Victor .... About CMGI deal valuation
>>>When the CPQ-CMGI deal was announced the strike day or valuation day was set at a future specified date when the deal would become effective. Do you know what was price of a CMGI share on the day that COMPAQ effectively acquired the 17%. It would be good to keep a running count of the unrealised capital gain (or loss).<<<
When the deal was announced in August 99, CMGI shares traded at ~$91. However, for some reason or another, it seems that CMGI shares in CPQ accounting books were acquired at ~$76. Here is what they said in the 10Q for Q3-99
"In August 1999, Compaq sold an 81.5 percent equity interest in AltaVista for approximately 19 million CMGI common shares, CMGI preferred shares convertible into 1.8 million CMGI common shares and a $220 million three year note receivable. On October 28, 1999, CMGI converted the CMGI preferred shares held by Compaq into 1.8 million CMGI common shares. CMGI common shares of 20.8 million carry certain restrictions whereby Compaq may not sell 50 percent of its CMGI common shares in less than one year and the
remainder in less than 18 months from the date of the transaction. Total consideration received from CMGI was valued at $1.8 billion. After adjusting for the net assets sold and for the expenses associated with the divestiture, Compaq realized a gain of approximately $1.2 billion ($670 million, net of tax). Compaq accounts for its minority investments in CMGI and AltaVista under the cost method."
The way I read this 10Q filing is as follows:
They sold 81.5% of AltaVista to CMGI for 20.8M common shares plus $220M note. The value of the deal is $1.8B. The value of CMGI shares in their books would be $1.58B ($1.8B -$.22B) and CMGI base share price is ~$76 ($1580M /20.8 Shares).
Today, CMGI shares trades around $160. The value of these 20.8M shares is ~$3.3B. |
