NAB and Aviva: Same Assets, Different Price
NAB and Aviva: Same Assets, Different Price
The art of corporate spin has come a long way. In yesterday’s announcements that National Australia Bank had bought Aviva’s Australian insurance operations, the two companies announced different sale prices.
Ian Rogers, publisher of The Sheet, did a great job of unravelling the truth in this morning’s missive to subscribers:
‘In addition to the $825 million headlined by NAB in two announcements yesterday the bank must pay $60 million in follow-on costs.
NAB contorted the value follow-on payment in its investor pack, styled as a net asset adjustment to be paid post completion, and the exact level subject to closer review. Aviva spelled out its estimate of the value of this component clearly.
Aviva also takes a $40 million dividend, leaving a $100 million difference in the claimed values of the seller and buyer.’
It would be laughable were it not so frustrating. We spend hours every day trying to interpret the truth from the drivel that comes out of the corporate relations departments of Australia’s listed businesses. It’s time that could be much better spent.
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Ahh, that's the "advisory fees", dear boy!
The best way to fight corporate drivel is to highlight the issue and embarrass the driveller. In that regards, three cheers to Ian Rogers for highlighting this, and a cheer or two to Steve for bringing it to our attention. NAB, don't think nobody notices this. Stop drivelling!
and I just thought someone made a 'minor' typo in their media release!
Eliminating drivel would also eliminate one of the tools that investors can use to differentiate between the quality of different businesses. I'd bet that if you were to quantify the proportion of management announcements that are obviously BS, that it would have a strong negative correlation with LT TSRs.
Fair point Shum, and were I simply managing my own or other people's money I'd exclusively share your view. But in this role I get a lot of contact with people whose BS detectors aren't as well practiced as ours, and this sort of spin often catches them out. I'm cheering on their behalf. But otherwise, completely agree that anything that could create inefficiencies is a good thing.
Are you guys serious? You are advocating imperfect communication so that the resulting inefficiencies can be exploited by investors? That's a good thing overall- efficient use of resources, better marketplace, better society? So what about stock fraud and accounting? Stock fraud is good for the same reasons? Enron and Satyam are good as it allows investors to spot inefficiencies?
Hmmm... Would value investing exist without the opposite? Are poor management practices and low integrity joined the brothers of speculation? Can there be good without evil?
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