The last of the behemoth mega-debt deals has collapsed. There are none left from the Japanese carry-trade Wild West days of 2007, the year that saw more debts dumped on corporations than any time in history. The deal that finally collapsed here is one that the shareholders of BCE didn’t want to see in the first place. I wrote an extensive story about this last year.
CLICK HERE LARGE PRINT EDITION: LAST STUPID MEGA-DEAL COLLAPSES IN CANADA « Culture of Life News 2
(Bloomberg) — BCE Inc., the Canadian phone carrier going private in a leveraged buyout, signaled the C$52 billion ($42 billion) takeover may unravel because the debt might be too much for the company to pay off as the economy sinks.
The stock fell as much as 40 percent after auditor KPMG determined Bell Canada parent BCE wouldn’t meet solvency standards set in the acquisition agreement with a group led by Ontario Teachers’ Pension Plan. The deal won’t close Dec. 11 unless KPMG changes its opinion, BCE said today in a statement.
The failure of the transaction, the second-biggest leveraged buyout, would leave BCE a public company, forcing Chief Executive Officer George Cope to answer to shareholders as he seeks to revive sales growth. The stock was already trading 20 percent below the offer price on concern that the seizure of credit markets and a global recession would lead the buyers or their bankers to back out.
The people who mostly hold this stock had little interest in seeing it shoot up in value. This stock was one of those ‘blue chip’ deals which sane, cautious people love. They pay good dividends and do not do horrid things all the time. Since this piratical deal has collapsed, the stocks are falling. But the important thing here is, the holders of this stock DO NOT CARE. They are, indeed, happy that it is not a ‘hot stock’.
This is because all of the ‘hot stocks’ this last 10 years were mostly ones where people were shoveling debts on top of in these goofy mega-deals. Few of the stocks shooting upwards were doing this due to innovations or new markets and products! No, it was 100% a transfer of wealth from the corporations to the gnomes, bandits, pirates and hell hounds that were using cheap loans from Asia to enslave everyone on this planet. Here is my story from June 30, 2007:
The International Herald Tribune reported the results of a group of the biggest M&A deals over the last few years. Only three out of seven of them had a positive effect on the companies involved. Unicredit bought Capitalia for $30 billion this year. So far the shares are down 10%. AstraZeneca bought Medimmune for $15 billion, another deal done this year. So far, the result is a 9% loss.
n the first five months of 2007, the hustlers earned $25 billion doing deals of this sort. But when Boston Consulting Group looked at the results of similar transactions – 3,200 of them – it found that nearly 60% of them actually reduced shareholder returns.
Takeover activity rose 38% in the first half of this year, compared to the same period a year ago. A breathtaking $2.5 trillion is changing hands as a result. How much of it will really “add value”? Not much.
The world is flooded with ‘liquidity’ which I would like to say, is pure red ink from the massive trade deficit the US runs with the world coupled witih global government overspending, again, the US leading the way. This money has to make money and all the financiers know, if you pass it through many hands, the more it circulates, the more ‘value’ one can squeeze out of it. They conviniently leave out the bad news that all this vapid psuedo-wealth vanishes in a flash if the money either stops moving or if one of the players screws up and can’t pass it onwards.
So here is the story of Canada Bell which was a very big favorite for conservative hold and reinvest the dividend people seeking security, not great riches:
Bell Canada’s directors endorsed an offer worth about 51.7 billion Canadian dollars ($48.8 billion) from the Ontario Teachers’ Pension Plan and the private equity firm Providence Equity Partners on Saturday to take the company private. The deal for Bell Canada would be among the largest leveraged buyouts ever.
If approved by shareholders and regulators, the deal would be Canada’s largest takeover to date.
This is big, big news in Canada. This is a ‘leveraged’ buyout which means zillions of Canadian workers will soon lose their jobs, their homes and their futures. There will be suicides and bankruptcies as well as child abuse, etc. But the pirateers will be happy! Who cares if the company does badly? It will limp along and soon be resold to yet another, even uglier privateer.
The offer led by the teachers’ pension plan will pay 42.75 Canadian dollars a share. In the last year, the company’s shares have traded as low as 25.32 Canadian dollars a share.
The stocks have stagnated pretty much since the great collapse of March, 2000 when it shot up, over the course of just 2 years from $30 a share to $200 a share and then there was this $133.52 dividend payout and the stock collapsed in one day to $41.00 a share. Normally, the dividend payouts were 34-37¢ a share.
