The furore – or storm in a teacup, depending on which newspaper you read – over Racal Electronics Plc’s plan to float a minority of its Racal Telecommunications Plc business underlines the very different cultures that still exist in London and on Wall Street – and it is ironic that Millicom Inc, whose biggest asset is now the Racal Electronics Plc shares that it took in exchange for its stake in the Racal-Millicom joint venture, should reportedly be one of the Racal holders that is considering voting against the flotation. Because in the US, several of the companies that have cellular subsidiaries have floated a minority off – Pacific Telesis and McCaw Communications Cos to name two. Unless the institutional holders want out of Racal altogether and are really only interested in an all-cash bid for the company, something that would be made less likely if the flotation gets away successfully, it is difficult to see the objection to the plan. The element of dilution of Racal holdings in floating 20% of Vodafone is hardly enormous, and the plan to offer some of the shares to US and Japanese investors is only prudent: Americans certainly put a higher value on cellular businesses than London does, and if Racal can get them interested in the stock, the small number of shares that will be out should ensure a very lively aftermarket since demand is likely to exceed supply. Unless sentiment towards the cellular business changes completely and Racal Telecom slumps into the bargain basement in a few months, Racal Electronics shares are certain to trade higher with the flotation than they would if Vodafone remained a wholly-owned subsidiary. And if they start trading to a discount to the market capitalisation of Racal Telecom, there will be any number of brokers telling their clients to sell Telecom and buy Electronics, keeping a very solid floor under the Racal share price. And with $400m in its locker and a reputation for entering exciting and unexpected new growth areas to maintain, Racal post-float should regain some of its lost glamour. Some of the UKP400m or so raised will be going into Orbitel, we can be sure that the very promising Security business built around Chubb will be another beneficiary, but it would be very uncharacteristic if Sir Ernie did not have one or two other quite unexpected but sexy cards up his sleeve. The new breed of cordless telephone is a potential goldmine few seem to have spotted yet, and there are any number of variations to play in the new technolo gy TV satellite or cable capital equipment theme…
