Joe – as always I’m interested in your take.

One clause in all merger agreements states that the deal can be cancelled if there are any material adverse changes in the target company’s position or business. So you must ask: Are these steps at these prices and terms materially good for the company or can they be considered “adverse” for the company’s position. (i.e., should the TV unit have been sold for $1.2 billion as originally planned or was it still a great sale at $1.1 billion?)

All I’m saying is that these are potential applecart tippers and that this deal is not as certain as the others we’ve done in the past. Because of that, you should:

• demand a greater spread (premium), or
• be willing to move on to the next deal.

Simply put – a 5% premium on RTSX was perfectly acceptable. In CCU, you should look for a greater premium (perhaps greater than 8% or 10%) to compensate for the greater risk of similar deals falling apart.

This particular deal may go through, but as you do 100 of them over the next 5 (or 20) years, you’ll find that the “CCU” deals fall apart a little more frequently than the “RTSX” deals. As such, the larger premium is required to compensate for that.

Make sense?

Tender offer:

“The completion of the Merger and the related debt financings are not subject to, or conditioned upon, the completion of the tender offers or the related consent solicitations or the adoption of the proposed amendments with respect to the Notes.”

Though, how these notes work is honestly not something I understand yet. Could someone please explain? http://news.moneycentral….:CCU&feed=BW&date=20080306&id=8297928

TV Station divestiture:

“Further, the sale of the division is not a condition to the closing of the merger described above.”

And that sale is complete now. Also, a completely seperate company bought these than the company aquiring CCU.

Radio Stations:

“Further, the sale of the division is not a condition to the closing of the merger described above.”

These are still in the process of being sold, and not all stations are covered by definitive agreements. It shouldn’t matter though, right?

Am I missing something?

I am still in CCU Good luck to us

There is a little bit of a leftist political bent to it, and they fail to mention hard assets as being storage for debt, but it is still a simple and shocking video.

Just thought it was fitting to this post Joe.

Nick

In real estate, as inflation brings prices up but the loans against the properties remain the same (in dollars), property owners win. Example: If a property owner can raise rents at the pace of 5% inflation, (s)he would see an increase in $1,000 of cash flow to $1,629. At 5.75% on $100,000 she would pay $584 today, and $584 in ten years. Her net cash would grow from $417 to $1,046 in ten years.

Real estate (like certain companies) can be a great hedge against inflation if it is purchased right.

Nice run up on CCU today. The deal looks pretty sound, but I’m not positive on the timeframe. There is (or was this morning) enough of a premium to buy in, even if the deal can’t close until mid-Q2 (though they’re calling for end of Q1).

The senior note buyback and the division sales are a little unnerving. Are these at the right prices, terms, and timetables for the deal? (I assume the acquirers are involved on all of these.) Or, are they creating opportunities for the acquirers to break the deal because they don’t like the terms?

In addition to the financing, these are the things that I think could upset the applecart, if it does get tipped. I also think that’s why there has been such a huge premium as of late.

I think there is a little more risk here than there was in RTSX or TRB; that alone doesn’t make it a good or bad workout. Risk + Premium = CCU looks/looked pretty nice.

When you have a static debt and inflation hits, usually wages/income (I can especially see this for farmers, who create their product with relatively few inputs & sell their product for more) have to increase somewhat to offset the inflation or everyone starves to death. So now people have a higher nominal number of dollars, and mortages are static debts.. So they are comparatively smaller and easier to pay off than before.

Imagine going back in time to the 1940′s when a loaf of bread was a nickel. You’d be rich as hell. During times of inflation that only applies to static debts, though.

(would fixed debts be a better way to put it?)

“Farmers and holders of urban property seemed to benefit [from hyperinflation] if their property was mortgaged; the inflation soon wiped out the mortgage debt.”

That seems counterintuitive…how does inflation reduce or wipe out mortgage debt?