Although Barron has a special relationship with the Hearst sisters, now that business matters are involved... he certainly wouldn't give up on acquiring Hachette Group.
After all, take the globally renowned fashion magazine "ELLE," owned by Hachette Group, for example. It has 43 editions worldwide (including country and regional editions, such as "ELLE China Edition") and is considered the crown jewel of Hachette Group.
Psychologies magazine also has 12 editions.
Barron already owns the luxury fashion group, Gucci-Hermès. If it also owns such an influential fashion magazine, it would be highly advantageous for brand promotion and marketing.
Therefore, SEM Group will also actively participate in the competition.
Speaking of Gucci-Hermès, its brands' revenue has declined due to the impact of the subprime mortgage crisis.
However, at Barron's instruction, they began focusing on developing the Asian market, particularly the Chinese market, relatively early on. Gucci-Hermès' brands' revenue growth in China is among the highest among all luxury brands.
Therefore, growth in China has offset a significant portion of the revenue decline in the European and American markets. Overall, Gucci-Hermès Group's performance this year has been satisfactory.
Furthermore, Gucci-Hermès Group itself is not a publicly listed company—having already privatized Hermès, it doesn't need to worry about the impact of the global economic downturn on its stock price.
For example, the stock prices of fellow luxury goods groups LVMH and Lifeng Group have fallen by over 25-35% from their highs last year!
Both private and public companies have their advantages and disadvantages. Publicly listed companies are accountable to investors, and stock price performance can put considerable pressure on management, leading to certain measures to boost stock prices that may not necessarily be beneficial to the company's long-term development.
This is actually somewhat similar to Western electoral systems—professional managers have term limits. From a personal perspective, their natural goal is to ensure the "prosperity" of the company they manage during their tenure, thereby earning larger bonuses and equity incentives. As for
the company's long-term interests? Why worry about ten or twenty years when the term is just a few years?
How many people, for the sake of long-term benefits, would endure business decline during their tenure, perhaps even resulting in dismissal... and then allow their successors to reap the long-term benefits?
Of course, the reason most multinational corporations are publicly listed is because, at that scale, it remains the most reliable non-family-run management model after careful consideration.
You can't avoid all possible risks, but you can only choose those that are relatively safe—this is inherently risk aversion after a company reaches a certain scale.
Small companies and startups can take risks, but large corporations require stability.
...
In mid-September, the Federal Reserve and the European Commission approved Standard Chartered Bank's acquisition of Merrill Lynch.
This means the merger will officially enter its substantive phase. Former Standard Chartered Bank President David Davis will become President of Standard Chartered-Merrill Lynch, while his deputy, Paul Sprinter, will be promoted to CEO of Standard Chartered. He will oversee the combined branches and deposit operations of Northern Rock, Merrill Lynch Industrial Bank, and IndyMac.
Furthermore, former Merrill Lynch Chairman and CEO Anthony Thain, who took over this year following the resignation of his predecessor, will become Chairman of Standard Chartered-Merrill Lynch's Securities and Wealth Management division. It
's also worth noting that Standard Chartered's stock price has recently declined, from $25 per share to below $20, significantly reducing the total purchase price of Merrill Lynch.
After all, a significant portion of the Merrill Lynch acquisition was financed through a stock swap.
The vast majority of the $25 billion in cash will be directly injected into Merrill Lynch to repay some of its debt and alleviate its liquidity constraints.
Interestingly, after Standard Chartered's acquisition of Merrill Lynch received approval from US and EU regulators, its share price fell by nearly 5% that day. This
was primarily due to widespread market speculation that Standard Chartered would need to fill Merrill Lynch's "hole," coupled with the mess it had previously acquired, Northern Rock.
In the current market, this could drag down Standard Chartered's performance.
Then, when Standard Chartered-Merrill Lynch announced it would pay £1.5 billion in bond interest to the Cavendish Trust by the end of September, its share price fell again by over 3%.
Last year, Standard Chartered's acquisition of Northern Rock required it to repay a £250 million loan plus interest to the British government.
At the time, the Cavendish Trust helped Standard Chartered repay this loan by purchasing £25 billion of convertible bonds from Standard Chartered.
However, the £25 billion convertible bonds carry an annual interest rate of 6%, meaning Standard Chartered Bank must pay $1.5 billion in interest annually to the Cavendish Trust. Now, a full year after the bonds were issued, Standard Chartered Bank must make this payment by the end of September.
While Standard Chartered Bank has been relatively unaffected by the subprime mortgage crisis in the current market, the stock market, and especially bank stocks, have been in a state of decline. Their share price has already fallen by over 20% from last year's peak—a relatively small decline among bank stocks.
Now faced with the burden of such heavy financing interest, it's no surprise that Standard Chartered Merrill Lynch's share price has plummeted further.
Under these circumstances, when the Cavendish Trust proposed converting its £25 billion convertible bonds, plus £1.5 billion in interest, totaling £26.5 billion, into Standard Chartered Merrill Lynch common stock at £9.72 (US$17.50) per share, the board of directors of Standard Chartered Merrill Lynch immediately approved the proposal.
Additionally, the $25 billion in convertible bonds BFT purchased from Standard Chartered Bank during its acquisition of Merrill Lynch will be converted into Standard Chartered Merrill Lynch common stock at this price.
While the conversion price ($17.50) is slightly lower than the current Standard Chartered Merrill Lynch share price, converting this "debt" into Standard Chartered Merrill Lynch stock will at least avoid the high annual interest payments. Honestly, the 6% annual interest on these convertible bonds isn't particularly high, but the sheer size of the debt makes the corresponding payments quite substantial.