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Strategies & Market Trends : Buffettology -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (2635)	8/4/2000 1:23:49 PM
From: LauA	Read Replies (1) \| Respond to of 4691

Wayne - I'm convinced that the most important reason you list is # 9 - Other. Since the CEO usually is compensated on the basis of Total Revenue or in terms of the Total Number of Employees he/she supervises, the driving force is often to buy size. Share price is determined on the margin, and the premium ensures the ability to buy the controlling shares. Lau

To: Freedom Fighter who wrote (2635)	8/4/2000 6:17:32 PM
From: James Clarke	Respond to of 4691

Re: Theoretical question re: takeover value I used to be a mergers and acquisitions banker at Morgan Stanley. The answer to your question is yes, and your example of the food industry is perfect. Comparable multiples for takeovers are useful. If something is trading at half the multiple that competitors are being bought at, that tells me to buy the stock, though I would sell at a substantial discount to takeover value unless I thought the company was going to be taken over imminently. Other companies you know are not going to be bought out, so there the analysis is much less relevant. Non-Buffett (maybe) but a good example of this is one of my two largest positions, a microcap called Huttig Building Products. Comparables (Cameron Ashley) are being bought for a multiple which would imply a valuation of 12 for HBP. It trades below 5. That's where this analysis is useful.

To: Freedom Fighter who wrote (2635)	8/5/2000 1:16:36 AM
From: Moominoid	Read Replies (1) \| Respond to of 4691

I figure the biggest gain is big tax savings. They only pay tax once on the earnings rather than the takeover target paying corporation tax and then the stock owner paying capital gains tax and income tax on dividends or for a corporation holding a stake in a company, two rounds of corporation tax. Or am I wrong on that. In Australia this tax incentive is much weakened and you see relatively few domestic takeovers. Most takeovers are foreign purchases of Australian corporations or takeovers by Australian corporations of foreign subsidiaries when the foreign owner decides to sell up or takeovers of foreign companies by Australian corporations. David