Financing capital: opportunities & threats government subsidies bank loans issuing bonds issuing shares  acquisitions: buyouts and takeovers (takeover bid vs. takeover raid)

Tue, February 17, 2009 Calgary oil company taken over by Brits CALGARY -- Debt-strapped Canadian oil company Bow Valley Energy Ltd. is being acquired by Britain's Dana Petroleum in a friendly deal valued at about $240 million.

Vocabulary to take over (v) = to _____ = to acquire a takeover ≈ a buyout a takeover (n) – the act of getting _______ of a company by buying over 50% of its _____ (Longman,BED) friendly takeover <> ______/________ takeover friendly deal<> ______/_________ deal a buyout – when a person/organization buys a business

Vocabulary to take over (v) = to buy = to acquire a takeover ≈ a buyout a takeover(n)– the act of getting control of a company by buying over 50% of its shares (Longman, BED) friendly takeover <> hostile/unfriendly takeover friendly deal<> hostile/unfriendly deal – unsolicited /hostile bids a buyout – when a person or organization buys a business (Longman, BED) a merger – an occasion when two or more companies join together to form a larger company (Longman, BED)

Broadcom mounts hostile bid for Emulex Chewing up poison pill 21st April 2009 Chip designer Broadcom has launched a $764m unsolicited bid for network adapter and array switch vendor Emulex. Broadcom first approached Emulex late last year, it has emerged, but Emulex broke these off and adopted a poison pill defense to thwart any unwanted bid. Broadcom has now gone public with its desire for the firm, setting the scene for a bruising takeover battle.

Vocabulary to bid (v irregular: bid, bid) –to offer to pay a particular price for sth. The company is bidding 910p a share for control of AB Ports...The bidder is interested in... a bid (n) –a price offered to buy sth. such as goods, property, shares, bonds (Longman BED) Takeover bids: - unwanted / unsolicited / hostile<>friendly bid

It’s a shark eat shark world - shark - shark repellent - shark watcher - poison pill defense poison pill = shark repellent a raid – an occasion when someone suddenly buys a lot of shares in a company corporate r__________ (Reader I, Entrepreneurship?)

Vocabulary cont.: Match! launch thwart mount adopt a $764m bid a poisonous pill defence a hostile bid any unwanted bid

Can you simplify the language? mount / launch a bid ≈ make /start a bid adopt a defence ≈ use a defence thwart a bid ≈ frustrate / hinder a bid

Letter from Broadcom CEO Scott McGregor to Emulex executive chairman Paul Folino: "As you know, we have believed for some time that a combination of our two companies would benefit both companies’ shareholders and the customers we serve. With that 1 strategic opportunity to meet the needs of the market in mind, we sought to engage you and your Board of Directors in discussions in late December regarding a potential combination of Emulex with Broadcom.“ 1 What does it refer to?

Continued: "We were disappointed when, in early January, you responded that the company 2 was not for sale and abruptly cut off the possibility 3 of further discussions. Even more troubling was the fact that merely one week after that communication 4, you took actions clearly designed to thwart the ability of your shareholders to receive a premium for their shares. These included adopting a “poison- pill” and amending your bylaws. 2 What company? 3 Who cut off the possibility of discussions? 4 What communication?

Continued: "It is difficult for us to understand why Emulex’s Board of Directors has not been open to consideration of a combination of our respective companies. We would much prefer to have engaged in mutual and constructive discussions with you. However this opportunity 5 is in our view so compelling we now feel we must share our proposal 6 publicly with your shareholders.“ 5 What opportunity? 6 What is their proposal?

Mergers and acquisitions Success Money Investments in R&D Acquisition of other companies (t__________, b_______) Merger - integration: Comp. in unr___ed fields Conglomerates Competitors = horizontal m/i ver Distributors = forward m/i LBO ti Suppliers = backward m/i cal stripped of assets & split up a_________ financed by debt a financed by debt

Mergers and acquisitions Success Money Investments in R&D Acquisition of other companies (takeovers, buyouts) Merger - integration: Comp. in unrelated fields Conglomerates Competitors = horizontal m/i ver Distributors = forward m/i LBO ti Suppliers = backward m/i cal stripped of assets & split up acquisitions financed by debt

MK U 19 Takeovers, mergers and buyouts 1c – read and decide 1 B 2 A 3 B 4 B 5 B 6 A 7 C 8 B 9 A10 C11 A12 C 13 A or B14 A15 B Hw. Make structured notes: - arguments for vs. against mergers or takeovers -advantages of a raid compared to a takeover bid

Buyouts 2a Reading –underline (notes) the arguments in favour of LBOs many companies + insufficient synergy = assets worth more than comp. market v. stockholder value not maximized central management a hindrance splitting up and reselling at a profit asset-stripping – highly lucrative little risk–debts guaranteed by comp.’s assets: esp. cash reserves and successful subsidiaries threat of takeovers – motivates managers

What is missing? ~ between ~talks ~ proposal ~ agreement conglomerate ~ defensive ~ friendly ~ horizontal ~ vertical ~

What is missing? MERGER a merger between similar banks but to merge with a similar bank merger talks merger proposaln. + n. merger agreement merger ≈ integration conglomerate merger defensive merger friendly merger adj. + n. horizontal merger / integration vertical merger / integration

What is missing? friendly ~ hostile/unfriendly ~ leveraged ~ creeping ~ ~battle ~bid What is missing? employee/staff ~ management ~ leveraged ~

What is missing? TAKEOVER friendly takeover hostile/unfriendly takeover leveraged takeover creeping takeover takeover battle takeover bid What is missing? BUYOUT employee/staff buyout management buyout (MBO) leveraged buyout (LBO)

2c Writing, MK p 117 Read the text and use one of the three connectors to fill the gap. 1 for example2 Furthermore 3 Yet4 in other words 5 on the contrary6 Moreover 7 for instance8 Even though 9 i.e.10 however 11 Nevertheless12 Although 13 because14 Consequently