Striking the Privatisation Lottery 4 Times

I am not sure if you have read the letter that I sent to Today, which was published on Tue (27 Jan). Here is the link if you have missed it: "Review Wave of Delistings on SGX".

Coming back to the topic, how many times do you hope to strike lottery in a year? For me, I struck the privatisation lottery 4 times last year (based on date of announcement of the offer)! Below is the list of lotteries that I struck:

1. CapitaMalls Asia (privatisation at $2.35)
2. STATS ChipPAC (takeover at $0.466; sold)
3. UE E&C (privatisation at $1.25)
4. CH Offshore (cash offer at $0.495)

Before you congratulate me on my "good luck", allow me to share an analogy on football with you.

For those who are fans of Premier League football, you would be familiar with the news that Gareth Bale moved from Tottenham to Real Madrid in 2013 for a transfer fee of between £77 million and £85 million. The latter transfer fee would be a world record. This was followed by the transfer of Luis Suarez from Liverpool to Barcelona a year later for a transfer fee of between £65 million and £75 million. Although the 2 Premier League clubs had hoped to retain their star players, the huge transfer fees nonetheless represent a huge windfall. After receiving the transfer fees, they went about reinvesting the fees into other good players, hoping to replace the star players that they have lost. However, the players that they bought have not yet been able to replicate the huge impact of their former star players in the club. If you were to ask the fans whether they would have preferred to keep Bale/ Suarez or take the huge windfall, I guess some would have preferred the former. As at today, Tottenham and Liverpool are in the fifth and seventh positions in the Premier League table. There is still much work to do to win the fourth position, which is the last position for Champions League qualification. So, one thing we can learn from this is: if we keep on "selling" our best "players", we will not reach the "Champions League" of world-class stock exchanges!

Notwithstanding the above, this is not to say that we should never accept any privatisation offers. Privatisation offers are a double-edge sword; we might gain in the short-term but lose in the long-term. It is important to assess each offer on its own merits and determine whether we might lose in the long-term before accepting the offer.

See related blog posts:

• Are Investors Short-Changing Themselves Over Privatisation Deals?
• Investors' Guide to Privatisation Deals
• Case Studies of Unsuccessful Privatisations