Saturday, April 06, 2013

Business Times Writes About Unfair And Reasonable!

After making several postings on this issue, If The OFFER is NOT FAIR, how can it be REASONABLE?. and How could it be reasonable to accept an offer which is deemed not FAIR?, Business Times decided to post an opinion on it too. :)

  • Investors want 'KISS', not word games

    Published: 2013/04/06

    STICK TO THE BASICS: Shareholders need crystal clear explanation from those independent advisers

    WHAT is "not fair but reasonable"? For the life of me, I cannot understand the meaning of it.

    These days, such term is used so frequently by independent advisers when advising minority shareholders on the worthiness of a corporate exercise.

    Who pays the independent advisers? If a public-listed company does, then, in theory, all of its shareholders pay for their service. Hence, the shareholders should get a crystal clear explanation from the highly-paid independent advisers.

    The catch is not on who pays them, but rather, who is in charge of hiring them.

    Are corporate fees too tempting that layman investors are forced to put up with reports that highlight proposals as being "not fair but reasonable"?

    Looking back, the only thing that pops into my mind as being unfair but reasonable is being caned in school.

    Mind you, my "not fair but reasonable" assesment on being caned at schools comes more than two decades after the incident had happened.

    I had aged and, presumably, gained some wisdom in coming to that conclusion.

    In the action-packed world that we live in, an average investor does not have the liberty to wait for 10 or 20 years to see if a deal, proposed in the current time, is indeed "not fair but reasonable".

    As my first boss in Business Times once told me, KISS! (short for "keep it short and simple") So, why can't independent advisers (aka merchant bankers in disguise ) just stick to facts and keep their Shakespearean instinct in their closets?

    Independent advisers who fancy themselves as talented writers and poets should quit the merchant bank industry altogether.

    Let's go back to the basics. Independent advisers must only be allowed to recommend to shareholders either to accept or reject a deal.

    If they ask shareholders to accept a certain proposal, then it should be on the assumption that it is a fair and reasonable one.

    Rejecting the proposal should be on the basis that it is unfair and unreasonable.

    Independent advisers should not be allowed to be politically correct by disguising a bad proposal as "unfair but reasonable".

    Before the next independent adviser contemplates keying in a proposal as "unfair but reasonable", take a minute to unwind by listening to Bob Dylan's "Gotta Serve Somebody".

    The lyrics go something like this: "You may be the heavyweight champion of the world. You may be a socialite with a long string of pearls. But you're gonna have to serve somebody, yes indeed. It may be the devil or it may be the Lord."


limko said...

What comes to mind is the two occasions when Pharmaniaga planned for privatisation.
On the first privatisation, "independant adviser" advised not to accept the offer, and the exercise did not go through. Subsequently, the price of Pharmaniaga slummed.
On the second privatisation, another "independant adviser" advised to accept, and the exercise completed. Subsequently, the price of Pharmaniaga soars.
On both occasions, the mionrity shareholders got screwed.
Advise or lie?