atans1

When a controlling stake goes at a massive discount

In Energy, Investments on 16/12/2009 at 9:10 am

Glencore International, the world’s biggest commodity trader, has bought a 51% stake in  Chemoil Energy for US$233 million ($325 million) from the Chandran Family Trust.

It paid 35.52 US cents a share: 21.1% discount to the  closing price of 45 US cents, on Friday.

In late May this year, just before rumours of Glencore buying a stake appeared, Chemoil was trading at around the 30 US cents level. The rumours pushed it to as high as 56.5 US cents.

Moral of the story: buyer of a controlling block may not need to pay a premium to market. It all depends on its bargaining power vis-a-vis the seller. And whether there is another major shareholder willing to deal:  Itochu Corporation, a Japanese conglomerate, with a 37.5%  stake in Chemoil, was apparently contented with its stake.

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