Corporate Actions

What Does Sainsbury’s and Asda £10bn Merger Mean for Shareholders?

Sainsburys and Asda mergerSainsbury’s and Asda have announced plans to merge!

Sainsbury’s and Asda are the UK’s second and third biggest supermarkets and if the merger goes ahead, it will be one of the biggest the UK has ever seen, valued at around £10 billion.

J Sainsbury and Wal-Mart, who own the Asda brand, are in advanced discussions to combine the two stores. The result will be automatic promotion to the top of the UK supermarket league, knocking Tesco off the number one spot.

If this merger goes ahead it will impact the entire UK retail sector. We are expecting a full announcement on Monday 30 April, although it’s possible that they will have to disclose their intentions before trading starts on Monday.

No details of how the merger will be structured, so shareholders of Sainsbury do not know if they will lose their shares or not at the moment.

It is possible that the Competition and Markets Authority will overrule any decision.

Sainsbury has recently taken in Argos, and Tesco tookover Booker this year. The retail industry is in a state of change at the moment, as the traditional supermarkets continue to evolve to compete with the growth of online stores, such as Amazon Pantry, and the rise of budget supermarkets, such as Lidl and Aldi.

Sky News suggested that a Wal-Mart source says the reason for the merger is to lower prices – this suggests to compete with the budget chains.

More on this soon.


Dixons and Carphone Warehouse merger = Dixons Carphone

Dixons Carphone

Dixons and Carphone Warehouse are merging to form Dixons Carphone (not the new logo)

Once there was Dixons, Currys, Comet, Carphone Warehouse and PC World. Slowly Dixons took over them all, and the latest merger talks are concerning the merging of Dixons and Carphone Warehouse  to create Dixons Carphone.

With electrical retail outlets becoming larger and fewer, more sales online and mobile phones being free of cars, I cannot help wondering why the new company is not called Dixons Warehouse.

There are over 500 Currys and PC World shops in the UK and Ireland and over 2,000 Carphone Warehouse shops across Europe. Carphone Warehouse was one of the first mobile phone shops to hit the high street – they arrived at a time when many people still felt that phones in cars was just a gimmick and mobile phones would never become popular.

Sebastian James – Dixons CEO

Sebastian James revealed the merger plans when he updates shareholders with Dixon’s trading performance for the past year.

Dixons has seen an increase in sales of around three per cent. This is in addition to the opening of new stores. Dixons profits are well within market expectations for the year and might even exceed them slightly.

Sebastian James’s Announcement

“Today we also announce that we are setting out on a new journey with Carphone Warehouse and it is good to be in such a strong position as we embark on this adventure.

“The ability to take what we have built in electrical retailing and add the profound expertise of Carphone Warehouse in connectivity would make us a leading force in retailing for a connected world.

“Together we can create a seamless experience for our customers that will enable technology to deliver what it promises – that is, to make their lives better.”


Dixons sells handsets and Carphone Warehouse mostly manages the deals with the mobile networks. The merger will give customers an easier way to buy the phone they want with the best deal for their needs.

More jobs for Carphone Warehouse

It is not often the mergers result in more jobs, but Carphone Warehouse has said that there would be   “significant job creation” with an increase in staff of about four per cent.

Fewer jobs for Dixons

Dixons, on the other hand, expects to lose some jobs, maybe around two per cent of the work force.

Share prices

Today’s share prices:

  • Dixons Retail PLC(LON:DXNS): 47.95 p down -2.95 (-5.80%) at 11:57AM BST on 15th May 2014
  • Carphone Warehouse Group PLC314.50 pm down -13.30 (-4.06%)

The news of the merger has resulted in a fall in share prices this morning, The news does not seem to be impressing shareholders and fund managers.

The merger deal is valued at around £3.8 billion.

Learn more:

Full Year and Q4 Trading Statement 2014, 15 May 2014: DIXONS RETAIL PLC Another excellent year. Merger with Carphone Warehouse GROUP plc announced

Penguin and Random House Merger

Penguin and Random House have announced merger plans. A successful merger will make the new company the largest book publisher in the world. Board members feel that this is a necessary step to take to allow them to compete with the mighty Amazon.

The merger of Penguin and Random House will mean that they will control around 27% of the paper book market. As well as dominating the book market, Amazon also dominate the electronic book market. it is thought that am aggressive move into digital publishing will be announced by the new Penguin / Random House company in the near future.

Both companies are of a similar age and size. Penguin was founded in 1935 in London, Random House in 1925 in New York. They both have 15 offices. Penguin employs fewer people, with 3500 staff compared to Random House’s 5300. Penguin sells around 110 million books a year with a revenue of £1 billion, whereas Random House sells around 400 million books a year (some of which are audio and digital books) with a revenue of £1.5 billion (2011 figures).

Merger Approval

Penguin is owned by parent company Pearson, and Random House is owned by parent company Bertelsmann. Both companies are confident that regulators will approve the merger plans. Pearson will have to demerge some parts of its business to ensure that the merger can take place.

