RE: Hostile takeover29 Nov 2018 06:03
twohits, you obviously didn't hear him say that some of the cash pile may have to be used to defend a hostile approach. Those were his words, not mine.
Additionally, you have mis-understood the free-float argument and what a hostile approach seeks to achieve. The task of a hostile bidder is to persuade shareholders that their offer is the most attractive way of achieving shareholder value and in our case, this would come down to price. If someone made an offer, albeit one that management initially rebuffed (in other words, NM considered it undervalued the business), they may decide to go hostile. From NM's point of view it would all be about negotiating the price higher and he may consider making someone go hostile, rather than trying to negotiate a deal in private, would be the best way to get someone to pay more. (the process becomes much more of an auction, particularly as other bidders will likely emerge) This is a standard corporate finance technique.
As far as the shareholders are concerned, if NM can get what he regards as a good price and one that he eventually recommends, apart from Newcrest and BHP, who wouldn't sell? And bear in mind, they can't block a deal.
So, to conclude, NM may well regard the best way to achieve maximum value is to force a hostile bid from an as yet unknown party, in order to get BHP/NWC to play their best cards. This may explain why he mentioned the fact that some of the cash may be needed for this purpose.
To repeat myself; in 40 years of being involved in corporate finance, acting as a CEO and company chairman, never once have I heard a CEO say in public that he may need cash to defend against a hostile bid that is, as yet, not in the public domain. It could be that it was a slip of the tongue, but such slips often mean it's on someones mind and no more than that. Alternatively, he was using the opportunity to mark someones card. Who knows?
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