I am not so sure how much more economies of scale could or would be realized, although there would clearly be some. VSH already controls and has combined sales and marketing. VSH already controls publicity. Although it is not formal yet, I suspect that VSH will also control IR directly, although SILI may hire an IR person. I suspect, but do not know for sure, that there are many other areas that are already combined. I have heard that they are already cross-marketing products.
Some portion of SILI's growth has been as the result of the existing economies of scale realized from the existing combinations of many of the same functions. While a complete merger would realize some cost savings, I doubt that they would be substantial.
That said, VSH could purchase SILI with VSH stock worth, on a relative basis, almost twice what SILI stock is presently worth. VSH would have to buy ~5.9 million SILI shares: at $100 a share, this would cost VSH nearly $600M, which I doubt they would be willing to spend, even in stock and even though it would be immediately accretive. As I recall, this is just shy of twice what VSH paid for its 80% share two years ago.
Troy |
