Investors Chronicle
by Simon Thompson

Bargain Shares 2025: This top-performing trust trades at a huge discount and is in line for a re-rating

Crystal Amber (CRS) is the best performing UK small-cap closed-end fund over the past 12 months and three years, delivering a 35.2 per cent and 75.6 per cent total return, respectively, according to data from Trustnet.

Despite the ongoing outperformance, Crystal Amber is rated on a 39 per cent share price discount to spot net asset value (NAV) of 185p, one the widest discounts in its history. It means that the fund?s valuation of £131.7mn is almost two-thirds higher than its market capitalisation of £80.5mn even though it has returned over £110mn of cash to shareholders through share buybacks and dividends since 2013 and continues to wind down its portfolio to maximise shareholder value.

True, US hedge fund Saba Capital Management holds a 29.1 per cent stake (worth £21mn) in Crystal Amber and is trying to shake-up the management of seven larger UK investment trusts in which it has invested £1.5bn. However, this sideshow doesn?t have any bearing on the investment strategy of Crystal Amber, which intends to continue making NAV per share-accretive share buybacks and has a B-share scheme to make cost effective returns of capital to shareholders, too.

Read Full Article

Source: Barron's

Long before Saba's arrival, activism had been on the rise on this side of the Atlantic with immediately clear benefits - according to research from financial consulting firm Alvarez & Marsal, UK companies that found themselves in the crosshairs of activists outperformed the broader market by 9.2% over a two-year period. That's higher than the 6% additional gain seen in Europe and the US, suggesting that UK equities have been both relatively undervalued and that there are clearer performance gains to be extracted from approaches such as corporate governance improvement or M&A, including disposals.

And while activism has been largely the domain of aggressive New York hedge funds, their techniques are being adopted more widely. In fact, several investment companies themselves use activist strategies to eke out performance from listed holdings they feel may be underperforming.

Take the Crystal Amber Fund (CRS), for example. Under the long-term management of Richard Bernstein, its strategy is to identify small companies where, in its own words, "value is hidden or trapped" and the fund can find "ways to release it" through engagement with management. "The response of management and boards to our suggestions has generally been encouraging", it says, noting that it prefers to approach its activism in private discussions with targets rather than through public campaigns. It's previously targeted UK smaller companies including film studio Pinewood Shepperton, real estate group Grainger, and financial services specialist Equals.

That's seen it deliver returns far in excess of the broader investment company benchmark - in the three years to the end of June, the company's share price had risen by 68.4% comfortably beating the -9.2 three-year price return from the UK Investment Trust Smaller Companies index. The largest contribution to the company's stellar performance in 2024 came from De La Rue, the embattled bank note producer that in 2019 found itself on the receiving end of "a prolonged period of intense and successful activism" from Crystal Amber, which is now its largest shareholder owning 17% of the company.

Crystal Amber's involvement in De La Rue is a perfect demonstration of its activist playbook. Having taken its first large stake following criticism of the target's corporate governance and strategy, it successfully pressured De La Rue to restructure its board and implement a turnaround plan, including cost reductions, operational efficiencies, and non-core disposals. Its profitability has improved considerably since, debt is down, and orders are up, but Crystal Amber argues that its "strategic value [remains] substantially more than its operational value and that it is now a highly attractive takeover target in an industry requiring consolidation."