Bakery sale unlocks Weston’s value

Article Excerpt

Holding companies often own a variety of unrelated businesses. As a result the shares of those complex companies tend to trade for less than the value of their assets. One of the best ways to reduce or eliminate this “holding company discount” is for the firm to sell or spin off some its holdings. George Weston is a great example. The company now plans to sell 139-year-old Weston Foods. It could use that cash (potentially as much as $2.2 billion) to buy back shares and boost its dividend. It’s also possible that Weston will eventually opt to hand its stake in Loblaw and Choice Properties REIT to shareholders as a special dividend. Even without a break-up, the stock remains a good way to buy its high-quality underlying assets at a discount. GEORGE WESTON LTD. $116 is a buy. The holding company (Toronto symbol WN; Consumer sector; Shares outstanding: 151.8 million; Market cap: $17.6 billion; Dividend yield: 1.9%; Takeover Target Rating: Lowest; www.weston.ca) is…