How do you tweak the cost of capital of a company with interests in Media & Gaming industries that individually have unequal capital costs?
Break the company into two – one company media; one company gaming.
1. Publishing & Broadcasting Ltd., Australia's largest casino and media owner, plans to split into two companies and pay A$2 billion ($1.7 billion) to shareholders to boost returns.
2. Investors will receive one share in the new companies and A$3 cash for each Publishing & Broadcasting share.
3. The split may help bring the market value of Publishing & Broadcasting's gaming assets in line with those of Las Vegas Sands Co. and MGM Mirage., the world's biggest casino operators. The shares of the three biggest gaming companies in the U.S. by market value, Las Vegas Sands, MGM Mirage and Harrah's Entertainment Inc., sell on average of 35.6 times estimated earnings, compared with Publishing & Broadcasting's multiple of 25.2 times earnings.
4. It will allow management to run the businesses separately, giving investors a choice of betting on the gaming or media industries. 5. The cash return to shareholders will be paid off Publishing & Broadcasting's balance sheet
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