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10/26/2010

A buy out, sell out or a merger?

In very simplistic terms that a layman can understand, a buy out is done when one company pays another company, normally with a premium, and take over the other company, lock stock and barrel. In a sell out it is just the reverse. In the SGX/ASX case, SGX pays ASX shareholders a sum plus X premium dollars, and it ended up in a merger. So it is not a buy out and SGX does not take over ASX, or does it? In the case of a merger, normally both parties will make a valuation of the shares and use that as a basis to determine the number of shares each owns in the merged company. You don’t normally over value one against the other or pay a huge premium. Premium only applies to a buy out. The monetary consideration goes as follows. SGX values the ASX shares at A$48 a share, inclusive of a 37% premium. This will be paid in SGX shares at around 3.5 SGX shares for each ASX shares and another $22 in cash. That is what an ASX shareholders will end up with. After paying these shares and money, does SGX owns the new company and all of ASX? No? It is reported that the market cap of SGX is $7.86b while ASX is worth $6b. This deal is touted as a merger. An ASX shareholder will now own 3.5 SGX shares and still getting a cash of $22 or a total equivalent of 45% of the $8.2b payout. (Today it is reported as $11b based on the same A$8.4b) If this is so, this amount is enough to buy over half of the existing SGX shares in the SGX, which only has a market cap of $7.86b with some to spare. And the Australian share holders could own half of all the shares in SGX plus all the SGX shares in ASX. Am I wrong? What does SGX owns eventually after the payout, and what is the benefit to a SGX shareholder? If it is only a merger, then there is no need to pay a hefty 37% premium. If it is a buy out, I can agree to a premium though how big is the premium depends on many factors. So, is it a buyout or a merger?

13 comments:

Wally Buffet said...

The issue is academic because I think the deal will not win Australian regulatory approval.

The share prices of both have slumped from its high when the proposal was announced.

Matilah_Singapura said...

To add to Wally, I think you are splitting hairs.

If you really want to buy something, you have no choice but to sweeten the deal by offering extra goodies to similarly greedy owners of property to want to "give up" that property to you so that you can become the Uber Greedy Owner.

It was the SGX who made the move. But it unclear if this IS what it seems -- perhaps there were secret "discussions" prior to the announcement...who knows?

Remember, Aust has a quasi-Marxist govt narrowly holding power. The independents who really hold the power -- none of them are "free marketeers" in the true sense, and the conservatives mostly lean toward protection.

I had my doubts from the time the announcement was made that The Federal Govt Of The People's United Democratic Republic Of Soviet Australia is UNLIKELY to approve the merger/ buyout/ JV/ marriage/ pakat of the 2 bourses.

Of course, I am hoping I am wrong and that after the unavoidable bluster, name-calling, insults and really stunningly stupid economic/ financial/ social impact ANALysis by Govt Ex-spurts frothing at the mouths like rabid dogs, the deal will be allowed to go thru -- with all the necessary "conditions" and "new regulations" imposed by our pompous erudite minds in Parliament.

I do however consider myself to have a good grasp of how the shit works or often DOESN'T work here on the world's largest and only island CONTINENT -- a place so fucking rich, so shockingly badly managed financially, and perennially governed by charlatans, imbeciles and wankers, that it is a WONDER anyone of us can live, and live quite well at that.

Australia -- a wonderful place, unfortunately the govt is fucked which gives you a clue on why the people deserve them.

Wally Buffet said...

Instead of wooing the ASX, the SGX should have whispered words of love to Bursa and the HKEX which are all on the same time zone and ASIAN at that.

What the fuck do we want to go after an Ang Moh skirt?

Sure kenna fuck one.

Hehe.

Matilah_Singapura said...

One ST journalist I do agree with EY Goh on the ASX-SGX Merger

Anonymous said...

Inter-marriages produce better offsprings, meaning 'chapcheng'(mixed-bloods) are more intelligent and better looking. A tran-national merger should be taken as part of globalization benefitting humanity world wide, more sharing of wealth or profit, so to say.

Matilah_Singapura said...

anon 1156

> Inter-marriages produce better offsprings, meaning 'chapcheng'(mixed-bloods) are more intelligent and better looking

Not necessarily :-). But mixing up the gene pool potentially is beneficial, on a variety of levels which enhance survival.

Not every act of interracial fucking produces "superior" offspring. Not every chap cheng baby grows up looking like Keanu Reeves or Jessica Alba

Chua Chin Leng aka redbean said...

Long long ago they held a Miss World contest and Einstein was invited to present the crown to th winner. After the clowning, oops, I mean crowning, Miss World told Eintein, 'How good it will be if we got married. Our children will be as beautiful as me and as intelligent as you.'

Einstein stared at her for a moment and then replied. 'What if the children look like me and have brains like yours?'

Chua Chin Leng aka redbean said...

The most successful forced breeding of the human race was done at the cotton fields of USA. And they produced half white/blacks that were stronger than horses, taller than the giraffes, and great entertainers, musicians, singers, dancers etc.

They consciously chose not to program in the intelligence part that could have gone with it.

Matilah_Singapura said...

In fact in some instances they used to kill negroes who could read.

However we're running in danger of mixing up different contexts here.

Human genetics and stock market mergers are two different things. The questions remain:

Is this merger "good"?

Why?

and

Who benefits and who doesn't?

Anonymous said...

How many sinkapooreans will benefit from the merger and how will they benefit ?

Matilah_Singapura said...

capitalism is an honorific: i.e. no one forces you to play, but if you want "in" you have to put up "resources".

So whoever benefits, is in the game. If you are not in the game, why the fuck should you "benefit"?

Matilah_Singapura said...

Expecting parliament to do the right thing is wishful, willful ignorance:
The ASX, The National Interest, and The Hung Parliament

More potential bourse-on-bourse action (Magnus Brocker, you sure did start something here. Well done):

SGX’s ASX Takeover Igniting Speculations of Further Mergers in the Region

Anonymous said...

For the majority of the Sin Citizenry not in the game, let the two governments screw each other. As the saying goes when two elephants fight or make luv, the grasses suffer. And when the elephants produce more of themselves, the grasses suffer even more.