For all you people who think you are smarter than CSCO.... I'd like to see you lamers get a deal like this...
Did you get in on KPMG IPO? CSCO did.
Read just how smart this company is. Better buy now or miss the fire sale of the year.
Cisco's own actions--detailed in KPMG Consulting's securities filing--are even more telling. A year ago, Cisco gave KPMG Consulting $1.05 billion. In return, it took five million preferred shares, which pay a 6% dividend. The investment stood as a golden endorsement, even though it's separate from the companies' marketing pact. That, while leaving Cisco free to cut similar deals with rivals PricewaterhouseCoopers and Cap Gemini Ernst & Young, limits KPMG Consulting's ability to sell jointly with such Cisco rivals as Nortel Networks.
But here's what really knocks me back: After the IPO, Cisco's investment in KPMG Consulting will be far less than it at first appears. That's because, in a flurry of paperwork to be completed with the IPO, Cisco will get most of its money back. KPMG, the consulting company's parent, will first buy back from Cisco half of its preferred shares at cost, or $525 million. Next, the remaining preferred shares convert to common stock, and KPMG Consulting will then spend $400 million of the $469 million it expects to raise in the IPO to buy back still more of Cisco's stake, which Cisco says is needed to conform to a regulatory ruling.
When the ink dries, Cisco will wind up with 15.1 million common shares in KPMG Consulting, or 9.9%. Its final cost? $125 million, or $8.26 a share. That doesn't include the $63 million in dividends Cisco will have collected on its preferred shares, and it's less than half the indicated IPO price of $17 a share. |
