meek-investor

Mergers & Acquisitions are often the glamorous side of business. CEOs love  them - you go through the excitement of doing a deal, get on to the papers and TV, become famous etc etc. Most of the haggling on the deal is on the price - how much the buyer is willing to pay the seller. But how about a M&A transaction where the seller has to pay the buyer in order for the buyer to buy the business !! Fanciful ? Well, that's exactly what has happened with the sale of Fresh & Easy by Tesco to Ron Burkle . Tesco is an UK based grocery retail giant; it is the third largest retailer in the world. From the UK, where it is a household name, it has expanded in Europe and Asia. But in the US, the largest retail market in the world, Tesco was non existent. In 2006, it decided to foray in to the US with the branding  of Fresh & Easy - in small store grocery format, primarily in the Western states. It never took off and Tesco faced mounting losses despite opening some 200 stores...

Barbarians at the Gate is the name of the scintillating book that detailed the leveraged buyout of RJR Nabisco in the mid 1980s. It was made into a movie as well and for a long time it was the biggest M&A transaction in the world. I strongly recommend the book, if you have an interest in business. ( or if you like thrillers !)   Take 2 seems to be happening in the goings on with Dell . The resemblance to what happened with RJR Nabisco is uncanny.   The Dell story started with Michael Dell, the founder teaming up with Silver Lake, a private equity firm,  and announcing a bid to take Dell private at $13.65 a share (a 25% premium over the closing price of $ 10.88 prior to this announcement). When rumours of this started to surface in January, people thought it was not a doable deal. Dell after all is a struggling PC maker in an industry which is declining with the onslaught of tablets. In any case its a fiercely competitive and somewhat commoditized industry. Whoev...

Chicken Tikka Masala is reputed to have taken over as the national dish of Britain. Perhaps the best example of reverse colonisation, although it must be said that overthrowing "British food" is not as great an achievement; such being the epicurean significance of the cuisine in Her Majesty's land. Actually its a Bangladeshi takeover, given that 99% of the curry houses in Britain are run by Bangladeshis. But we shall lightly pass over Bangladesh propagating "Balti"cusine" and such other monstrosities. Stay with the chicken. British affinity to consuming this hapless avian is the only logic I can find (after much scratching of the head in vain) to explain the take over of Blackburn Rovers , a Premier League football team, by Venky's - an obscure chicken farming company from India. Firstly the facts. Blackburn Rovers is a struggling middling football side in England. Its been bought out by Sri Venkateswara Hatcheries for £ 53 m , an Indian famil...

The Labour party in the UK has announced a “Cadbury Law” as part of its election manifesto. This was motivated by the aftermath of the Kraft takeover of Cadbury. It has many good and some bad features and can potentially be a model for takeover law in many countries. The broad proposals are as follows - M&A transactions have to be approved by a two thirds majority and not just a simple majority. - People (read hedge funds) who buy shares in the target after a bid is announced would be barred from voting - A “national interest test” is being considered to prevent foreign takeovers in vital industries” – defence, utility, infrastructure being thought of as “vital” In the red corner in fervent defense of these proposals are the Labour party, obviously, the Confederation of British Industry and Unite – the powerful Trade Union. In the blue corner, opposed vehemently to this are the Conservative Party, obviously, and the Association of British Insurers. Silent, but presumably in this ca...

Its difficult to reconcile to the way the Kraft Cadbury deal finally ended (the deal got done today). Not the outcome – M&A transactions like this happen all the time. But the way it happened makes me reflect if unbridled capitalism is really a good thing. My ire is on the hedge funds – they are no different to a herd of vultures which circle over an animal that’s about to die. When there’s a whiff of a M&A transaction, the hedge funds pile in to buy the shares of the target, hoping to make a killing . This is what happened in the Alcon transaction about which I posted here . Somebody tell me how what happened in the Cadbury case is reasonable by any yardstick. Here’s what happened. When the first whiff of a possible takeover of Cadbury was in the air, the hedge funds bought heavily into Cadbury shares. They then drummed up noise that Kraft’s bid was inadequate and it had to raise the price. They kept making this noise and were prepared to play brinksmanship. Till virtually yes...

This seems to be the season for whispering sweet nothings. K and C are engaged in a very public courtship as I blogged here – its progressing at such a snail’s pace that its probably more exciting to watch grass grow. K has threatened to abduct and carry away C, and C is saying “bah” as women are wont to do ! But there’s another rumour doing the rounds. Yesterday curious things happened with Colgate Palmolive’s share price. The speculation is that Reckitt Benckiser (makers of Dettol) and Colgate Palmolive (makers of, well, Colgate) are looking coyly at each other. It appears that Reckitt is sending strong signal that he/she is ready to marry. What is not clear is who the target of its affection is. Is it Colgate, or is it SSL (makers of Scholl and Durex) ? If its Colgate, then its not clear who is the bride and who is the groom. For they are both roughly equal. It's supposed to be a marriage of equals. But then women’s lib has not yet reached the corporate world where the traditi...

Will they , or won’t they ? Get married that is. The very public match making process between K and C is as riveting as any soap on TV. Readers of this blog would know that I’ve taken a fancy to mush in my old age. Especially since A Journey called Life and The Thoughtful Train have suggested that I better wear black than pink. This is another mushy post to prove that “macho men” can also mush ! K and C had gone out on a date about three weeks ago. K tried to hold C’s hand, but C pulled it back ; you see C is a “decent” girl and doesn’t hold hands on the first date. K , being an American, then wrote a long flowery love letter and then published it for the world to read. K said he was prepared to marry C and if C agreed and would pay C’s parents $16 bn as dowry. C was angered by the public announcement after just the first date. C promptly said NO and that she was prepared to die a spinster and would not marry K, especially with such a piddly dowry. Despite C’s brave words that she wa...

On 17th October 1988, late in the day, Monday, Philip Morris announced an unsolicited bid to acquire Kraft. It set off a soap opera , the likes of which have not been seen since. October 1988 was an unbelievable month in business history. Two weeks earlier, on October 3, Grand Metropolitan (now Diageo) launched a hostile bid for Pillsbury. But then on October 20th, the atom bomb fell. The management of RJR Nabisco announced a bid to take the company private. That set off a bidding war with KKR, a private equity firm, who ultimately acquired RJR Nabisco for a staggering $25 bn. For 10 years that was the largest acquisition in the world by far. Between October and December of 2008, for the first time, the front pages in newspapers around the world were filled with business news. With three large hostile bids going on simultaneously, daily gossip, who did what, who was seen with who, became staple news. News helicopters hovered above company headquarters taking pictures. The soap opera wa...