The Illusion of International Small-Cap Investing

The Illusion of International Small-Cap Investing

Drew Spangler
Grantham, Mayo, Van Otterloo & Co. LLC
March 2001

Investing in international small-cap is a complicated and deceptive business.  Many of the common assumptions used to justify international small-cap investing are misguided.  The sticker must read “caveat emptor.”


Many investors are attracted to international small-cap because they believe that small companies are capable of faster earnings growth.  They reason that higher growth rates will lead to superior performance.  But the great irony of small-cap investing is that these companies do not grow any faster than their larger peers.  

• In fact, the corporate financial performance of international small companies is below average.  
• The small universe is populated with mediocre companies because the common definition of small contains an implicit bias for stocks with low valuations.  
• Low stock valuations are often the consequence of inferior corporate results. 

However, the hidden tilt towards value stocks actually provides the international small sector with the engine for excess returns and ironically enables international small-cap investing to be potentially very lucrative.  In addition, this value bias can be used to assess the future prospects for small stocks in the international equity markets.  This paper seeks to reveal the true identity of international small stocks and thereby equip investors with the information, insight and tools.


Executive Summary

Investors are beginning to awaken to the compelling case for small stock investing in the international markets. Recent outperformance, low valuations and increasing diversification benefits are all reasons investors are becoming attracted to this sector. Before they jump in head first, however, investors need to be aware of a few issues that make assessing the risks and rewards of international small stocks more challenging.

1. First, it is not entirely clear how to define small-cap and there is a diversity of opinion about what method is most appropriate for identifying the small universe. In this paper, we compare and contrast the construction methodologies of the two leading international small-cap indices.
2. Second, most conventional methods for defining small use market capitalization to measure company size.This introduces an implicit bias for companies with low stock valuations relative to corporate fundamentals such as earnings or assets.
3. Third, it is the quality of cheapness rather than smallness that drives small stock performance and is a powerful tool for forecasting the future performance of these stocks.
4. Fourth, although investors are often tempted by small-cap because they perceive these stocks to be capable of higher earnings growth, our empirical analysis shows this to be a fallacy.  In fact, the fundamental corporate performance of small stocks is below average.

Finally, the diversification benefits of international small are alive and well. Not only have correlations with international large stocks decreased, but international small continues to be asynchronous with both US large and US small stocks.

In conclusion, while international small stocks currently present a compelling opportunity, investors need to be educated and informed in order to take full advantage of this potentially lucrative sector.


Read the full report here.

Training the Government towards a Good Governance

If the government is trained well enough, then they would be able to move towards a good governance. So, to set an example, the starting point for the training should be government itself.

The areas of training should be at least include:

- How to avoid Corruption
- How to respect and implement Law and Ethics
- How to implement Justice
- How to become a genuine and sincere Leader
- How to build Public and National Interest first and throw personal interest at the end.

This "Training Program” is required in the Government from top to bottom.

What is Your Company's Altman's Z Score?

What is Your Company's Altman's Z Score?

A fundamental step in determining the health of a company is the analysis of a company's historical financial statements. Historical data analysis provides a picture of the financial health of a business and a roadmap outlining the direction the business is heading. An integral part of historical analysis is the use of financial ratios. Financial ratios are analytical tools applied to financial data, which are used to identify positive and negative trends, strengths and weaknesses, investment attributes, and other trends, which measure the viability of a company's business.

Ratio analysis is typically used to measure a firm's liquidity, leverage, activity, profitability and growth. No single ratio calculation can provide a meaningful picture of a firm's financial condition. This article will focus on a model, which captures the predictive viability of a firm's financial health by using a combination of financial ratios that ultimately predicts a score, which can be used to determine the financial health of a company.

In 1968, Professor Edward Altman of the New York University School of Business developed what is known today as the "Z-Score." The Z-Score is a statistical model that incorporates the use of five different ratios, which serve to predict the health of a firm. Professor Altman believed that selecting various financial ratios and applying a certain weight to each ratio could develop a meaningful prediction model. The model was developed by sampling 66 publicly traded manufacturing companies that all had assets in excess of $1 million. Professor Altman evaluated 22 different ratios that ultimately were reduced to five balance sheet and performance ratios, which were weighted by established coefficients that account for their importance.

The following calculation is used to arrive at the total Z-Score:

Z = 1.20(X1) + 1.40 (X2) +3.30(X3) +.60(X4) + .99(X5)

X1 = Working Capital / Total Assets

X2 = Retained Earnings / Total Assets

X3 = Earnings before Interest and Taxes / Total Assets

X4 = Market Value Equity / Book Value of Total Debt

X5 = Sales / Total Assets

Z = Overall Score

The above calculation represents the overall index for a publicly traded manufacturing company. The calculation would be modified for a privately held business by implementing book value of equity because the privately held company's stock is not publicly traded. The private company Z-Score calculation would be calculated as follows:

Z = .717(X1) + .847(X2) + 3.107(X3) + .420(X4) + .998(X5)

Professor Altman further modified the formula for non-manufacturing companies by eliminating X5 (sales / total assets) due to the fact that sales / total assets can vary from industry to industry. The non-manufacturing company Z-Score would be calculated as follows:

Z = 6.56(X1) + 3.26(X2) + 6.72(X3) + 1.05(X4)

There is a different interpretation for each model. Professor Altman concluded that a Z-Score in the unhealthy category meant a company had the risk of going bankrupt, whereas a Z-Score in the healthy category represented a stable healthy company. Those companies that were in the gray area were considered misclassified.

