MERGERS, TAKEOVERS AND SELL-OFFS
1. Stakes and joint ventures:
a stake an interest in a company - the shares that one investor has in a company a holding |
stake a majority interest holding - when more than 50 per cent of the shares of a company are owned by one investor, giving them control over how it is run |
stake a minority interest holding - when an investor owns less than 50 per cent of the shares of a company
|
Two companies may work together in a particular area by forming an alliance or joint venture; they may remain separate companies, or form a new company in which they both have a stake.
2. Mergers and takeovers:
“General Oil and PP have announced they are going to merge. It will be the biggest ever merger in the oil industry.”
“Blighty Telecom is to split into two, and demerge its fixed-line and mobile businesses as part of on-going restructuring. The aim of the demerger is to cut debt by £10 billion.
Ciments de France, the French building group, is to acquire Red Square Industries of the UK for 3.1 billion euros.This is a friendly bid, as RSI are likely to welcome it and agree to it. But the takeover comes only a year after RSI rejected a hostile bid, an unwanted one.”
“Abbot Bank is doing badly, and may become the victim of a predator. There were rumours of a possible takeover by Bullion, but it says it won't play the white knight for Abbot by coming to its defence.This leaves Abbot exposed to acquisition, and it may be prey to a big international bank. Abbot does have a poison pill however, in the form of a special class of shares that will be very expensive for a predator to buy.”
3. Conglomerates:
1985 - Low-price general retail Cotton Stores acquires Bestco supermarkets and diversifies into food retailing.
1990s - Cotton makes a series of acquisitions of retail and non-retail businesses, and becomes the parent company in a conglomerate or combine, with the other businesses as its subsidiaries.
2000 - Shareholders complain that Cotton Group is unfocused. They demand that its CEO should dispose of non-retail companies, which they describe as non-core assets, and reinvest the money in its main, core activity: retailing. They say that this divestment and restructuring is necessary for future growth and profitability.
Exercise 1. Match the sentence beginnings (1-5) with the correct endings (a-e). The sentences all contain expressions from points 1 and 2.
1. The Canadian government decided to sell 45 per cent
2. UK Gold is a successful satellite channel
3. Russia's second biggest airline is trying to buy a stake
4. China signed an agreement to develop a regional jet, setting up a joint
5. Mr Sugar's majority holding in Amstrad
a. made him the UK's 15th richest person.
b. of the state airline to the public, and keep a 55 per cent majority stake.
c. in which the BBC has a minority interest.
d. in its US counterpart so they can work out a marketing alliance.
e. venture company in which it will have a 46 per cent stake, Airbus 39 per cent, and Singapore Technologies 15 per cent.
Exercise 2. Use expressions from point 3 to complete what this journalist says about conglomerates.
A company that has (1) d................... may decide to limit its activities by selling those (2) s................... that do not fit in with its overall strategy. The board of the (3) p................... c................... may talk about (4) d................... and (5) r.................... and getting out of particular businesses.
In this case, the group (6) d................... o................... its (7) n.................... c................... a................... and uses the money to invest in and concentrate on its (8) c................... activities.
Exercise 3. Choose the best word from the brackets ( ) to fill the gap in each sentence.
1. I have a 20% ............................. in a small printing company. (invest/interest/input)
2. Charles Wilson now has a majority ............................. in Alicom PLC. (hold/holder/holding)
3. ProSports and Fit Folk gave details of their new joint............................. . (venture/account/combine)
4. Kola-Co has made a ............................. bid of 21p per share. (kind/friendly/gentle)
5. Buying out the contracts of senior executives will be a poison ............................. for any predator to swallow. (medicine/tablet/pill)
6. Eastern Water proved to be our white ............................. saving us from collapse. (angel/knight/saint)
7. Their ............................. company is a multinational based in New York. (parent/father/family)
8. We started as a music company but we ............................. into television.
(diversified/diverted/differed)
9. We do many things but our ............................. activity is publishing. (concern/centre/core)
Exercise 4. For each sentence, find one word to replace the underlined phrase. Write the word at the end of the sentence. The first two letters have been given to help you.
1. The problem is that the company is not concentrating on a few important things.
un _ _ _ _ _ _ _
2. Robert Bateson now has a bigger than 50% stake in English Petroleum. ma_ _ _ _ _ _
3. I think that selling off non-core assets is necessary to save the company. di_ _ _ _ _ _ _ _
4. Europe Airways has formed an arrangement to work together with Alpha Airlines.
al_ _ _ _ _ _
5. Global Electric's latest company that it has bought is Cambridge Electra. ac_ _ _ _ _ _ _ _ _
6. At the moment, we just make shoes but we want to start doing business in other areas.
di_ _ _ _ _ _ _
1