I wonder why the transcript isn’t out yet. It was a thoroughly disappointing call on the part of the management. They kept on justifying that MEBL’s valuation was done by an independent valuer so they just took it.
The issue is. If this was a merger between two unrelated parties (separate promoters), nobody would just agree to an “independent” value and arrive at a swap ratio just like that. They would obviously use their brains to figure if it’s a good deal or not.
With valuing MEBL at a 30% premium to AABL, they’ve conveniently increased their rewards. Their holding goes up, they get free cash when they have to bring it down to 75%, the minority shareholders end up losing representation as well as possible loss in value. It’s a blow in the face of minority shareholders. I don’t remember any other time where I have come across such outright rejection of stakeholders.
Irony is that promoters have been taking out a high percentage of money off AABL, kept on supporting MEBL at the expense of AABL (erstwhile Corporate Guarantees), and now they inflate MEBL’s value on hope that the future is bright.
The book values of both the companies are starkly in contrast! And if a 15% grower with 25% ROCEs and a high EBITDA to FCF (AABL) is at such a discount, then MEBL should be one of the best businesses ever. (sigh)
I have put my concerns during the call as well. Have asked for past 4-5 years of data. I’m sure that again will be of no help. They’ve honestly lost credibility. Earlier incidences were already off-putting but this time around they’ve handsomely outdone themselves.
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