Various business school studies have shown
that most takeovers fail – the predator company does not produce shareholder
value through the acquisition. If it’s a hostile takeover, the chances of
failure become much greater as it increases the likelihood of paying too much
for the target.

The Alinta-AGL fight looks like heading
down that hostile path as the battle of egos and executive pay packets overtake
the business case. Now that AGL has effectively accepted the business case of
the Alinta bid, it’s all about who gets to be paid many, many millions for
running the show and who gets to walk away with many, many millions for not
running the show.

It remains possible that the Alinta and AGL
boards could rise above the ambitions of their CEOs and sit down together to
work out what might actually be best for their shareholders, but it’s unlikely.
Chairmen and boards have healthy egos as well. And then there’s the reality
that AGL chairman Mark Johnson is hopelessly conflicted given that his ruthless
Macquarie Bank M&A team is advising Alinta in the fight. Macquarie doesn’t
have a good record when it comes to what’s best for Macquarie compared with what’s
best for some other group of shareholders.

Bryan Frith in The Oz goes into great detail about the possibility of this fight becoming a rare
Pac-man battle – a hostile race between each company to swallow the other.
Meanwhile, The Smage is wrapping up divided analyst opinion on the
values involved in a war of attrition.

The way it’s going, the winners will be the
CEOs and the losers will be the shareholders, who will be left holding the “victorious” company at
the end of the battle.

Peter Fray

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