JPMorgan manages to say nothing in 'fair opinion'
October 23, 2009
Whatever you say, say nothing, was apparently the instruction held most dearly by Irish Republican Army operatives in the old days of British rule in Ireland - or so folklore has it.
It is a mantra that seems to have been adopted with great conviction by today's corporate bankers as they apply their minds to "fair and reasonable" opinions.
At the best of times these opinions are mealy mouthed in the extreme. The "fair and reasonable" opinion provided by JPMorgan Chase, summarised in the Mutual & Federal (M&F) Sens announcement, probably represents the worst of times.
So, JPMorgan was appointed (that is, paid) by the M&F board to advise it on the financial terms of the offer.
And "based on its independently performed procedures and subject to the conditions set out in the fairness opinion, JPMorgan is of the opinion that, as at October 15, the exchange ratio implied in the scheme consideration based on the offer price of R21.25 per M&F ordinary share is fair, from a financial point of view, to the M&F shareholders."
For a start the sentence is much too long, and all those commas... So you make allowances for the legal brains involved in its construction, but then you are left with something nearly impossible to decipher. Do they think this is a fair deal or not?
If you deconstruct it carefully, JPMorgan does seem to be saying the exchange ratio is fair. And then tosses in the rather obscure afterthought "from a financial point of view". Huh?
This presumably means that from a humanitarian point of view, they're not willing to commit themselves.
Rather strangely it does seem to take as a given the R21.25 on which Old Mutual has based the deal and so gives no opinion as to whether this is fair or not.
Perhaps it will all become clear when the circular is sent out.
Refreshing national asset
Umgeni Water, the second-largest water utility in South Africa, has come a long way in the past five or six years. Today it is showing healthy profits, enabling it to cut debt, invest in infrastructure and implement only modest tariff increases.
Mzimkulu Msiwa, the utility's chief executive, said yesterday that five or six years ago Umgeni Water was in the intensive care unit and was "drowning in debt".
Today its debt is being steadily reduced and should hit the target of between R1.4 billion and R1.6bn next year.
The improvement has been helped by rising profits, which hit R527 million in the year to June. These numbers show a far healthier organisation.
Now that it has its house in order, Umgeni Water is generating revenue from implementing water projects for government departments and municipalities.
And its ability to finance its own infrastructure investments should not be affected by the recession and the subsequent tighter lending environment.
Fitch Ratings this week affirmed its investment grade long-term rating of AA+ and its short-term rating of F1+, with a stable outlook, saying this was due to its sustained financial improvement over the past four years.
The implied government support for the utility in the event of financial distress (due to the critical nature of its work) also supported the rating. But Umgeni currently gets no government funding.
Although it had raised its capital expenditure, its strong cash flows meant it would have a limited need to incur additional funding during the period, Fitch said.
Msiwa said Umgeni Water was the only government entity that had not had its rating lowered during the financial crisis.
Perhaps the organisation is doing so well because those who work there and manage it, according to Msiwa, regard it as a national asset, a refreshing approach from a state-owned entity.
Bowing out - on the quiet
Parliament is going to be robbed of the last opportunity to grill outgoing Reserve Bank governor Tito Mboweni, who had been scheduled to address the National Assembly finance portfolio committee today.
Mboweni, who retires on November 9, will not be in the team led by the new governor Gill Marcus that will appear before the committee at the rescheduled meeting on November 17.
As governor, Mboweni has visited Parliament each quarter and taken questions for two or three hours at a time.
DA finance spokesman Dion George said he was phoned by ANC MP Thabadlawa Mufamadi, the chairperson of the finance portfolio committee, to ask him if he thought it was necessary to ask the outgoing governor questions.
"I did not think so," said George. Mufamadi said it had been decided to postpone the meeting to next month because of Parliament's heavy schedule.
Asked why Mboweni would not be appearing, Mufamadi said it was "purely coincidental" that Mboweni could not be at the rescheduled meeting.
Maybe Mboweni is not being snubbed by Parliament, but the National Union of Metalworkers of SA felt there was no reason for restraint.
The union, through spokesman Castro Ngobese, declared deplorable the governor's remarks in relation to the economic crisis that "we are experiencing a mild recession, it is not severe".
The governor was reported as saying: "If it was severe we wouldn't have so many cars on the roads and people buying these large houses. Though spending patterns have come down (they did not fall to levels) of a severe recession."
Mboweni held "misleading views", the union said. Workers and the poor were "feeling the pinch". Massive retrenchments in major sectors were taking place.
The union gave the governor a goodbye kick in the pants: "We are eagerly awaiting Mboweni's departure."
Edited by Peter DeIonno. With contributions from Ann Crotty, Samantha Enslin-Payne and Donwald Pressly
|
|
