Rebirth of England

After hearing Barron's intention to acquire O2, Rolf was surprised and his expression became cautious.

After checking some O2 company information, he said:

"According to the current situation of O2 Company, although it was spun off from British Telecom, its current development is not bad. If it is to be acquired at present, it is not expected to be less than 4.5-5 billion pounds. Your Highness, even if it is used If you want to make a leveraged acquisition, you will need at least 500 million to 1 billion pounds of free funds. Only in this way can you convince the consortium including us, Barclays Bank, to support your acquisition. The question now is, can you come up with this money? ?"

Why are some companies able to carry out leveraged buyouts and only use one-fifth or even one-tenth of the total acquisition amount to complete the acquisition?

Just like the Sinclair Group, in the original time and space, when their market value was only more than 2 billion U.S. dollars, they formed a consortium and leveraged buyouts. When Disney acquired the 21st Century Fox Group, from their hands , bidding more than $10 billion to acquire 21 regional sports networks affiliated with the original Fox Group.

It was done through a leveraged buyout.

For example, this time Barron plans to acquire O2 Company. The process is that he first announces the acquisition of O2 Company and then negotiates with the other party.

After the final purchase price is determined, the financing consortium that cooperates with Barron's can come on stage. Barron's will use the O2 Group equity it will acquire in the future as collateral to provide loans to these financing consortiums.

Use these loans, plus its own funds, to complete the acquisition of O2 Company - the other party's mortgage loan cannot be 100% based on the acquisition price, and Barron needs to come up with part of the funds himself.

In this case, if Barron's eventually fails to repay these higher-than-market interest rate loans, the O2 shares used as collateral will belong to these financing consortiums.

This is equivalent to these financing consortiums getting O2 Company at a discount price - because Barron's own funds were impossible to recover at that time.

These financing consortiums can choose to sell O2 to others, or run it by them and sell it when its valuation is higher.

Now for Rolf, Barron hopes to cooperate with them and let Barclays Bank join its financing consortium to acquire O2. This is no problem.

But what he is concerned about is how much of Barron's own funds can be spent on this acquisition.

According to Rolf's understanding of Barron's, although his DS Capital's investment performance during this period was very impressive, according to his valuation of O2, Barron's needs to spend at least one-tenth of its acquisition price. of their own funds - this ratio is not a particularly safe ratio for the consortium participating in the financing, because it means that if the other party defaults, they will get O2 at a 10% discount. For this kind of communication company, The change in market value is still huge.

Even the lowest one-tenth of his own funds would cost close to 500 million pounds. Rolf does not think Barron can come up with these funds now unless he mortgages all his assets. It can be said to be a desperate move.

Inevitably, in this kind of leveraged buyout, the more free funds you can provide, the easier it will be to persuade the bank consortium to join the financing consortium, because relatively speaking, the risk of default will be smaller and more secure.

"If I can come up with 500 million pounds of capital, will Barclays be willing to join me in financing this acquisition?"

Barron asked rhetorically.

"If that's the case, Your Highness the Duke, I can try my best to convince the board of directors. Basically, it's not a big problem. But I need to remind you that for this kind of highly leveraged acquisition, we can't provide all the funds alone, so you need to add more funds." Find one or several financing partners to join your financing syndicate.”

"Okay, now we can talk about another thing, that is, I need to mortgage some of my assets for a loan."

Barron certainly can't come up with 500 million pounds now. The reason why he dared to propose the "Snake Tun Xiang" plan to acquire O2 Company is that he has a good grasp of the recent international oil prices.

Since the first half of last year, the United States has continued to increase public opinion and sharpen its sword against Iraq.

Until December last year, it could be said that not many people questioned their determination to use force against Iraq. This made people generally worried about the crude oil supply in the Middle East, coupled with the oil production caused by the strike of domestic oil workers in Venezuela. Supply disruptions, Palestinian-Israeli conflicts and terrorist activities have caused oil prices to skyrocket and continue to rise.

When Barron's first began to use funds to build positions to be bullish on international oil prices, oil prices were still around US$20 per barrel. But by January 3 this year, the price of London North Sea Brent crude oil had climbed to a "high" of US$31. A full 50% increase!

One question is, if the United States really uses force against Iraq, will international oil prices continue to skyrocket?

From a feeling point of view, it seems so. After all, by 2003, Iraq's proven oil reserves were approximately 15.7534 billion tons, ranking fourth in the world; its proven natural gas reserves were approximately 3.11487 billion cubic meters, ranking 10th in the world.

According to speculation by relevant agencies, if Iraq strengthens exploration, its oil reserves will more than double, making it truly the world's largest.

Therefore, if the United States and its allies use force against Iraq and plunge it into a war, it will inevitably affect the supply of international crude oil and eventually lead to an increase in oil prices. This logic seems to be unproblematic.

But the fact is that through experience in his previous life, Barron knew that after reaching a high of $36 in early February this year, the international oil price stabilized, and until the end of the war and the establishment of the Iraqi transitional government in June, International oil prices have never returned to the price of 36 US dollars per barrel.

The reason is that although the subsequent "rule" of the United States in Iraq was not smooth, the war in Iraq ended too quickly. The situation that many people thought that the American coalition forces would fall into the stubborn resistance of the Iraqi army did not happen. , on the contrary, they ended Saddam's rule in a devastating way.

This reality has instead made international capital's optimistic view that Iraq's oil output will recover quickly take over the mainstream. After a brief rise in the two days after the outbreak of the war, international oil prices began to stabilize or even fall.

Although Barron knows that in the past five years, the overall trend of international oil prices has been rising - from 2002 to 2008, international oil prices rose from US$20 to nearly US$150!

Finally, on July 14, 2008, oil prices reached a high of $147.27 per barrel.

But in the short term, Barron's will have the opportunity to make excess profits on international oil prices by relying on the fluctuations during this period.

Therefore, before the beginning of February, DS Capital will liquidate all long investments in international oil prices, raise funds through mortgage financing, and start a wave of short-term short selling of international oil prices.

When this wave ends, Barron's will have enough capital to acquire O2.