On January 27, shareholders of Royal Dutch Shell will vote on the company's plan to buy BG Group PLC (the upstream remnant of Margret Thatcher's privatized British Gas).
If you are a merger arbitrageur, you are praying that the RDS shareholders will shoot themselves and vote yes, as the deal spread is very wide.
If you are a shareholder in RDS and have carefully studied the assets, forward prices, and assumptions, you have concluded that this deal is likely to be remembered among the largest destructions of shareholder value in the history of the world. I reached this conclusion several weeks ago. Today, Standard Life, RDS' 11th largest shareholder concluded the same thing and said they will vote "no."
Perhaps if you are the analyst at Institutional Shareholder Services (ISS) who recommended that shareholders vote in favor of the deal, you might be assured of a future job at Goldman Sachs, JP Morgan or Rothschilds after the deal closes — as the investment banking success fees will likely be extraordinary.
But — where are the activists? They can easily and rightly point out that there are numerous other assets around the world that RDS can buy at much better prices ; with a better risk/reward…
THIS DEAL IS EERILY REMINISCENT OF BANK OF AMERICA'S KEN LEWIS BUYING MERRILL LYNCH DURING THE FINANCIAL CRISIS OF 2008. The day that this RDS deal closes, billions of RDS equity will be destroyed.
Are we witnessing the downside of billions of dollars of passive index money blindly following the ISS pied piper over a cliff?
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