Monday, June 04, 2007

Did you say valuation ?

Earlier during my career, I had known several companies where owner CEO `A’ meets another owner `B’ at some party and talk deal. It could either be a total buyout or acquiring one of its divisions or brand or some assets. No due diligence, no valuation exercise, not even verification of asset quality or title. In owner CEO situation, you can’t ask questions. Just do it.

But will TATA do something like it ? It seems when driven by despair, even they would.

The Tatas are paying Rs.140 per share for acquiring Mount Everest Mineral Water, which values the company at around Rs.4.60 billion($115 m). For a company with an annual turnover of Rs.250 million ($6.25m), it’s a very steep price. Mount Everest’s net profit in the quarter ending December 2006 was a mere Rs.3.3 million ($82.5 k). Earnings per share added up for the four quarters ending December 2006 amounted to only 53 paise ($ 0.013).

After Vodafone buyout of HutchEssar, yet another case of acquisitive ego defying valuation math…full story here.

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