Securicor set to gain from tax changes

Proposed changes to the capital gains tax regime are likely to open the way for Securicor to withdraw from a distribution joint venture with Deutsche Post, without incurring a tax charge of up to Pounds 100m.

The security services group has an agreement with Deutsche Post whereby it can force the German group to acquire its 50 per cent stake in 2004.

This would be for fair value plus a premium for control, and would not incur a capital gains tax charge.

If Deutsche Post were to buy the stake before 2004, Securicor would incur a tax bill.

Selling its 50 per cent share in the distribution division, most logically to Deutsche Post, would be an important step for Securicor, allowing it to meet its strategic aim of becoming a pure security group.

Commerzbank Securities values the distribution unit at Pounds 100m-Pounds 150m.

Securicor sold 50 per cent of the distribution division to Deutsche Post two years ago for Pounds 236m. However, since then it has experienced some difficulties.

Although the proposed changes, to be finalised in the Finance Bill – which introduce an exemption regime for capital gains tax on substantial shareholdings and amend the way degrouping charges operate – are encouraging, Securicor would still have to negotiate a sale price with a buyer.

The company has also said in the past that it would want to improve the performance of the division before it was sold.

In the year to September 30 2001, the division’s profit before interest tax and exceptional items was flat at Pounds 6.1m.

Roger Wiggs, who retired as chief executive at the end of last year, but who has remained a non-executive director, has taken on responsibility for managing the relationship with Deutsche Post.