ms "bb", page-6

dewe... I appreciate your comments as a free exchange of views is important when a company is facing such an upheaval... however, I do worry about a few of your comments, especially, "a deal where cah will be the dominant comp."

have you actually read the CAH announcement dated 15th May 2011 "Merger and Asset Acquisition Transaction"???

If so, how are CAH the dominant company when it is a "merger of equals"??? Existing CAH shareholders will only have 33% of the new entity IF they shell out more cash and take up their rights in the $150 million rights issue equity raising - otherwise, CAH shareholders stay diluted to 31% of the new entity. Insofar as the new merged entity board, CAH do get 3 out of 8 seats, but so does CQT.

also, CAH only owns 30% of Cracow (not 50%), and NCM are not part of the merger, they are just selling their 70% of Cracow and 100% of Mt Rawdon to the new merged entity, and receiving a 38% share of the new entity in return (plus 2 board seats). They will get diluted down to 33% after the rights issue equity raising.

Interestingly the 15th June 2011 announcement tries to pitch NCM's dilution down to 33% as a positive - "At Caltapa and Conquest's request, Newcrest will not participate in the equity raising and its interest will be diluted to approximately 33% of the Merged Entity"...

this is all fine and dandy until you consider that for NCM to participate in the rights issue, they would need to write out a cheque for $57 million (38% of $150 million) - maybe just maybe NCM are happy not to participate???

The next question I ask though, is given this is going to be a renounceable rights issue, is NCM's 38% of the new entity "cum entitlement"??? If so, they not only sell a couple of assets, but they get the chance to monetise their rights and get paid for the pleasure! (e.g. if it turns out to be a 1 for 6 rights issue, NCM will get about 40 million rights, and if they can sell them for $0.025 each, they get a handy $1 million cheque in the mail! Sweet deal!). I guess NCM may chose to let their rights lapse, and fall into the hands of the underwriters?

I agree in the longer term the larger entity will probably deliver better returns, but this deal seems to be tilted in favour of NCM and it could take some time for the value to be created to generate those better returns...

perhaps you could consider an apt simile for this three-way transaction to be a case of two small monkeys trying to do a deal with the 800lb alpha-male gorilla... it is no surprise that the two small monkeys might be limping for a while, but at least their offspring (assuming they were female monkeys in the first place!) will be bigger and stronger...



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p.s. bad luck for the monkeys if they are not females!! lol