Both companies are hoping that the merger will be approved by the third quarter in 2013.

Reduced Costs

Both companies should see a significant reduction in costs following the merger, however, this is expected to also mean some job losses.

Penguin and Random House have an excellent portfolio and long history. Random House has recently experienced an upturn following the racy Fifty Shades of Grey books and Penguin continues to produce some very popular books, such as the Jamie Oliver cooking books.

Both houses will continue to publish under their original imprints. Penguin publishes some of its books under the name of Michael Joseph, while Random House publishes some books under the name Virago. These brands will remain.

Penguin Random House

The Penguin Random House HQ will be in New York with a major office in London. Both companies currently have 15 offices around the world. Many of these offices reside in the same cities and mergers of resources and staff is expected in these locations.

Company Information and Resources

 Stock Prices and Shareholder News

BSkyB Share Buy-back

BSkyB are planning to buy-back £750 million of their own shares to help protect themselves from a hostile takeover bid. The move will also make it clear to shareholders that they do not plan to be taken over any time soon.

BSkyB has reported good financial results this year with an increase in revenues of 16% to a total of £6.6 billion. Their cash flow has also increased considerably with £869 million sitting in the bank. So a share buy back is the most sensible course of action in the current circumstances.

Some investors actually wanted to see BSkyB claw back more of their shares though, but SSkyB’s CEO said that they wanted to keep a healthy cash flow for any future investments.

At the moment the big news at Sky is the partnership with the BBC to share some of the F1 Grand Prix coverage. The partnership is running from 2012 to 2018 and it will see half of all the grand prix’s aired on the BBC. Sky will be showing them all on its own Sports channels.

HD (high definition) is boosting Sky’s coffers, with many people paying out an additional £10 each month for the right to view HD TV. With 10.3 million customers this alone has the potential to add £1.2 billion to its annual revenue. Currently there are around 3.87 million Sky+HD customers who are paying a premium fo the right to record Sky and watch in HD. However, overall there has actually been a small drop in average revenues per customer of around £5.

With the growing interest in FreeSat, which offers free HD television and free recording, pausing of live TV and series linking (i.e. everything which Sky offers) plus access to BBC iPlayer via the set top boxes, it is a surprise that Sky continues to grow its customer base.

Also on the horizon is the long awaited Google TV which will revolutionise the way we watch television. At the moment the battle is between  satellite and cable services, but soon superfast broadband will be streaming films first to screens in high definition. If you are planning to invest in Sky in the long term then it is important to consider the new technologies and services which are growing rapidly.

Good news for shareholders this year though as the board agreed to raise the dividend by 20% to 23.2 pence.


PNC Financial Takeover RBC – Huge Banking Takeover for 2011

Big news today, PNC Financial Services Group Inc are making a bid for RBC (Royal Bank of Canada).

PNC is the 6th largest bank in America and has made an offer to pay a total of $3.62 billion in cash and stock for the Royal Bank of Canada’s retail business.

PNC wishes to acquire RBC to help grow its retail banking business. Currently its main presence is centered in Florida and the neighbouring states whereas RBC has over 420 branches in 15 states in northern US states.

Many other Canadian banks are currently looking to expand into America so this move by RBC to invite a takeover by an American bank is an interesting decision to say the least. RBC has had some financial issues in the last few years and has suffered from too much real estate exposure during the sub-prime crisis.

PNC will be taken on a lot of debts from RBC. RBC Bank has made losses for each of the last 11 quarters.

PNC Takeover Terms

PNC takeover offer terms will be announced soon. The takeover is expected to be completed in the first quarter of 2012.


Rolls-Royce and Daimler Takeover Tognum

In case you had not already heard, Rolls-Royce and Daimler are taking over Tognum. On 6th June 58.35% of Tognum shareholders had accepted the offer from Daimler and Rolls-Royce.

Daimler and Rolls-Royce now control a total of 59.87% of Tognum through their joint venture called Engine Holding GmbH.

The final acceptance of shares is due to close on Monday 20th June and it is expected that sufficicent shares will be tendered to finalise the deal.

Terms of the Offer

Daimler and Rolls-Royce offered Tognum shareholders EUR26 per share tendered. Very soon after this offer the Supervisory and Management Boards of Tognum AG accepted the offer.

Tognum AG

Tognum is a Mechanical engineering company which controls several divisions of DaimlerChrysler and was originally set up by a private equity fund called EQT IV. Tognum has been trading on the Frankfurt exchange since 2007, however, EQT sold out its 22.3% stake to Daimler in 2008. Daimler had increased their shareholding in Tognum to 28% prior to the takeover bid.

