Quindell (LSE: QPP) updated the market this morning with news of three transactions that represent the first steps towards the group’s goal of simplifying its structure and selling non-core assets.
£7.1m cash injection
First up was news that Quindell has sold its 25% stake in National Accident Repair Services (NARS) for £7.1m, or 65p per share.
This represents a 21% discount to Wednesday’s closing price of around 83p, suggesting that buyer demand was weak — or that Quindell was seen by the market as a forced seller, in serious need of cash.
Back in 2013, Quindell paid an average of about 84p per share for its stake in NARS, so this sale represents a loss of around 22% — or £2.1m. However, Quindell’s original purchase was funded with shares, rather than cash, so by my reckoning, this investment, including dividends, has generated around £7.5m of cash for Quindell.
Legal settlement
Quindell also announced that it has settled a legal action relating to its telematics business in the United States, for a cash payment of $1m and an issue of 684,770 new shares.
Quindell says that it was confident of winning the case, but the high costs and long delays typical of US litigation made it more sensible to settle: this does seem logical.
More acquisitions?
Quindell’s final update appears to be aimed at consolidating ownership of some of its subsidiary businesses in order to make them easier to sell. In 2013, the firm acquired Quindell Property Services, a newly formed group containing a number of companies.
To complete the acquisition of certain subsidiaries of Quindell Property Services, the firm said today that it will issue 3,666,667 new shares (worth around £2.9m at today’s price) to acquire the remaining 50% of BE Insulated (UK) Limited and its subsidiary, Carbon Reduction Company (UK) Limited.
However, Quindell Property Services didn’t feature in the firm’s interim results, and it’s very hard to know how much business these acquisitions have generated for the group, or whether there is any realistic opportunity to sell them.
Game plan?
It’s hard to know from today’s announcement whether Quindell has a game plan that will lead to a leaner, more profitable business, or whether the firm is simply reacting to problems and opportunities as they arise.
In either case, until we know the result of PwC’s independent review into the firm’s accounts, for me Quindell is uninvestable: there are simply too many unknowns.