price predictions, page-34

Certainly a streeful time for all.....but here is an article from the other day, which perfectly explains what I have just posted. $2.4 million value in their travel business or $4 per share

Stella's chance to starNick Nichols

15Jan08

AFTER seeking a buyer for its Stella business for more than a year, it looks as though MFS may have come up with the perfect scenario to measure the true value of its travel arm.

Property finance group City Pacific yesterday unveiled plans to merge its funds management operations with those of MFS.

The Gold Coast companies have toyed with the idea of a union for the past two years.

A newspaper report in August put the deal in the public domain for the first time, forcing the corporate tigers weeks later to scramble for cover and announce that they had dropped out of negotiations.

While MFS chief executive Michael King yesterday said the merger was still just a proposal at this stage, his City Pacific counterpart Phil Sullivan described it as good as done.

Once completed, the deal will see MFS become a stand-alone tourism company, through its Stella tourism and travel business.

Since late last year, MFS has been seeking a 50 per cent equity partner in the business, with some sources valuing the business at $2.4 billion-plus.

Based on Friday's closing price for MFS, the company as a whole -- including the funds management arm -- was worth just $1.7 billion, clouding the true value of Stella which is on track to deliver an interim profit, before interest, tax, depreciation and amortisation of $103 million.

There was a rapid readjustment of the share price yesterday after the City Pacific proposal was announced.

MFS shares jumped almost 11 per cent to close at $3.94, adding another $190 million to its market capitalisation.

City Pacific, which last week was buoyed by an expected 15 per cent increase in its December-half profit, closed steady at $3.70.

Last year, MFS was close to securing a partner for Stella, a company formed through a rapid acquisition spree over 2006 and into 2007.

The businesses of Gold Coast tourism identities Tony Smith (BreakFree) and Chris Scott (S8) were absorbed in the buying frenzy, along with the Saville Hotel Group.

Private equity firm CVC Asia Pacific has long been mooted as MFS's preferred partner in a Stella buyout, but the deal collapsed late last year, no doubt aided by the current global credit squeeze.

MFS is understood to have not been happy with the price put on the table by CVC and instead opted to retain the business whose profit forecasts continue to surprise on the upside.

Once the funds management business is extracted from MFS and the dust settles from the deal, the true value of Stella will begin to emerge.

However, details of the proposed merger remain unclear and, no doubt, have yet to be fully thrashed out by the parties.

The question remains as to how Mr King will fit into the City Pacific picture, having virtually run his own show, along with founding partner Phil Adams, for more than seven years.

Brokers were quite perplexed by the announcement, and are awaiting more detail.

ABN AMRO Morgans has suggested the deal will deliver MFS shareholders 0.45 City Pacific shares and one Stella share for each MFS share currently held.

Effectively, MFS shareholders would own 60 per cent of the combined group, said the broking house.

But, Morgans said the offer undervalued the MFS financial services business by up to 54 per cent.

On the other hand, Morgans said the market had equally undervalued the Stella business which it said was worth $3.49 a share, based on a projected 2009 net profit of $113 million.



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