What price a vote? Long before Google and its ilk brought dual-class shares to public markets, Britain plc routinely disenfranchised swaths of the investor base. Most — think Whitbread in hospitality or WHSmith in retail — merged their voting and non-voting shares in the early 90s. Straggler PZ Cussons, home of Imperial Leather soap, did so in 2005. Four decades later, asset manager Schroders is following suit.
The tardiness of the City’s last big, independently-owned historic brand is surprising. Non-voting shares have traded at a 30-40 per cent discount in the past decade. The premium accorded to ordinary shares, now four-fifths of the total, reflect the attendant benefits of votes. In 2012, non-voting shares were excluded from a premium listing and, ipso facto, index funds. Liquidity evaporated.
The discount over the previous decade was a more modest 12.4 per cent. Unsurprisingly, Schroders has used this as the basis for unification. Ordinary shareholders, losing their stranglehold on votes, would receive a compensatory three for 17 bonus issue. That would create 40mn new shares. Using Monday’s closing price for ordinary shares and adjusting for dilution gives an implied price of £26 per unified share. That is a 12.4 per cent discount for voting shares and a 39 per cent uplift for non-voting stock. Investors, impressed but with residual wariness, marked down the ordinary shares to £29.30 — implying £25.65 post-dilution — by lunchtime on Tuesday.
The structure is an anachronism and unification is likely to proceed. Holders of more than 40 per cent of the non-voting shares — including the Schroder family trust, which holds nearly half the ordinary shares — back the move, which requires a 75 per cent approval rate to pass.
The move marks the end of an era for Schroders. Founded by the Hanseatic Schröder family of Hamburg, it grew to become a fixture of the City of London. After flogging its investment bank in 2000, Schroders flourished as an independent asset manager. Shedding its two-tier shares shows confidence in retaining that clout without recourse to an inequitable structure.