As GVC’s acquisition of Ladbrokes Coral becomes effective leading to the cancellation of the target’s shares by no later than 08am tomorrow, a 52nd founding member of the original FTSE 100 in January 1984 will disappear from view. Two more, GKN and Hammerson, are also both facing questions over their independence, after the bids from Melrose and France’s Klepierre respectively, says Russ Mould, AJ Bell Investment Director.
Even if GKN staves off its predator the company is due to be broken up, as the defence plan outlined by chief executive Anne Stevens sanctions the merger of the Driveline operation with America’s Dana, leaving shareholders with 47.25% of the new entity and the disposal of non-core assets ahead of a sizeable cash return.
GKN will thus become either the 53rd founding member of the FTSE 100 to be swallowed up or the eleventh to be broken up.
Mould said: ““If it fails to fend off the attentions of Klepierre, Hammerson will become the 54th of the original line-up to become part of another firm. Should the real estate investment trust retain its independence it will be one of four firms that started off in the FTSE 100 in 1984 but are now in the FTSE 250, alongside Edinburgh Investment Trust, Elementis (which was known as Harrisons & Crosfield, back in the days) and Rank. Hammerson is also looking to acquire Intu in a cash-and-stock deal that could return it to the FTSE 100.
“Only 16 of the original 100 names are still in the FTSE 100 under the same name and some of those – such as Whitbread, Pearson, Lloyds Bank and Royal Bank of Scotland – have seen dramatic changes in their business structure or even their business model over the last 34 years.
“A further 13 are still in the benchmark index but under a different name, including GKN, which in 1984 was known as Guest, Keen & Nettlefolds. Twelve more live on as part of a firm that is in the FTSE 100 now, a number Ladbrokes will swell should GVC attain promotion to the premier index, as seems likely.
“The real secret to long-term investing in stocks is to pick companies with strong competitive positions that are reinforced by investment, high barriers to entry and healthy finances and nurtured by capable management. However, the remarkable rate of turnover among the UK’s premier elite, with just 29 survivors after 34 years, shows how hard finding those sustained winners can be, especially as three founder members of the index went bust, two within a decade of its launch.”