Fernando MonteiroKerry Stokes Creeps in the Shareholder Registry
July 26th 2009 11:19
This week Kerry Stokes, majority owner of Channel 7, increased his ownership of James Packer’s Consolidated Media Holdings to almost 20 per cent. He will certainly try to buy the whole of it, but, in an old style, Stokes will never pay the extra that normally is asked from someone making a bid for the whole company.
What Stokes has in view by acquiring a position in CMH is the pay TV channels Foxtel, Fox Sports and the internet job website Seek that CMH owns. James Packer is putting up a fight by increasing with urgency his own stake in CMH to 40 per cent so that he can continue to dominate it.
Now, when you get to own 20 per cent of a company the law in Australia requires you to make a bid for the whole company and, as unfortunately happens, the target company also requires you to pay extra for it. It can be asked why you have to pay extra for a company that is already quoted in the stock market and I think that is the question that goes in the mind of Kerry Stokes because he never pays that extra. Why?
I think that asking for a premium above the market price is most of the time something similar to someone wearing a balaclava jumping on you in a dirty road and taking your purse full of gold coins. Why do you have to pay extra for any company you want to buy in totality? If a company is happy trading its shares in the market for a quote, you could easily think that the price of that company must be the value of all its shares added together. But no: there is the premium. It can be asked what is the premium covering? Often, ridicule, the answer is that it’s the hidden value of its assets.
It’s funny to consider that the stock market brims with people who believe in the Efficient Market Hypothesis to death and defend that, being investors perfectly informed and rational, today’s price is always right. How come any of these people accepts to pay a premium on a take-over? Would that be dismissing the own theory they so fiercely believe in? I laugh a lot on this.
What Kerry Stokes always does is, before he reaches the stage – 20 per cent – when he needs to make an official take-over offer with a premium in it to make it sweet and acceptable, he stops in the figure just before. With the current investment in CMH, Stokes bought 19.9 per cent and stopped. He will remain quiet for 6 months, which is the time the law requires for that situation to elapse, then he will buy more until he has the whole company or just the control of it for himself. Sounds unfair? Do premiums on take-over sound fair?
What Stokes has in view by acquiring a position in CMH is the pay TV channels Foxtel, Fox Sports and the internet job website Seek that CMH owns. James Packer is putting up a fight by increasing with urgency his own stake in CMH to 40 per cent so that he can continue to dominate it.
Now, when you get to own 20 per cent of a company the law in Australia requires you to make a bid for the whole company and, as unfortunately happens, the target company also requires you to pay extra for it. It can be asked why you have to pay extra for a company that is already quoted in the stock market and I think that is the question that goes in the mind of Kerry Stokes because he never pays that extra. Why?
I think that asking for a premium above the market price is most of the time something similar to someone wearing a balaclava jumping on you in a dirty road and taking your purse full of gold coins. Why do you have to pay extra for any company you want to buy in totality? If a company is happy trading its shares in the market for a quote, you could easily think that the price of that company must be the value of all its shares added together. But no: there is the premium. It can be asked what is the premium covering? Often, ridicule, the answer is that it’s the hidden value of its assets.
It’s funny to consider that the stock market brims with people who believe in the Efficient Market Hypothesis to death and defend that, being investors perfectly informed and rational, today’s price is always right. How come any of these people accepts to pay a premium on a take-over? Would that be dismissing the own theory they so fiercely believe in? I laugh a lot on this.
What Kerry Stokes always does is, before he reaches the stage – 20 per cent – when he needs to make an official take-over offer with a premium in it to make it sweet and acceptable, he stops in the figure just before. With the current investment in CMH, Stokes bought 19.9 per cent and stopped. He will remain quiet for 6 months, which is the time the law requires for that situation to elapse, then he will buy more until he has the whole company or just the control of it for himself. Sounds unfair? Do premiums on take-over sound fair?
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