From bail-out to buy-out
Posted on September 19, 2007 by Richard Beddard
Filed Under Companies |
According to Citywire on Monday, broker Keefe, Bruyette & Woods has valued the bank at 475p a share, “somewhere between its net asset and run-off values”. I put that figure to Professor Scott Moeller, a mergers and acquisitions expert at Cass Business School and fellow blogger.
He says the price depends on the nature of the buy out. Whether there is a strategic buyer, which he thinks is increasingly unlikely (I presume a strategic buyer might pay a higher price), or whether the buyer is after the distressed assets (”more likely now”).
I’ve heard some numbers around 185p/share in that instance
He says, “It’s a moving target”.
As I write, the share price is 280p, so despite all the guarantees it seems to me trading in NRK is still speculative, and the ‘floor’ under the price could be lower than some traders expect.
That’s just my view, though. Scott wrote an article for the BBC on the potential for a carve up at NRK on Monday.
Fore more buy-out speculation, see Selling Northern Rock.
Update!
Cut from Alphaville’s Markets Live this morning, a daily chat session between two well connected FT journalists. It comes into it’s own at times like this, shame they were on holiday when the subprime crisis started. I include a bit of the transcript just to illustrate how rumour and speculation still surrounds NRK:
PM: Very good comment from OJ earlier — X falls on bid spec!
NH: yep, the Crock is the only stock in London at the moment that could fall on a bid story
PM: Shares are currently down 26p at 280p
NH: but they have been as low as 246.25p
PM: So what’s going on?
NH: rumours of deeply discounted bids for the former bank
PM: From who?
NH: talk that Lloyds has lobbed in an offer 200p a share for the former bank
NH: and HBOS 100p
PM:
PM: Do we believe this?
NH: Not sure
NH: but I reckon the Bank of England would not stand in the way of a low-ball bid
NH: after all the criticism they have taken it would allow Mr King to stand a bit taller and say he does not bail out shareholders for making poor investment decisions
PM: thats true
PM: but would shareholders except it?
NH: I think 100p is unlikely given that the loan book is reckoned to be worth 180p in run off
NH: hang on a minute just got another email on the Crock
PM: What does it say?
NH: that today’s fall may have nothing to do with low ball bids
NH: apparently there are concerns that NRK have “other debt” investments that can’t mark to market.
PM: Such as?
NH: NRK have some SIV lites…
More from Neil Hume (NH) Paul Murphy (PM).
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6 Responses to “From bail-out to buy-out”
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your piece includes the PM saying “will they except that?” Was this written by someone educated after 1960, no wonder universities have re-educate students arriving from our schools
“your piece includes the PM saying “will they except that?”
Well, it was written during an online chat session so perhaps one can excuse the occasional slip-up? I went to school after 1960, in fact I was born after 1960 - so I have been doubly careful with this reply
what happens to the dividend?
Hi Stelios. They still plan to pay it, apparently: http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article2492892.ece
Northern rock is worth in excess of £4 a share and anyone who gets it for less must have bribed somebody. Since the Bank of England was effectively nationalised in 1997 we can see that the bribe taker must be he in charge of HM Treasury or he in charge of him.
Brown thinks he can come out of this mess squeeky clean but we see the banking sector in disrepute unless NRK dies a proper death with all due fanfare and all shareholders get the proper price.