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Johnson Matthey, the come back Kid back


Once upon a time, there was a very honourable institution which embraced a proud tradition of 200 years of prudent trading, and became the pride of British merchant banking until the mid 1980's, when it was embroiled in a scandal of the magnitude comparable to that of Barings later in the same decade. The spectacular collapse of Johnson Matthey Bank (JMB) in 1984 led to the first dramatic rescue of a private bank by the Bank of England, when JMB was bought for the princely sum of £1. This meant the Bank of England effectively absorbed the large debt incurred by JMB. There are indications this event might have been a constituent catalyst for the rise to prominence of a fresh faced young lawyer, who opposed the principle of this rescue, and went as far as making his feelings known. Yes, this young William Pitt wannabee, the Right Honourable Tony Blair, later on went on to become the leader of the Labour Party and the Prime Minister of the United Kingdom.

There were rumours of frauds, of misappropriation, of bad loans etc., and for the next ten years, Johnson Matthey was protected by bankruptcy law in the United Kingdom against its creditors, and did not have to pay any tax on its net profits (every cloud has a silver lining !). This story so far draws remarkable parallels with the collapse of Barings Bank, anothe fine British Investment Bank, which was bought out by the Dutch bank ING for £1. The reason why Barings still attracts notoriety and Johnson Matthey is largely masked is because Barings happened later, and the amount involved was nearly three times that of Johnson Matthey. Nevetherless, this is where the similarities end, Johnson Matthey emerged from bankruptcy and went on transforming itself into a major player in the chemicals, precious metals and ceramics business. There were of course rumours that the part that went bankrupt was an empty shell which contained all the liabilities of the disastrous banking activities, and the real assets miraculously belonged to the separate precious metals arm of the business, but they were just that, rumours.

Today, Johnson Matthey is the world leader in research and development into the new alternative energy field of fuel cells. This relatively young industry currently has only a handful of players around the world, and the potential is enormous, as the search for greener forms of energy races on. Johnson Matthey proudly appears in the FTSE 100 list of shares and has a market capitalisation of £3.1 billions and revenue of £4.6 billions. They virtually have the catalytic converter market cornered due to their stock pile of platinum. Their other line of business also based on platinum is the production of the cancer drugs based on carboplatin.

With the acquisition of the business lines of their principal competitor in the ceramics business, namely Cookson, in 1995, the future for Johnson Matthey looks very rosy indeed. If ten years ago you had bought a Johnson Matthey share, you would have made a tidy profit and achieved a modest growth of 400% after today's market close.


 by by David at 27 Mar 2006 23:04:59
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