It would be a safer bet if one could get all cash.
from nationalpost.com
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Investors cool on offer by Amvescap
Trimark Financial: Shares fall, as analysts predict deal will be 75% stock
Thomas Hirschmann
Financial Post
Even as speculation mounted that a buyout was imminent, Trimark Financial Corp.'s stock fell back yesterday as shareholders expressed their disappointment that an offer from AIM Funds Management Inc. may not be as flush with cash as previously expected.
The decline came even as AIM's British parent Amvescap PLC confirmed it is talking to Trimark about an acquisition thought to be worth $2.5-billion.
"It's a lot more stock than people expected," said one industry analyst about speculation the deal will be 75% stock and 25% cash.
"You don't have to look any further as to why the stock is down." Trimark shares fell 70½ to close at $24.25 in Toronto, even as reports circulated that the bid will be $27 a share.
The Financial Post reported last week AIM was the front-runner in the race to buy Trimark.
Amvescap said a deal with Trimark is not assured, and Trimark responded yesterday with its own statement saying "it continues to be in discussions concerning a transaction that may affect control of the corporation."
A source close to the negotiations said that AIM is now the only party at the table. Last week, AGF Management Ltd. was understood to be in talks, but analysts said there were too many stumbling points to allow a deal to go ahead.
The source close to the discussions confirmed that the deal is "pretty close" to three-quarters stock, far greater than previous expectations.
"The problem with stock is that you don't know what it's going to be worth when the deal closes, so there's more risk than with cash," said one analyst who asked not to be named.
The combination of AIM and Trimark would create Canada's second-largest mutual-fund company with more than $34.4-billion in assets under management. This would put them slightly ahead of Royal Mutual Funds Inc. but behind No. 1 Investors Group.
Trimark's sale has been underscored by the Street's belief that the two principals, Arthur Labatt and Robert Krembil, are not on the same page in their careers. Mr. Labatt is said to want to retire while Mr. Krembil is intent upon retaining a position in a merged company.
The source said that the deal is close to being finalized, and the roles of the principals at the merging firms has already been sorted out.
"[Robert] Krembil will have a role," said the source. "The key guy is going to be [AIM president] Rob Hain."
Prior to joining AIM at the end of 1998, Mr. Hain held senior executive positions in the financial services industry including a stint in marketing and strategy at Investors Group. During his time at AIM, the company has risen from the 21st-largest fund company to No. 14.
It is expected that much of Trimark's senior management will be let go in the wake of a deal, but that compensation packages will be generous.
Under the terms of the proposed deal, shareholders would receive cash and/or Amvescap shares, said the source close to the negotiations.
The shares would trade on the Toronto Stock Exchange, and would be exchangeable at any time for Amvescap shares, which trade in London. For shareholders, receiving the shares is more tax efficient than cash, as the shares are tax exempt until they are exchanged, while cash is taxable immediately.
TRIMARK FINANCIAL CORPORATION: 52 week high (5/04/2000) $25.25; 52 week low (2/24/2000) $13.65; Market capitalization $2,282 million |
