Two of my stocks are now in merger talks: Powertel - a small Aussie telecom firm - and Symbion Health - an Aussie healthcare firm (what else?). Powertel is in talks with Telecom NZ, which I really shouldn't have sold. It has gone up around 10% since I sold it! Talk is that Telecom NZ will acquire Powertel and merge it into its underperforming Aussie subsidiary, AAPT. AAPT was one of the first stocks I bought - I bought it at the IPO and sold when Telecom NZ acquired it. Symbion is one half of the former Mayne conglomerate that remained after Mayne Pharma was spun off in a demerger. Yup, Mayne Pharma was acquired too. An advantage of investing in mid and small cap stocks is that they are more likely to be acquired than mega-cap stocks are. That's one reason I made my disastrous investment in Croesus Mining. Sometimes it works out and sometimes it doesn't...
There is a global wave of mergers, acquisitions, and privatization buyouts going on that rivals the previous peak of such activity in 2000. In theory this suggests that shares are cheap as most of the acquisitions are being made with cash or borrowed money, not other shares. But I don't think the evidence is that acquirers are actually that smart and the high level of such activity could be seen as a sign of an overheated stock market instead.
P.S. Tuesday, 30 January
Telecom NZ is offering $A2.30 per share for Powertel. I paid $A1.20. The stock is trading at that level. The only issue is I bought on 6 May 2006. So I need to hold on till this 6th of May to get the long-term capital gains rate. This is worthwhile when considering the tax saving vs. interest paid in the meantime. Only question is whether I'll be able to hold on till then. The news release talks about Powertel shareholders voting on the deal in late April. If the acquisition (for cash) proceeds immediatately there is going to be no point in waiting till then - unless a better deal comes through. I'm skeptical about that, because one potential bidder already dropped out earlier saying that the price of Powertel was already too high then!
2 comments:
You are not alone - at least as far as Croesus. And if I get a final return of 30c on the dollar invested out of Aspect, I will be less harsh on the shannanigans that have gone on with the sale to Davos! But to the heart of my response - the M&As and private equity plethora that clog up my Oz Fin Review speaks to me of an overheated market so I have been quietly (well maybe the odd heavy 'clunk') moving a good % into gold as my 'little person' hedge against the catastrophes that Macquarie and his mates may already be wrecking. Why does Macquarie Bank remind me of a modern day Alan Bond?
At least bond could sail a boat... Or pay for those who could
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