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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (82928)	6/21/2007 12:17:15 AM
From: J_Locke	Respond to of 110194

They will borrow $3.5 billion to do the tender offer. I'm guessing they'll pay about 6.75%. The stock has very little float; 94% is owned by 5 entities: Barry Diller, Liberty Media, Legg Mason, UBS, and Capital Research. I'm assuming the point of the thing is to let some of these folks cash out without tanking the stock (Diller is keeping his). My back-of-the-envelope calculation is that earnings will decline from .79/share to .61/share. The deal will be dilutive to earnings because return on equity is lower than borrowing costs will be (5% vs. 6.75%). Before the deal, Expedia has $500 million in debt and book value of $5.3 billion; after it will have $4 billion in debt and book value of $1.8 billion.