Tognum’s CEO was very optimistic of the takeover, stating:

“Together with the two companies, we further strengthen our technological leadership in propulsion systems and distributed energy systems and develop our company into a platform for growth”

Engine Holding GmbH

Engine Holding is a joint venture by Daimler and Rolls-Royce. The acquisition of Tognum will allow Rolls-Royce to develop its marine and diesel power activities while Daimler is likely to focus on developing its relationship with its major clients who currently order modified Daimler diesel engines from Tognum for a variety of specialist roles.


Metallica Rights Issue

No, not the American heavy metal band, but the Australian resource and commodities company Metallica Minerals Ltd.

Metallica has announced plans for a rights issue to raise $4.9 million to develop is Tri-metal Project.

Metallica’s Tri-Metal Project operates in the Townsville area. Also it is running a Weipan zircon / rutile mineral sands project on the Cape York Peninsula in the Far North Queensland region.

This news has led to a rally in share price with a rise of 5.8% today to 36.5 cents.

Terms of the Metallica Rights Issue

For every 10 shares currently held shareholders may elect to take up 1 new share in Metallica Minerals and 2 shares in Planet Metals Ltd. at a cost of 42 cents. This represents a discount as Metallica was trading at close at 34.5 cents and Planet Metals is trading at 9.5 cents, so the combined cost to buy the 3 shares in the open market is 53.5 cents.

Who Are Metallica Minerals?

Minerals and commodities are in high demand at the moment which is why Metallica is keen to develop its projects. Metallica current specialise in extraction of these minerals:

  • Nickel-Cobalt
  • Coal Energy
  • Bauxite
  • Tungsten
  • Copper
  • Gold
  • Limestone

On the 3rd June 2011 it announced that it had positive tests from its recent surveys in the Tri-metal project zone.

Find out more about their operations on their website:


Resolution Share Buy Back Returns £500 Million

The insurance company, Resolution plc, is planning to return up to £500 million to shareholders by way of a share buyback (also called a share repurchase offer).

Companies perform share buybacks when they are cash rich and wish to reduce their cash balance. Buying back shares is a way to reward investors by offering a price exempt from trading fees (or much reduced fees) and also reducing the number of shares in the open market.

Resolution has over £1 billion on its books which comes from its Friends Provident and Axa UK Life assurance businesses. Resolution acquired with Friends Provident in 2007 which also gave it the Axa UK life assurance business.

£3 Billion Rights Issue

Resolution raised a huge amount of cash through a rights issue however early in 2011 it announced that it was going to cease its hunt for new businesses to acquire and focus on developing its current brand and services.

A share buy back is proof that Resolution are serious about consolidating their current stocks and working on developing their products now. They have grown quickly in recent years and now is a good time for them to invest internally and at the same time reduce the number of shares on the market which will reduce risk of hostile takeovers.

Fixed Price or Dutch Auction

There are several ways a company can buy back its own shares. Sometimes it will just fix a price and invite shareholders to tender.

If it wishes to restrict the number of shares / the amount of cash it has to pay it will most likely issues a Dutch Auction and invite shareholders to bid to tender their shares at a price within a fixed range. The company will then start tallying up the number of shares tendered from the lowest price upwards until it reaches the target cash figure.


Bank of Ireland Rights Issue

The Bank of Ireland has announced plans to carry out a rights issue to raise an estimated EUR4.35 capital. The rights issues is likely to be underwritten by the Irish government and represent a reasonable discount to market price.

Full details of the rights issue will not be announced until after an agreement has been made with the underwriters, who are the Minister for Finance and the NPRFC (National Pensions Reserve Fund Commission).

Bank of Ireland is also redeeming bonds by offering a cash or stock option. The more shareholders that elect for stock the lower the capital raising will need to be. So the rights issue is tied in with the “bondholder burden sharing” scheme and the Liability Management Exercise (“LME”) that they are also running.

Full details of the Capital Raising scheme can be found on their website:


Medion Takeover Offer By Lenovo

The first big tech stock corporate takeover in a while. News in that Lenovo who are the 4th largest computer manufacturer in the world, have made a takeover bid for Medion.

Medion is a German stock and Lenova is Chinese. Lenovo are looking to purchase 36.66% of Medion AG shares at EUR13 each from the founder Gerd Brachmann, who owns 55% of the stock. So shareholders will not be electing to tender their shares in this offer.

Lenovo build personal computers as well as commercial systems, workstations, servers and storage drives. They currently control around 10% of the world market in computer hardware. The Chinese state own about 27% of Lenovo through state shares in Legend Holdings Limited.

Medion produce a budget priced range of computers and electronics and markets most of its products through the Aldi supermarkets.

Takover of IBM’s PC Company Division

In 2005 Lenovo bought the IBM PC Company Division for $1.75 billion. This was its first and largest takeover to date. Earlier this year Lenovo made a partnership with Japan’s NEC to create a new company called Lenovo NEC Holdings B.V.

This is the first takeover offer on a German stock by a Chinese corporation and it will be interesting to see what shareholders make of it.

Lenovo’s CEO Yang Yuanqing has stated that he is looking for more takover opportunities to help grow his business further.