seven-westrac mergerkwhat a great deal!, page-4

Continued from my previous post
Fourthly, there are no synergies. Why buy if there are no synergies? What is the Board going to do. One moment talk about TV programs, then the next minute talk about axles?
The other big issue is the transfer of risk from Kerry Stokes to all SEV shareholders. It has been widely publised that Caterpillar only needs to give 90 days written notice to terminate the dealership agreement with WestTrac. Previously, if this occurred it would be Kerry Stokes wearing the loss. Imagine, if the deal proceeds and soon thereafter WesTrac lost the catepillar dealership. Oops. The $450million of intangibles in WesTrac books will all disappear in a puff of smoke. The share price will be in a free fall. We will all experience that eventually my barmaid sighed. Not with the shares I own I hissed. Not happy Jane!
Also, it has been flagged that WesTracs EBITDA will drop for 2010 presumably due to competition.
As part of the deal WestTrac which owns 66.2% of National Hire (ASX code:NHR) has kindly agreed to sell this stake to SEV shareholders for $246million ($2.50/share). What? No thanks I say. Any shareholder interested in owning NHR can go on market and buy it at prices as low as $1.50/share! A 40% discount. For the record, NHR, since listing in 1997 except for a couple of brief periods one at the height of the market in Nov 07 has never traded above $2.50.
My sixth point is Kerry Stokes will increase his stake from 49% to 68%. There will be decreased liquidity and Stokes will increase his control. Of course, this is strictly not true. Those familiar with Seven do realise Stokes allready has total control. There will still be the same number of non-Stokes shares to buy and sell. However, due to this perception, the big institutions will just not be interested. "Better value elsewhere" will be quoted at the top end of town. Due to lack of interest from institutions, shareholders will have difficulty selling. The Seven Network (or should I say Seven Group Holdings or whatever else Kerry wants to call it) share price will languish for years to come. Then, one Monday morning we will all wake up to find Kerry Stokes wants to privatise the whole company!
Finally, if everyone votes NO, it will force Kerry Stokes to sweeten the deal. Since it wouldn't be easy and it wouldn't be cheap to roll over WesTracs funding facility, Kerry will in all likelyhood return to the table with a better offer. I say vote NO and await for this better offer. If he doesnt shareholders have avoided buying a overpriced asset.
hih
This is the third in a series of articles that I will be posting on the merger.
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