Monday, January 08, 2007

Wesfarmers overpays ....

Wesfarmers paid $500 million to buy Linde Gas from its German parent company. This acquisition has caused comment due to the price it paid. The price represents a multiple of 13.5 times EBITDA, which is much higher than usual for specialty gas businesses.

The price is also up to $A200 million more than another offer. The industry has also expressed some surprise that the deal was approved by the Australian Competition & Consumer Commission, without requiring Wesfarmers to divest another venture in Western Australia.

All up a poor acquisition by WesFarmers and it has to make you think what management are doing. Do they have too much money ? Why not give it back to the shareholders. They could have probably got it for $400 million and gave $100 million back as a special dividend or buy back shares. Management needs to start thinking about what they are doing with investor money.

Good Luck Investing.

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