Lindsell Train winds up with crashing Cazoo stake and £250m after Daily Mail deal

Lindsell Train has acquired a significant stake in UK tech stock Cazoo, an online car retailer listed in the US, as part of the recent takeover of Daily Mail and General Trust.

Lindsell Train has acquired a significant stake in UK tech stock Cazoo, an online car retailer listed in the US, as part of the recent takeover of Daily Mail and General Trust.

Shares in DMGT, held for a decade in Nick Train’s UK Equity fund and Finsbury Growth & Income (FGT ) investment trust, delisted from the London Stock Exchange yesterday after the Rothermere family took the Daily Mail publisher private.

The deal, which compensated fellow stockholders in a mix of cash and Cazoo shares, has given the notoriously trading-averse Train as much as £250m to splash at the start of the year, as well as putting a direct stake in the UK tech stock into the firm’s hands.

In a US regulatory filing yesterday, Lindsell Train declared a stake in Cazoo worth an estimated $74m (£55m) under ‘beneficial ownership’ rules which compel investors to declare significant stock interests. The announcement said the firm owned about 16.6m, or just under 15%, of the company’s A share class.

The fund group, which Train co-founded with Michael Lindsell, confirmed it had inherited those shares from the recent DMGT transaction going through. The firm added that Cazoo has more than 750m shares trading in total, meaning Lindsell Train owns about 2.2% of the company overall.

The firm did not comment further on the company’s prospects or plans for the holding, but said the shares are subject to a lock-up period, which prevents any immediate sale.

The holding’s future is uncertain, but Train and Lindsell have traditionally been reluctant to invest directly in tech-related plays, despite the sector’s strong performance during the pandemic. The managers, buy-and-hold investors who rarely buy new stocks, have acknowledged this as a major factor in their funds’ lagging recent returns.

Cazoo, the sponsor of both Everton and Aston Villa football clubs, was launched in 2018 by Alex Chesterman, who previously founded property portal Zoopla. Having attracted investors including DMGT due to its fast growth, the company went public in New York with an $8bn valuation in August last year.

However, the shares have halved since, including major losses since the start of the year. Falling from a post-flotation peak above $10 in November to around $4.50 today, the company’s market capitalisation has dropped to about $3.4bn (£2.5bn).

The stock was still loss-making in 2020 and has recently attracted unfavourable comparisons with UK rivals such as Lookers (LOOK) and Pendragon (PDG), which without the ‘tech’ associations are much more lowly valued despite operating in the same market.

New year cash windfall

The DMGT transaction has also delivered a chunky cash payment for Lindsell Train’s funds. The terms of the deal included a 270p per share offer price, a 17.3p final dividend, and a special dividend of 568p. That equates to a total cash payment of 855.3p per share, on top of the transferred Cazoo shares.

Train (pictured), who had spoken out in support of the deal as the largest non-family shareholder, continued to add to his holding during the takeover period, according to stock exchange filings.

As a result, the stake in DMGT across Lindsell Train had swelled to nearly 29m shares by mid-December. Based on that holding size, Lindsell Train funds should be in line for a total payout of roughly £247m.

According to their latest accounts, DMGT was not held by the firm’s Global Equity fund or other strategies in the first half of last year.

As such, it is believed Train’s £6.1bn UK Equity fund, the £2bn Finsbury trust and other UK mandates will have been the main beneficiaries, giving the manager plenty of cash to deploy during a volatile start to 2021.

The exact timing and size are difficult to calculate. However, in the open-ended fund’s just-published factsheet for the end of December, Train said the position in DMGT had generated a ‘circa 50% total return before being taken over at the close of the year’. Cash in the fund also doubled month-on-month to 3.8%, which may reflect some portion of the payout.

Over five years, the fund has delivered a 61.1% return versus 30.2% for the FTSE All-Share index.

DMGT was also held by other UK-based asset managers including Majedie and JO Hambro Capital Management, both of which had previously criticised the deal. Both firms declined to comment.

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