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CFC Restructuring
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mukiha
#1 Posted : Friday, January 15, 2010 2:14:36 PM
Rank: Elder

Joined: 6/27/2008
Posts: 4,114
There is a plan to separate the insurance and the banking businesses of this group to create a new holding company for the insurance business.

I wonder what will happen to the share price...

Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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muganda
#2 Posted : Friday, January 15, 2010 2:25:13 PM
Rank: Elder

Joined: 9/15/2006
Posts: 3,907
I must say this is proof that 4 out of 5 mergers only serve to destory shareholder value. Kenya doesn't seem to be an exception. Wasn't the merger launched as an act of brilliance amidst alot of fanfare?
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mukiha
#3 Posted : Friday, January 15, 2010 2:29:40 PM
Rank: Elder

Joined: 6/27/2008
Posts: 4,114
@muganda; does the reverse hold true? Will a separation increase shareholder value?
Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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muganda
#4 Posted : Friday, January 15, 2010 3:50:00 PM
Rank: Elder

Joined: 9/15/2006
Posts: 3,907
@mukiha, once read an interesting article...
M&A Needn't Be a Loser's Game
by Larry Selden, Geoffrey Colvin

Three out of four acquisitions fail; they destroy wealth for the buyer's shareholders, who end up worse off than they would have been had the deal not been done. In evaluating acquisitions, companies must look beyond the lure of profits the income statement promises and examine the balance sheet, where the company keeps track of capital. It's ignoring the balance sheet that causes so many acquisitions to destroy shareholders' wealth. Unfortunately, most executives focus only on sales and profits going up, never realizing that they've put in motion a plan to destroy their company's true profitability--its return on invested capital.


Often in the case where company is going through problems, a spin-off of profitable divisions releases trapped value resulting in greater sum of the parts.
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gathinga
#5 Posted : Saturday, January 16, 2010 6:23:35 AM
Rank: Veteran

Joined: 11/30/2006
Posts: 635
This merger seams to have gone completely wrong, especially on the banking business. I was a customer of Stanbic when this happened and woke up to find lots cash sitting in my account...which usually had negative balance..to date, 4 years later, these guys havent relaized the error. Several friends have confided in me having faced similar 'payments'

There was also a highly publicized retrenchment in their broking division recently. Cant a company retrench quetly like all other stock brokers did, without having to put up ads in the dailies?....methinks, the management also is still living in the old days
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mukiha
#6 Posted : Thursday, January 21, 2010 2:20:50 PM
Rank: Elder

Joined: 6/27/2008
Posts: 4,114
I picked up a few more CFC today @ sh44, using cash generated from KENGEN (sold a small portion at 15.20). Now my average buy price is just a few cents above 70....not bad for some one who started from sh115!!!

We are getting there...
Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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mukiha
#7 Posted : Thursday, January 21, 2010 2:56:15 PM
Rank: Elder

Joined: 6/27/2008
Posts: 4,114
Now my eyes are on EQTY (18.5) and KENRE (15). If these levels are reached, my re-structuring will be complete.
Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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VituVingiSana
#8 Posted : Wednesday, January 27, 2010 12:16:20 PM
Rank: Chief

Joined: 1/3/2007
Posts: 18,349
Location: Nairobi
CFC Stanbic Bank has almost 2x the balance sheet of Diamond Trust, NIC or I&M Bank... yet it generates the same profit as the above 3 banks...

So... does that mean there is value in CFC Stanbic IF they get their act together ama the other 3 are showing CFC Stanbic a clean pair of heels?

DTB & I&M have been expanding in Kenya & regionally thus eating into CFC's customer base.
Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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mukiha
#9 Posted : Wednesday, January 27, 2010 1:12:16 PM
Rank: Elder

Joined: 6/27/2008
Posts: 4,114
Good point @VVS. Large assets were a result of the merger. Also, CFC alone [pre-merger] had additional assets in the insurance business.

I am betting on the proposed divorce of the insurance business from the banking one. Hopefully; the two separate businesses will create more value than the combined outfit
Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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gathinga
#10 Posted : Wednesday, January 27, 2010 1:21:39 PM
Rank: Veteran

Joined: 11/30/2006
Posts: 635
Aam with Mukiha on this one. when you have such a conglomerate, inefficiencies in one division are hidden in the other.Wwhereas insiders are aware of what business id thriving and what is not, outsiders can hardlly tell. This is complicated by presence of smooth talking executives and PR people.

If the two operate as seperate entities, the management of each will be easy to compare with other entities of similar size and in the same industry. To date, this has not been possible
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