Chapter 615 Debt-to-Equity Swap

Although Barron's relationship with the Hearst sisters is extraordinary, but now that it involves business matters... he will definitely not say that he will give up the acquisition of Huache Group because of this.

After all, take the world-famous fashion magazine "ELLE" owned by Huaxie Group as an example. It has 43 editions around the world (branches in various countries or regions, such as "ELLE China Edition"), and is known as the Huaxie Group. The crown jewel.

In addition, "Psychologies" magazine also has 12 editions.

Barron itself owns the fashion luxury goods group Gucci-Hermès Group. If it also owns an influential fashion magazine, it will be very beneficial for brand promotion and marketing.

Therefore, SEM Group will also actively participate in competition.

Speaking of Gucci-Hermès Group, due to the impact of the subprime mortgage crisis, the revenue of its brands has also declined.

However, under Barron's instruction, they had already begun to focus on developing Asia, especially the Chinese market, at an early stage. The revenue growth of Gucci-Hermès brands in China was at the forefront of all luxury brands.

Therefore, the growth in China has made up for a considerable part of the declining revenue in the European and American markets. On the whole, the performance of Gucci-Hermès Group this year is still satisfactory.

And the Gucci-Hermès Group itself is not a listed company - they have completed the privatization of Hermès, so they do not have to worry about the impact of the global economic downturn on the group's stock price.

For example, LVMH and Li Feng Group, which are also luxury goods groups, have seen their stock prices fall by more than 25-35% compared to last year's highs!

Private companies and listed companies still have their own advantages and disadvantages. Listed companies need to be responsible to investors, and the performance of stock prices will also put considerable pressure on management. This has also led to some of its measures to boost stock prices, which may not be beneficial to the company. long-term development is beneficial.

This is actually somewhat similar to the electoral system in the West - those professional managers have term limits. From the perspective of their private interests, it is natural to make the company they manage "prosperous" during their term and gain more benefits. Lots of bonuses and equity incentives.

As for the long-term interests of the company? A term of several years, why should we consider things that last ten or twenty years?

How many people can tolerate a decline in business during their tenure for the sake of long-term interests, and may even be fired because of it... and then let their successors enjoy the long-term dividends?

Of course, the reason why most multinational companies are listed companies is because at that scale, this is still the safest non-family management method of operation after weighing the balance.

You can't avoid all risk possibilities, you can only choose the ones that are safer in comparison - this in itself is the risk aversion of a company after it reaches a certain scale.

Small companies and start-ups can take risks, but large companies need stability.

…

In mid-September, the Federal Reserve Board of the United States and the European Commission successively approved Standard Chartered Bank's acquisition of Merrill Lynch Group.

This also means that the merger between the two parties will officially enter the substantive stage.

Davis, the former president of Standard Chartered Bank, will serve as president of Standard Chartered-Merrill Lynch Group, and his deputy Paul Spint will be promoted to CEO of Standard Chartered Bank - he will manage the merger of Northen Rock Bank, Merrill Lynch Industrial Bank and India Bank. Branches of Demac Bank and Standard Chartered Bank after depository operations.

In addition, due to the resignation of his predecessor, Thain, the former chairman and CEO of Merrill Lynch Group who just took over this year, will serve as chairman of the Securities and Wealth Management Department of Standard Chartered-Merrill Lynch Group.

It is also worth mentioning that because the stock price of Standard Chartered Bank fell during this period - from US$25 per share to less than US$20 per share, the total purchase price of Merrill Lynch Group also dropped a lot accordingly.

After all, a large part of this acquisition of Merrill Lynch was carried out through stock swaps.

The majority of the US$25 billion in cash was directly injected into Merrill Lynch to repay part of its debt and alleviate their lack of liquidity.

However, what is interesting is that after Standard Chartered Bank’s acquisition of Merrill Lynch Group was approved by relevant regulatory agencies in the United States and the European Union, Standard Chartered Bank’s share price fell by nearly 5% that day…

The main reason is that there are many voices in the market who believe that Merrill Lynch Group's "holes" need to be filled by Standard Chartered Bank. In addition, Northrock Bank, which they previously acquired, is also in a mess.

Under current market conditions, it may drag down Standard Chartered Bank's performance.

Then when Standard Chartered-Merrill Lynch announced that they would also pay £1.5 billion in bond interest to the Cavendish Trust before the end of September, their share prices fell by more than 3% again...

Because last year, when Standard Chartered Bank acquired Northrock Bank, according to the agreement, it needed to return a loan of 250 pounds and interest to the British government...

At that time, the Cavendish Trust helped Standard Chartered Bank repay the loan by purchasing 25 billion pounds of convertible bonds from Standard Chartered Bank.

But this 25 billion pound convertible bond has a stipulated annual interest rate of 6%, which means that Standard Chartered Bank needs to pay US$1.5 billion in interest to the Cavendish Trust Fund every year. It is now enough since the original issuance of this bond. After one full year, Standard Chartered Bank needs to pay before the end of September.

In the current market environment, although Standard Chartered Bank was not greatly affected by the subprime mortgage crisis, the stock market, especially bank stocks, was in a state of decline, and their stock prices had already fallen by more than 20% compared to last year's high point before this - this is a relatively small decline among bank stocks.

Now that they have to bear such heavy financing interest, it is no wonder that Standard Chartered Merrill Lynch's stock price will fall again.

Under such circumstances, when the Cavendish Trust Fund proposed to convert their 25 billion pounds of convertible bonds and 1.5 billion pounds of interest, a total of 26.5 billion pounds, into the common stock of Standard Chartered Merrill Lynch at a price of 9.72 pounds (equivalent to 17.5 US dollars) per share, it immediately obtained the approval of the Standard Chartered Merrill Lynch Board of Directors.

In addition, the 25 billion US dollars of convertible bonds purchased by BFT Fund from Standard Chartered Bank when it acquired Merrill Lynch will also be converted into the common stock of Standard Chartered Merrill Lynch at this price.

Such a proposal, although the conversion price (US$17.5) is slightly lower than the current share price of Standard Chartered Merrill Lynch, but at least after converting these "debts" into Standard Chartered Merrill Lynch shares, the high interest that needs to be paid every year can be avoided - to be honest, the interest on these convertible bonds is 6% per year, which is not high, but the scale of the debt they bear is high, so the corresponding amount to be paid is very high.