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Breakingviews: Sparkling M&A

Wednesday, Feb 19, 2014 - 03:09

Feb. 19 - Antony Currie and Breakingviews editors discuss how jewelry retailer Signet’s takeover of rival Zale shows that basic corporate finance math really does work.

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So this week we finally have some and -- deals that look simple and easy everyone seems to be having some funding and to date we have. A couple of good jewels and get it Jeff you're looking at this. The sales getting involved in the mix -- Cecil -- that have a great deal for everyone well. I mean you certainly in the markets insulate your Signet which sells all -- diamonds and brings in malls and stuff like that buying one of its competitors fail. Paying a 41% premium so that's good for this sellers. But the buyer stock also went up 17%. Why is that because a lot of cost savings during the deal so when he crosses the fact it covers the cost of all the equity that the IL. So market loved that and we've seen more and more of this over the last year. Where excellent yes clinic it is a -- attacks -- -- -- in this this found -- that activists involved but again the stock went up -- on both sides it it feels great it's not been everything we've been seeing -- -- as elegant in its ability this is just this. Puts paid to. The argument you heard during the boom years emanate from about some bankers all the time when there at the acquiring company would get. Pummeled in the stock market the data do the so well it's just lose you know well it's just this. Markets in the is but basically the deals maps didn't stack up. And what you're seeing now is because I think there has in this certain risk aversion by companies -- -- why haven't seen from years and the bank. Is they're doing deals and actually do you make sense their overlapping cost structures. There they're finding actual synergies are like you know promised. You know coughs or I don't revenues and -- don't risks that are shareholders tornados and write them. I mean it's getting a little closer the regulatory problem which is any trust Mecca you know because they are overlapping but. And we would -- that in at least one of the deals Joseph bank. Men's warehouse where there's going to be a second review 2000 medalist -- deal on this one on the jury -- Eagle -- should have been it should have been a clean one again it's much like the Signet -- deal it's too obvious competitors. Undoubtedly big cost savings of the hill so it made it should have been simple instead one of you know one of the targets what often. Try to poison thing by buying its own stock in buying another company and and now it's all kind of partnership yeah. This is all showing big corporate finance theory does is more than theory does seem to work investors do seem to believe in. In certain amount of it which is you know you -- reduce cost that creates more efficiency that creates more eBay dot. We value that he'd been done such a way that both shareholders. Take part that I mean that's sort of what was lacking a bit Comcast deal for example Comcast buying. Time Warner Cable. Where the stock -- -- -- -- down but maybe 6% or something like that and I was even given a little boost because a big buyback it announced over the numbers and stack up quite the same way that they do in this in this and the effectiveness of this transaction was the market react to it. Only makes that kind of deal look. All forms yeah so about it and I won Iowa machines to be working for them. He's been at least deals. Well guys thanks so much will be back -- will breaking --

Breakingviews: Sparkling M&A

Wednesday, Feb 19, 2014 - 03:09

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