Reminds me of all the armchair QB's who were bemoaning the "great loss" of "assets of immense historical value" when the Japanese were bidding up all the trophy properties way over book. 10 years later they had to unload at huges losses. I understand the arabs already own over a $Trillion worth of US assets, I'm sure they'll get the deal if they really want it. My take is give it to them if they want to pay more. Then we can have them by the balls when other things start going sour. BTW, thanks for the reply there Rufus. Your informed commentary is always appreciated.
highest bidder v.welcome indeed... now if u looking for a stock to short in the future, yeah i think the dubai guys wld be a good choice, or even calyon )))))) whatsit they bought recently? the ex- debit lyonnais? the gvt-cosy thing that only cost the french taxpayer $30bio? this guys r good, no question
Sorry for the lateness, I have been busy with other stuff. The other reason that Abadi's bid is problematic is that he indicated that he wants to buy all operating business of Refco for $1B, no debts, and with all the cash outstanding. I remember reading somewhere that he is talking about all cash, which seems to me including the $430M returned by Bennett, that would put the bid at a lower level than that of Flowers. I personally don't have a problem with a foreigh government owning a US private financial firm at all. But the buyout firms that I have dealt with have all had reservations about dealing with them. The Dubai investment arm is substantially different from CNOOC, CNOOC is a private organization with a majority ownership by the Chinese government (60%?), the Dubai investment arm is similiar in nature to Temasek Holdings, the 100% Singapore government owned holding firm. The main problem is in the event of a dispute, where does the jurisdiction lie, a number of judges have ruleD that in the event of a civil dispute (not criminal, but recent ruling by John Roberts, yes that John Roberts, have indicated similar trends) that the jurisdiction and its application on foreign government entities are problematic. Regardless, it seems that Interactive Brokers are now in the race.
106% of the capital still is a good price, it is only around $25m higher than Flowers' bid. It is when the premium get to the 10-15% level that the buyers start to take a second look. There are different reports about the Dubai group, some reports said that Blackstone will be part of the consortia, some reports indicated that Blackstone will serve as "advisor" only, with the bid 100% coming from Dubai government. I am not sure which is which, I doubt that Blackstone would be willing to play second-fiddle in a buyout, however. As for Calyon, isn't Didier Valet (Carr's former CEO) floating around Chicago somewhere? Personally, I hope that Calyon will bid for Refco. However, from Valet's departure from Credit Agricole seem to indicate, CA hasn't been happy with the low margins generated by Carr, and that Carr's expansion in the Us worried the Parisians about cost. I met Didier a few times, and I have yet met any frenchman that loves the US markets more than he does. So this give me a feeling that Calyon is not exactly looking to expand in the US. Of course, for a good price, anybody will buy anything. Flowers' bid set a good lower bound. IB raised a little (but only a tiny bid), IB enjoy the advantage of being a private entity as well. Only problem with the IB bid is cash, both IB and Timber Hill are the type of firms that <b>doesn't</b> need to keep plenty of cash on the books, which means that they will have to borrow the cash via some kind of debt offering. Edited: Key phase missing, heh.
Thx! I too pray Calyon buys REFCO but they've been eerily client, so it just may be unlikely. I guess by nextFriday things should be clearer. Praying for Calyon or Dubai to buy REFCO!
The FCM biz is a low margin biz thus requiring large volumes. Given this reasonig, why haven't any of the other members of the former quartet of major non-Ibank US FCMs not bidding for REFCO. You would think that Man, Calyon & Fimat would be stirring up a bidding war to get a hold of REFCO, LLC. In theory an acuisition of REFCO by any one of those three FCMS would catapult the new entity to the world's largest FCM. Or do they think, that REFCO will die and they will naturally just share former REFCO clients? Your thoughts, please...?
I believe the MCIP, MYG, and Unocal deals all went to the lower of the two bidders. The boards generally said they chose the offer with the best likelihood of actually going through in a reasonable period of time. MCI also said they wanted to go with the stronger company. But if RFX shareholders are getting nothing out of this deal, then RFX ought to go with whoever offers the most cash.
I can't speak for other firms. But I have had a fair bit of insight into SG / FIMAT, SG is certainly not terribly interested in expanding FIMAT, due to the lower margins. FIMAT is not an independent entity like IB (even MAN have the asset management side to worry about), which is why IB is bidding. Refco itself faced similar problems, which is why most of Refco's profits come from the Capital Markets division, one that provides the value-added services on top of the straight clearing business. The clearing business is viewed in the business as a necessary evil, it not that profitable, the only highly profitable part of clearing is prime brokerage, but that is highly dependent on financing, not processing the trades. There are firms like BoNY that focuses on clearing and custody, but BoNY is clearly viewed as a "second class" firm. Even GS's buy of SLK there are a lot of internal squabbles, GS has internally thought about divest out of the high processing side of the SLK, ala First Options of Chicago. There are plenty of firms that doesn't self-clear, even parts of Morgan and UBS do not self-clear in certain markets, processing only makes sense if there is volume, even then the profit margin is not terribly high. There are plenty of firms that will take the hedge fund clients of Refco, but they may think it is better just to poach them away.
Good thoughts...but note that REFCO LLC & RCM both contributed roughly 50% each of REFCO INC's profits so the RCM arm is not neccessarily more proffitable. So Sir, rufus waht's your gut feel as to how this plays out. Thx.
It is true that Refco FCM and RCM contributed the same numerical amount of profits, the revenue base is substantially different. According to the S-1 ('04 numbers), Refco FCM has revenues of $940M and profits of $130M, for a profit margin of around 14.5%, Refco Capital Markets has revenues of $430M, and profits of $140M, so that's profit margin of 30%. So there are substantial margin difference, of course it should be possible to extract Earning growth from the S-1, I am too lazy to do so.