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Today, (February 1st) Microsoft Corporation, the world’s biggest software maker, made an unsolicited $44.6 billion offer for Yahoo! Inc. to challenge Google Inc.’s dominance in Internet search services and advertising. The proposed deal, which would transform the software and internet-services industries, values Yahoo! at $31 a share, a 62% premium over the closing price on Thursday. What will the outcome be?
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And in a class all by itself, the US$1 trillion (1,000,000,000,000) club.
On Monday, the 4 billion A-share offering, priced at 16.7 yuan per share, finished its first day of trading on the Shanghai Stock Exchange at 43.96 yuan, rising as high as 48 yuan intraday. At US$1.005 trillion, PetroChina’s market cap is more than twice that of its US peer, Exxon Mobil (USD $486 billion), even though Exxon Mobil generated four times as much revenue last year and trades at only a quarter of PetroChina’s price to earning ratio, 13 to PetroChina’s 55.
But the craziness doesn’t end there. The lofty market cap comes with an asterisk: US$1 trillion only if you go by PetroChina’s local valuation. Shares traded overseas (Hong Kong and New York) values the company at roughly US$400 billion. One HK share (H-share) confers equity holders the same amount of ownership as one A-share, and one share of ADR traded on the NYSE grants 100 times as much ownership.
While PetroChina’s A share closed up today at 43.96 yuan, its H-share finished down 8.2 percent at HKD $18, or 17.65 yuan (1 yuan=1.02 HKD). The gaping difference is a function of many factors: Beijing’s restriction on capital flow, lack of investment choices in China, and of course, out-of-control greed coupled with widespread ignorance on the part of Chinese retail investors.
In a related story, billionaire investor Warren Buffet sold his entire PetroChina stake several months ago, calling the price action in China “carried away.”
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Chinese computer maker Lenovo has completed its $1.75 billion purchase of IBM’s personal computer division, creating the world’s third-largest PC maker, the company said Sunday. The deal — one of the biggest foreign acquisitions ever by a Chinese company — is expected to quadruple sales of Lenovo Group Ltd., already Asia’s biggest computer maker, the company said earlier. Complete coverage of this story can be found here and here.
Lenovo was founded in 1984 by academics at the government-backed Chinese Academy of Sciences and first worked out of a small cottage. First set up to distribute equipment made by IBM and other companies, by 1990 it was selling PCs under its own brand name.
IBM now focuses on consulting and software, outsourcing much of its manufacturing. The sale to Lenovo is expected to cut production costs and breathe new life into the PC business, which now accounts for a small portion of IBM’s total sales and profits.
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Combining two of the largest makers of software for creating and delivering digital content, Adobe Systems Inc. said Monday it will acquire Macromedia Inc. in an all-stock transaction valued at approximately $3.4 billion.
Both companies said the long-rumored acquisition was not to consolidate and cut costs but to help Adobe expand into new markets, particularly in the area of providing content to mobile phones and other handheld devices
“This is not a consolidation play. This is all about growth,” said Bruce Chizen, Adobe’s chief executive. “We’re doing this because we believe the combined offerings will be even more compelling to our customers given the challenges they’re going to face in trying to communicate information in this very complex environment.”
Neither company would speculate Monday on actual product plans after the deal is closed.
There is some product overlap, including Adobe Illustrator and Macromedia Freehand in graphics design, Adobe GoLive and Dreamweaver for Web page creation, and Photoshop and Macromedia Fireworks for working with photos and other graphics.
Under terms of the deal, approved by the companies’ boards of directors, Macromedia stockholders will receive 0.69 shares of Adobe common stock for every share of their Macromedia common stock.
That will result in Macromedia stockholders owning about 18 percent of the combined company when the deal closes.
Shares of Adobe lost $6.77, or 11 percent, to $53.89, in Monday morning trading on the Nasdaq Stock Market. Macromedia shares gained $2.76, or 8.3 percent, to $36.21.
The transaction, contingent upon the approval of regulators as well as the shareholders of both companies, is expected to be completed by the fall. The combined company will keep Adobe’s name and San Jose headquarters.
According to Adobe: The combination of Adobe and Macromedia will provide customers a more powerful set of solutions for creating, managing and delivering compelling content and experiences across multiple operating systems, devices and media. Together, the two companies will meet a wider set of customer needs and have a significantly greater opportunity to grow into new markets, particularly in the mobile and enterprise segments.
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