Wednesday, April 17, 2013

Odd Investment Risks

2 Posts - here and here.
They talk about a set of businesses sold by one Clariant AG - a reputable name in the global chemicals business. One of the businesses was held by an Indian listed company which is some 63% owned by the parent company mentioned above.

Now, these (global) businesses were sold as they rightfully can be, but the Indian business was only 63% owned - the rest owned by public shareholders or institutions.
So, apparently, the global operations were sold for a 0.45x to sales multiple (whatever that means) and the Indian ops for 0.6x; now, the Indian shareholders are not happy because they have not been told about the operations and numbers of the Indian business.

My thought is:
Normally, a board can get together and say that they are OK with selling off a particular business of a company. On certain occasions, it may go for a vote - if it does, a large shareholder usually holds sway. So, is a minority shareholder always going to be open to be mishandled :|?

It's similar to how Kraft sold a frozen pizza business for a bad valuation in a tax-disadvantaged manner when it wanted to pursue its acquisition/ merger of/ with Cadbury - Buffett didn't like it (as a Kraft shareholder), but there was precious little he could do. 

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