Canada Bell was like the US Ma Bell: a monopoly. Shareholders loved this, they bought and held the stocks. Once it was broken up, chaos caused a lot of ups and downs and the 2 year rise and collapse was due to attempts at buying up media organs such as TV and internet services. Since 2000, the company limped along but still paid dividends. Then it rose from $30 to $40 a share the last three months due to talk of privatizing the organization.
The unusually secretive process was also unpopular with many investors who saw the value of their shares swing based on rumors and incomplete news reports.
Bell is also one of Canada’s most widely held companies, with retail investors making up 60 percent of its shareholders.
Those shareholders will receive a healthy premium for their stock, but will lose Bell’s dividend payments, the main draw for many individual investors. Long-term shareholders may also face substantial capital gains taxes.
The majority holders were given no notice nor choice in this matter. The bidding war of the several private equity or hedge funds were barely beginning when the Teacher’s Union and several other holders suddenly dumped the whole process without consultation, voting or warning and simply inked the deal on a Saturday when the markets were closed and people were assuming this would continue for at least another few weeks while the stocks would continue to rise.
So here we are, just 16 months later! And finally, we see an end to that ODIOUS period. One which our central bankers desperately want to RESTART!!!!
This is key to the whole mess: instead of trying to understand the underpinnings of this royally messed up financial system, they just want it to restart, to come back. Certainly, stocks shot upwards during this mega-deal garbage scow business. The pirate islands in the Caribbean did great! But the only thing growing were two:
- The level of debt in all corporations that were targets of take overs.
- The Derivatives Beast and all his kin and ilk and assorted hanger-ons.
The world’s economy did grow during this time. For example, yacht makers made out like bandits. The auctions at high-end art houses shot through the roof. Very expensive ladies got lots of very expensive jewelry. But the mainsprings of the world economy were being crushed by debt. As more and more debt piled on top of all real estate across the planet, it then moved to the corporations and began to pile up there. This blizzard of FAUX MONEY, fake dollars created via computers and lending institutions of great size, namely, national central banks of the world’s biggest economies, this blizzard buried everyone and everything up to their necks in dollars that are DEBTS, not capital.
Note that today, the US and Europe and JAPAN are all ‘recapitalizing’ the bankrupt banks that loaded this crap on top of everything. So they can lend again! ACK. This goofy capitalization project is now crushing all taxpayers with immense mountains of debt. This is nearly impossible to fathom. Is it $7 trillion in less than three months? Or over $8 trillion? Or maybe it is the Derivatives Beast’s numbers which is around $50 trillion!
I am betting, this is where it will end up. This is why nationalizing banks and then having a healthy trade war is so useful. We can clean up these books [arresting the guys who did this helps, too] and still be semi-solvent.
I spent Sunday afternoon brooding over a great piece of Times reporting by Eric Dash and Julie Creswell about Citigroup. Maybe brooding isn’t the right word. The front-page article, entitled “Citigroup Pays for a Rush to Risk,” actually left me totally disgusted.
Why? Because in searing detail it exposed — using Citigroup as Exhibit A — how some of our country’s best-paid bankers were overrated dopes who had no idea what they were selling, or greedy cynics who did know and turned a blind eye. But it wasn’t only the bankers. This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics.
So many people were in on it: People who had no business buying a home, with nothing down and nothing to pay for two years; people who had no business pushing such mortgages, but made fortunes doing so; people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so; people who had no business rating those loans as AAA, but made a fortunes doing so; and people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so.
Time to laugh at Mr. Flat Earth. His wallet is flat. His rich wife just lost her entire fortune. She is about to be bankrupted. Her whole spoiled rotten family will now be street urchins rather than Wall Street Gnomes. A begging gnome is a terrible sight to behold. A begging spoiled daughter of a rich gnome is even more pitiful. I might toss her a dime when I walk past her in Manhattan next time I visit the Upper East Side.
This reminds me. The NYT is in trouble, too. Its ship is sinking fast. I hope Friedman finally figures out how reality works. He struggles with it every day. So before he digs into his turkey dinner, perhaps he can remember exactly who enabled all of this. For the roots of this mess are in two places: wars in the Middle East and Asia. And trade imbalances. And he celebrates both! So hang him. I won’t give HIM a dime even if he is begging on some Manhattan street corner, selling apples. Bah. Humbug.
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