Money Machine

Chapter 24A Deal That Shakes

The day after my daughter's graduation, I sent Newbridge investors a memo on the finalized deal with this brief description:

NB has the right to elect to receive the consideration in cash or PAIG H shares. If cash, Newbridge will receive 22 yuan per share or 11.4 billion yuan [in total] ($1.68 billion). If shares, Newbridge will receive 299 million PAIG H shares immediately and freely tradable on the Hong Kong Stock Exchange. The number of shares is based on an exchange ratio of 1.74 determined at the time of announcement and it is calculated as the last 30‐day average closing price of PAIG H shares divided by 26 yuan per share for SDB.

It should be noted that although the implied SDB per‐share price of 26 yuan at the time of the announcement might have seemed much lower than the price at its peak (40 yuan or so in 2007), the total value of our holdings came out to be about the same. Due to stock dividends and warrant exercises, our SDB shares had effectively split; we now owned many more shares than we had in 2007. Of course, we hoped to gain even more from the further appreciation of PAIG stock during the 18 months until the expiration of our option.

The saga of SDB was not yet over. The next phase required an intensive public relations campaign and lobbying with regulators for approval. Even though we had structured the deal so that each of its components complied with existing rules and regulations, taken as a whole the transaction was still ...