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Failing to understand takeovers

Quite the press release from the T&G.

Imerys, a French listed company with operations in over 40 counties has a UK subsidiary which is engaging in lay offs. I cannot say I know the ins and outs of that, and for the time being they are not hugely relevant to the issue at hand - its acquisition of UCM, a ceramics company.

Here are some quotes to savour:

"Imerys is spending over £20 million to buy UCM and says it can afford to do so from existing resources," said Jennie Formby, T&G national secretary. "They also say their offer represents of premium of nearly fifty per cent on UCM's share price. To our members facing redundancy and bleak job prospects it means Imerys is paying over the odds and has misled them by saying there is no money for a decent pay-off."

Jennie, go and read up on M&A tactics, practice and law. Imerys is not actually paying a premium because it fancies giving away money, it is doing so to avoid the cost of a hostile takeover. Doubtless the funding for redundancies and for acquisitions are not found in the same place in corporate accounts.

And there's more:

"She carried on to say today's announcement gave the real picture of a company which can "afford to pay probably already wealthy shareholders more than their shares are worth yet deny the people who have given years of service a proper pay off."

Erm, heard of institutional investment and pension funds? UCM is a PLC, so it is unlikely that every last one of its shareholders is a cigar-chewing plutocrat in a top hat.....

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Anonymous Voyager said... 6:55 pm

Doubtless the funding for redundancies and for acquisitions are not found in the same place in corporate accounts.

I wish I understood that comment. Both are Balance Sheet items and both are liabilities. There is a real question that a company that cannot pay redundancy pay may not be solvent enough to service debt repayments.

Then againImerys is the more aptly named English China Clay which tried in 2005 to screw its workforce over pensions. Then again Imerys had £140 million in Free Cashflow in 2006 and ran down Net Debt to 66% equity.

It is carrying a lot of Goodwill - nearly £560 million but does have around £120 million in Cash and around £140 provisioned for "Employee Benefits" and £140 million in "Other Provisions"

This company should be able to pay with ease  



Anonymous Voyager said... 7:03 pm

UCM is a £20 million agreed acquisition - UCM had put itself up for sale. Imerys is paying cash.  



Blogger Croydonian said... 7:05 pm

The reference to positions in the accounts was meant metaphorically.  



Anonymous Voyager said... 7:09 pm

The reference to positions in the accounts was meant metaphorically.

I'm terribly literal  



Blogger Peter Hitchens said... 7:10 pm

Will as a fan of futurama you must surely know that a true plutocrat also wears a monocle  



Blogger Croydonian said... 7:16 pm

Good point Hitch.  



Anonymous this guy said... 10:32 am

What a hoot. The TUC now support globalisation, and argue that foreign takeovers are good, as foreigners look after their people better. (Always?) Then when the new owners sack people rather than get them to do a job that's no longer there, they cry havoc.  



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