What Good Boards Do: Take the Better Offer

June 14, 2011

Graham Packaging is controlled by private equity titan The Blackstone Group.  Blackstone, which was behind the largest public company purchase of all time in 2006 (an all cash), sold Graham in decision that seems to be consistent with its roots.

Specifically, it jilted and cash/stock offer from Silgan Holdings Inc. to take a larger, all-cash offer from Rank Group.  Rank’s offer beat Silgan’s offer by $3 and was all cash.  There could be a number of factors as to why the board chose to take the all-cash offer as opposed to the cash/stock deal, but the board must have thought that the cash now was a better value than potential upside of a stock deal (where it could participate in future earnings).

This could be a sign that Blackstone: 1) is feeling bearish about the market in general and wants to hoard cash; or 2) simply doesn’t think Graham has $3 worth of growth in it over the short term.

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