The business world’s obsession with private equity firms is compulsive - akin to a 16-year-old’s first infatuation. The seduction of the mysterious or the unknown, depending on how you look at it, is irresistible.
Such is the case with David Jones’s mysterious suitor EB Private Equity, the little-known UK private equity firm, whose website boasts credentials in commercial real estate investment. Corporate buzzwords such as mezzanine and structured finance and joint ventures fill its pages with hopes of new money to be made.
And new money has indeed been thrown at David Jones to the tune of $1.65 billion, about $3.12 per share. Last Friday, David Jones announced to the market EB had approached them with a bid to buy its business. The market reacted to the news with a near 20 percent rise in David Jones’s share price bringing the price to a three month high.
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The markets are melting down again. The ASX 200 fell $33 billion, or around 3 per cent yesterday, on the back of more European scares. As you’d imagine, people like CommSec Chief Economist Craig James were rather busy yesterday. But we managed to grab him for a few quick questions.
What’s the best case scenario?
The best case scenario is that the Italian Government comes out with concrete proposals to address its budget situation. Another positive proposition would be instead of calling elections for early next year the Government or the Prime Minister simply resigns and a new government is formed. So anything that would provide a degree of confidence to the markets – at the moment we’ve got nothing.
And the worst case scenario?
It could be anything. It could be countries deciding to exit the Eurozone. It could be continued silence from the Italian officials on dealing with the situation. One of the worst case scenarios could be a country actually physically defaulting on its obligations. So there’s a whole range of negatives out there. There’s no one specific bad scenario; there are a number.
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Well, well, some politicians never cease to amaze us. Just when you thought all was lost with competition law and practice in this country, we have Wayne Swan standing up last week for a more competitive market place by prohibiting the acquisition of ASX Limited (ASX) by Singapore Exchange Limited (SGX).
That was very good decision and needs to be applauded. Now ,Swan has let the side down in the past by allowing bank mergers to go ahead - thereby destroying competition in the banking sector. But on the ASX and SGX deal he certainly did the right thing.
Of course, big end of town interests and their advisers and other supporters will criticise Swan, but such criticism needs to be dismissed for the simple reason that those big end of town supporters have an obvious vested interest in more mergers and acquisitions.
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On Wednesday Bob Brown said two odd things that either proved he is some kind of political genius, or was the kind of rhetoric that sets the Greens up for a big fall in the future. My guess is it’s the former now but will be the latter later.
The first was his apparent objection to the proposed merger of the Australian Stock Exchange with the Singaporean Exchange.
The crux of his opposition was that Singapore had executed the young Australian Van Nguyen for drug trafficking in 2005, and this was a militaristic non-democratic state that we should be careful about handing over our stock exchange to.
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