Questions on reverse-takeovers (Big private company takes over asmall public one)


2

2.7182818284590...

Suppose that Bose Corporation, which is a privately owned corporation
in Boston, buys out a small publicly traded company, called ABC Inc.,
with $50M in revenues. The market cap of ABC is $75M, and Bose bought
out 50% of the shares, let's say for this example.

1. Does this transaction improve the hell out of ABC's balance or
income sheet? Now, their equity is MUCH higher since it's now
amalgamated/comingled with that of the parent company, i.e. Bose
Corporation.

2. If Bose bought 100% of the shares, then would ABC still be
considered public when all the shares are owned by one entity?

3. Would the share price of ABC be a reflection of investor's
perception of Bose?

4. Would Bose purchase out a company like this simply for access to
capital markets and to raise money very quickly without the headaches
of going public? Another words, instead of IPO'ing with all its costs,
they can purchase a small public company and issue shares just the
same.

Thanks guys.
 
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L

Lubow

2.7182818284590... said:
Suppose that Bose Corporation, which is a privately owned corporation
in Boston, buys out a small publicly traded company, called ABC Inc.,
with $50M in revenues. The market cap of ABC is $75M, and Bose bought
out 50% of the shares, let's say for this example.

1. Does this transaction improve the hell out of ABC's balance or
income sheet? Now, their equity is MUCH higher since it's now
amalgamated/comingled with that of the parent company, i.e. Bose
Corporation.
It would improve the stock price because there is a demand for the stock.
2. If Bose bought 100% of the shares, then would ABC still be
considered public when all the shares are owned by one entity?
OMG. If the public has no stock is it publicly owned?

I quit. Read a fuckin' book.
 
R

Rod Speed

2.7182818284590... wrote
Suppose that Bose Corporation, which is a privately owned corporation
in Boston, buys out a small publicly traded company, called ABC Inc.,
with $50M in revenues. The market cap of ABC is $75M, and Bose
bought out 50% of the shares, let's say for this example.
Thats not buying out, with just 50% of the stock.

Many jurisdictions require that an operation that owns more than
much less than 50% make a takeover offer for the rest too.
1. Does this transaction improve the hell out of ABC's balance or income sheet?
Nope. It makes no difference to that if thats all that happens.

In practice no operation just buys 50% of another operation and
doesnt plan to do anything more than that unless its a pure investment
operation and even then, they dont normally buy 50% unless they want
to have control and that why they own half of the stock.
Now, their equity is MUCH higher since it's now amalgamated/
comingled with that of the parent company, i.e. Bose Corporation.
That doesnt happen with just 50% of the stock.
2. If Bose bought 100% of the shares,
That isnt usually possible. You cant ever get all of the shares just
buy buying them on the market, there will usually be some stockholders
that arent even aware that you want to buy the lot, so they wont be
selling them on the market.

You can make a takeover offer, and in most jurisdictions, if you get over
a specified percentage of the stock holders happy to sell you their stock
as a result of the takeover offer, you can normally compulsorily aquire the
rest for the same price as was offered in the takeover offer.
then would ABC still be considered public when all the shares are owned by one entity?
No it wouldn not. It would be delisted as a result of the takeover offer.

If they just buy what they can get on the market and then deliberately
make an unattractiv e takeover offer for the rest because legally
required to do that, and because its an unattractive offer, no one else
takes up the offer, THEN it would remain a publicly listed stock that just
happens to have the bulk of the stock owned by one major shareholder.
3. Would the share price of ABC be a reflection of investor's perception of Bose?
Nope, it mostly reflects what is expected takeover offer wise by Bose,
and from others if there is an expectation that some other operation
other than Bose might consider a counter takeover offer for ABC.

If it becomes clear that Bose isnt going to make a takeover
offer that might see enough of the ABC shareholders accept
that offer so the rest can be compulsorily aquired because
enough did accept the Bose offer, the price of the ABC
stock would normally fall when that becomes clear.

Essentially Bose sets the price of the ABC stock in that situation.
4. Would Bose purchase out a company like this simply for access to capital
markets and to raise money very quickly without the headaches of going public?
In fact nothing like that would happen. Bose would need access to capital
markets to raise the $100M or close it would require to acquire 100% of
ABC and just wanting to take over ABC wouldnt neccessarily raise money
very quickly and it would have to be spent on aquiring ABC anyway if they did.
Another words, instead of IPO'ing with all its costs, they can
purchase a small public company and issue shares just the same.
Yes, that is one route to publicly listing.
Thanks guys.
There are only us animals in here.
 
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R

Robert Cohen

This is how I may react to news items, buyouts, mergers, rumors,
unusual market activity

sometimes I try to go to the newspaper(s) in the city of a company,
run a search

Because the local media tend to do a story in non legalistic, non-
esoteric words

Of course the writer(s) can get a story with wrong emphasis about
complex financial nuanced situation,
while a mass media story by itself has at least some dynamic impact,
whether or not if it's exactly true

As a minor stockholder w/o contact in the company(ies) involved, ...
make a guess and beat up
self when guessing wrong

of course depending upon amount or value of shares, go to the town and
snoop, pick up gossip
at a dinner or motel, see if there is action at the loading dock,
visit chamber of commerce, and hang around bank
and spend rest of day being questioned by police
 

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