For my final blog on corporate finance, I have read an article dealing with a part of corporate finance that hasn’t yet been talked about that much; namely ‘takeovers’.
The British transport operator, ‘National Express’, is thinking about selling its business after having to endure some difficult times with poor financial results, losses etc. which have pulled down the value of its shares.
Amongst the investors, is the company’s biggest shareholder, a Spanish group, which has already made an offer, but which has now raised its final offer after first being rejected. Their plan is to buy the company and then again sell a part of it to National Express’ competitor, Stagecoach.
National Express however still doubts and is also considering another option. It would try to get out of (a part of) its debts by issuing rights worth £ 350 million. This might be a more difficult option because of for instance its low share prices.
Opinions about the takeover are still very diversified and the company just wants to have time to consider all of its options.
For my last blog, I found this article to be again very interesting. It shows how a company can get in such big financial troubles that they are unable to get out of these problems themselves, so they have to seek help in more desperate measures. One of those measures can be selling (a part of) your company. Then again, this might be the only way to insure that your company will survive and to still wake away with some money yourself.
In the case of National Express, I suppose it would be the right thing to do. The rights issue that they are considering would be too dangerous. Maybe the shareholders would consider buying new shares to save the company. Then again, not all of the money can come from existing shareholders and that is where the biggest problem would be, I suppose. Maybe the price of the shares is too low to attract enough new investors. Overall, in my opinion, the takeover is the best way to save the company from its debts.
I find this article to be a good last article about corporate finance, because you don’t only have the aspect about how a company gets a part of its capital, by issuing shares, but also the part in which they describe what a company’s options are when its financing gets into trouble. For instance by selling the company or issuing new rights.
Thank you for reading this blog the last couple of weeks!
Greetings,
Lien
Article: “Stagecoach books its seat as Spanish Group raises bid for National Express”
Source: http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6820976.ece Date: 4th September 2009
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Hey Lien,
BeantwoordenVerwijderengood article! I agree, we haven’t discuss takeovers a lot and because of that, it’s very good that you do because it’s also an important issue.
I also agree with you, saying that it’s the best option for National Express for sell it’s company because of all their debts. But, I think that it has to be a very hard decision for a company to sell it and to give it into someone else’s hands. But sometimes, it’s the only chose they have and I think that, if you can chose to close or to sell you’re company, the chose is quickly make. If you sell it, it stays existing and there is a chance that you can stay in the company.
Greet
Livine
Hi Lien!
BeantwoordenVerwijderenLike I’ve been saying the last few weeks, you write very fluent which makes it even more pleasant to read your blogs!
I’m glad that we had the same idea this week. Not even the search for money in good times but also the last attempt to save a company from bankruptcy is an interesting part of corporate finance.
I agree with you when you say that a takeover might be the right thing to do and maybe even the last thing they can do.
I admire companies who can give up their proud and admit that they are in trouble and then still find the power to search for solutions and try to overcome the bad times.
I want to thank you for all your writing. It’s been a pleasure to read your blogs and I must say that I learnt something about them.
Best regards Evelien
By Evelien Van Gaeveren
Dear Lien
BeantwoordenVerwijderenEveryone knows that the enterprises are having a lot of trouble during the economic crises.
These enterprises need some help. I agree that if they sell their shares this might be a part of the solution for them. But, in most cases their shares are still low. So when the shares are low, there aren’t a lot of people who want to invest in these shares.
They can also sell a part of the assets of the company. That might be another part of the solution but the money that company’s make isn’t sufficient to save the company.
The companies need some help of a third person. This person would take over the company and sometimes the company is saved.
I found your topic an interesting topic about corporate finance, I have read it with pleasure
Greet Annelies