BUSINESS ABROAD: Out of the Canal

In the New York and London financial markets last week there was a new speculative favorite: the Compagnie Universelle du Canal Maritime de Suez. After a drastic drop from $260 in the wake of Nasser’s nationalization of the big ditch, the shares have finally begun edging up and last week reached $182, four points above crisis low. Said a London dealer: “Since the crisis there have been many more canal buyers in London than before. Shares used to change hands by the fifties and hundreds. Now they change hands by the thousands.”

Not even in its pre-Nasser heyday, when shares reached $355 (in 1954), had the Canal Company inspired such excitement. Its stock was always the kind of security that Frenchmen, who own 45% of the shares, put away for old age; the British government, which originally called the project a “bubble scheme” for “gullible capitalists,” later bought 44% of the shares for £4,000,000, has netted a handsome 26%-a-year return on its original investment.

Actually, buying the Suez Canal Company’s shares now makes excellent sense to speculators. Whatever happens to its canal holdings, the company possesses a shrewd management and impressive assets outside Egypt. Long before Nasser took over, the company had been preparing to get out. Anticipating the end of the 99-year concession in 1968, it bought back more than half the original shares for redemption, paying off in cash and new limited-dividend shares. The company has also been diversifying into foreign investments, today holds shares in some 700 corporations all over the world, with an estimated book value of $46.5 million. While details of the portfolio are denied even to stockholders by the close-mouthed management, the company is known to hold blocks in Bendix Aviation, General Electric, General Motors, St. Regis Paper, Socony Mobil Oil. In addition the company holds another $54.3 million in short-term investments (mainly British and French treasury bills), which together with real estate, cash and materials bring net assets to a minimum of $290 million, exclusive of canal holdings.

Thus, should the Compagnie Universelle decide to liquidate, holders of its shares—900,000 in all—would receive $320 per share, or almost twice the current market price, plus whatever indemnity the company could get from Nasser. If, as is far more likely, the company should decide to expand its portfolio and stay in business, it could turn itself into one of Europe’s largest investment trusts.