Rebirth of England.

Chapter 615 Debt-to-Equity Swap

Although Barron has a special relationship with the Hearst sisters, now that it involves business matters... he certainly won't give up on acquiring the Hachette Group because of this.

After all, take the world-renowned fashion magazine "ELLE" owned by the Hachette Group as an example. It has a total of 43 versions around the world (sub-publications in various countries or regions, such as "ELLE China Edition"), and is known as the jewel in the crown of the Hachette Group.

In addition, the journal Psychologies also has 12 editions.

Barron himself owns the fashion luxury group - Gucci-Hermès Group. If it also owns an influential fashion magazine, it will be very beneficial for brand promotion and marketing.

Therefore, SEM Group will also actively participate in the competition.

Speaking of the Gucci-Hermès Group, due to the impact of the subprime mortgage crisis, the revenue of its brands has also declined.

However, under Barron's instruction, they began to focus on developing Asia, especially the Chinese market, at a relatively early stage. The revenue growth of Gucci-Hermès brands in China is at the forefront of all luxury brands.

Therefore, the growth in the Chinese region has made up for a considerable portion of the revenue decline in the European and American markets. Overall, the performance of the Gucci-Hermès Group this year is still satisfactory.

Moreover, the Gucci-Hermès Group itself is not a listed company - they have already completed the privatization of Hermès, so there is no need to worry about the impact of the global economic downturn on the group's stock price.

For example, the share prices of LVMH and Lifeng Group, which are also luxury groups, have fallen by more than 25-35% compared to their highs last year!

Private companies and listed companies each have their own advantages and disadvantages. Listed companies need to be responsible to investors, and the performance of their stock prices will also put considerable pressure on management, which means that some of their measures to boost stock prices may not be beneficial to the company's long-term development.

This is actually somewhat similar to the Western electoral system - those professional managers have term limits. From the perspective of their personal interests, they naturally want to make the company they manage "prosper" during their term so that they can get more bonuses and equity incentives.

As for the long-term interests of the company? Why should we consider things that will happen in ten or twenty years when we are only in office for a few years?

How many people can endure the decline of business during their tenure, or even be fired for it, for the sake of long-term interests... and then let their successors enjoy the long-term dividends?

Of course, the reason why most multinational companies are listed companies is that at that scale, this is still the safest non-family management method after weighing the pros and cons.

You cannot avoid all possible risks, you can only choose those that are relatively safer - this itself is the risk aversion of a company after it reaches a certain scale.

Small companies and startups can take risks, but large companies need stability.

……

In mid-September, the US Federal Reserve and the European Commission approved Standard Chartered Bank's acquisition of Merrill Lynch.

This also means that the merger of the two parties will officially enter the substantive stage. Davis, the former president of Standard Chartered Bank, will serve as the president of Standard Chartered-Merrill Lynch Group, and his deputy Paul Spinter will be promoted to CEO of Standard Chartered Bank - he will manage the Standard Chartered Bank after the merger of Northern Rock Bank, Merrill Lynch Industrial Bank and IndyMac Bank's branches and deposit business.

In addition, the former chairman and CEO of Merrill Lynch, Sean, who just took over this year after his predecessor resigned, will serve as the chairman of the securities and wealth management department of Standard Chartered-Merrill Lynch.

It is also worth mentioning that because Standard Chartered Bank's stock price has fallen during this period - from US$25 per share to below US$20, the total acquisition price of Merrill Lynch has also fallen accordingly.

After all, a large part of the acquisition of Merrill Lynch this time was carried out through stock swaps.

The vast majority of the $250 billion in cash was directly injected into Merrill Lynch to repay part of its debts and alleviate their lack of liquidity.

But what’s interesting is that after Standard Chartered Bank’s acquisition of Merrill Lynch was approved by the relevant regulatory authorities in the United States and the European Union, Standard Chartered Bank’s stock price fell by nearly 5% that day…

The main reason is that there are many voices in the market that believe that the "hole" of Merrill Lynch needs to be filled by Standard Chartered Bank, and the Northern Rock Bank they acquired before also has a lot of mess.

Under the current market conditions, Standard Chartered Bank's performance may be dragged down.

Then when Standard Chartered Merrill Lynch announced that they would pay the Cavendish Trust £9 billion in bond interest before the end of September, their share price fell again by more than 15%...

Because last year, when Standard Chartered Bank acquired Northern Rock Bank, according to the agreement, it needed to repay the British government a loan of 250 pounds plus interest...

At the time, the Cavendish Trust helped Standard Chartered repay the loan by purchasing £250 billion of convertible bonds from Standard Chartered.

However, the annual interest rate of this £250 billion convertible bond is 6%, which means that Standard Chartered Bank needs to pay $15 billion in interest to the Cavendish Trust every year. Now it has been a full year since the bond was issued, and Standard Chartered Bank needs to make the payment before the end of September.

Under the current market environment, although Standard Chartered Bank was not greatly affected by the subprime mortgage crisis, because the stock market, especially bank stocks, were already in an organic decline, their share prices had already fallen by more than 20% compared to last year's high - this was a relatively small decline among bank stocks.

Now that it has to bear such heavy financing interest, it is no wonder that Standard Chartered Merrill Lynch's share price has fallen again.

Under such circumstances, when the Cavendish Trust Fund proposed to convert their 9.72 billion pounds of convertible bonds and 17.5 billion pounds of interest, a total of 250 billion pounds, into Standard Chartered Merrill Lynch's common stock at a price of 15 pounds (equivalent to 265 US dollars) per share, it immediately obtained the consent of the Standard Chartered Merrill Lynch board of directors.

In addition, the $250 billion convertible bonds purchased by BFT Fund from Standard Chartered Bank when it acquired Merrill Lynch will also be converted into common stock of Standard Chartered Merrill Lynch at this price.

Such a proposal, although the conversion price (US$17.5) is slightly lower than the current share price of Standard Chartered Merrill Lynch, but at least after converting these "debts" into Standard Chartered Merrill Lynch shares, it can avoid the high interest that needs to be paid every year - to be honest, the interest rate of these convertible bonds is 6% per year, which is not high, but the scale of the debt they bear is high, so the corresponding amount to be paid is very high.

(End of this chapter)