The initial valuation report was prepared by ‘professional’ valuation experts hired by the company (Embassy and IB). What did the valuers do? They just put a stamp on the report prepared by the company i.e. they relied on the valuation number shared with them by the company instead of doing their job properly and doing the valuation themselves thoroughly. That would have (maybe) worked had both companies been private, but its not so easy when one of the parties is listed (IBREL in this case). Also, the IT dept seems to be have been tipped off. Once IT dept gets involved, it doesnt matter whether the amalgamating companies are private or public.
From the proceedings in the court, it is obvious that proper valuation wasnt done. The whole swap ratio seems to be based on the ‘calculations’ done by the two managements. Obviously, the ratio wasnt in favour of the shareholders of IBREL. Neither Management would do a deal which will leave them at loss, so they have many avenues to be compensated by the other party (outside this deal), the only sufferers are minority shareholders. Had due process been followed, this case wouldnt have prolonged for so long and the court wouldn’t have required to hire an amicus curriae. The original valuers took so long to submit affidavits which the court had asked them to submit because (your guess is as good as mine), they knew what shoddy work they did. Hence, the court had no option but to hire an independent valuer.
We retail shareholders are so deep in the hole now that even after fully knowing that the swap ratio was not justified (IB has net zero debt with huge landbank, Nam Estate has huge debt with assets whose worth is unclear. They just dangled a carrot of the ‘potential’ to develop millions sqft of commercial RE), most of us still hope that court approves the merger process, just so that the overhang of the court case clears and we again hope that we may see some appreciation of the severely battered stock.
Disc: Invested. Very very expensive lesson learnt.
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