Public Companies:
1.81 Unhealthy
1.81 - 2.99 Gray Area
2.99 Healthy

Private Companies:
1.23 Unhealthy
1.23 - 2.90 Gray Area
2.90 Healthy

Non-manufacturing Companies:
1.0 Unhealthy
 1.11 - 2.60 Gray Area ;
2.6 Healthy

The Z-Score is used by financial professionals, consultants, bankers, investors and various courts of law to measure a company's viability as an ongoing entity. Predictive models and ratio analysis are useful tools in measuring the health of a subject company. It should be noted that not every model is without shortcomings. First, ratio analysis is only as good as the underlying account data, which can be subject to manipulation. Additionally, ratio calculations can produce erroneous values when abnormal data is used.

The Z-Score is one way to provide a measure of a company's stability and its ability to function as a going concern. Many predictive models like the Z-Score provide credibility to the process. However, the Z-Score is just one method of predicting financial health and should not be the sole basis of evaluation. First hand knowledge of the operations and management are an integral part of the overall analysis necessary to come to any formal conclusions related to the final conclusion.


http://www.vercoradvisor.com/articles/CompanyScore.html

What Is a Trade Deficit?

What Is a Trade Deficit?

With all the talk of globalization, trade imbalances, imports, exports and deficits, it's easy to become confused and misunderstand some of the terms used by politicians and economists. The trade deficit is one of the more important issues facing American society. Knowing what it is and what it means to you can help make sense of what people and politicians say about it.

Significance
1. Trade is the lifeblood of any country. In the United States, literally trillions of dollars are generated by the importation and exportation of goods to U.S. shores. Ideally, the United States should export more than it imports, particularly if the value of those goods is high. For instance, selling raw lumber nets a relatively low profit. Turning the lumber into furniture, however, adds value to the lumber. These "value-added" products are then sold at a much higher profit and though less of them may be send abroad, the trade-off is a "surplus" of revenue.

Geography
2. The United States trades either directly or indirectly with every country on the planet, with a few minor exceptions. Some countries import American value-added goods and send raw materials to the United States. Underdeveloped nations, usually in Latin America and Africa, export agricultural or mineral products in exchange for American products. For example, Jamaica produces a mineral called "bauxite," which is used to make aluminum. The United States exports cars, computers and telecommunications equipment. With developed or developing countries, the United States trades finished goods (toys, electronics, machines) in return for finished goods from those countries. Another example is when the United States trades with China; China purchases high-tech equipment and some raw materials such as lumber and in return, the United States imports everything from toothpaste to flatware to clothing.

Effects
3. When a trade deficit is in effect, the United States is purchasing more from another country than it is selling to that country. In the examples mentioned earlier, the United States may have a trade "surplus" with Jamaica but a trade "deficit" with China. This means more of America's money is going to China than Chinese money is coming to America. A trade deficit may mean that products made in America are becoming too costly for Americans to purchase, or it may mean that foreign products are made more cheaply and thus are more attractive to American consumers. Either way, American companies are forced to cut jobs, cut production or close altogether in the face of dwindling sales. This means less jobs domestically and less money in consumers' pockets, which may reinforce the cycle of purchasing cheaply made imported items.

Types
4. Though there may be a deficit with one or even several countries, the aggregate value of all products exported is compared to the value of all products imported. If the result is a positive number, the United States is said to have an "overall trade surplus." If that number is negative, the United States is said to have an "overall trade deficit." Trade deficits vary from year to year; certain years may favor products from certain countries. French wines, for example, may be in fashion for a few years, but then as the price becomes too high, consumers may choose to drink Australian, Chilean or even domestic wines instead.

Prevention/Solution
5. Trade deficits, if left running for several years, can adversely affect the United States. Businesses, particularly small businesses, may cease to function or may be harmed by falling profits. As consumers become aware of the deficit between the United States and another country, they may opt to purchase products from another country or domestic versions. For instance, the proliferation of Japanese electronics in the 1980s and 1990s led to a growing dissatisfaction with Japanese dominance in that area. The result was purchases of domestic electronics, as well as the purchasing of Korean, Taiwanese and European electronics. For example, in the personal music industry, Japanese electronics giant Sony's Walkman product was the best-selling personal music player throughout the 1980s and into the 1990s. With the advent of Apple's iPod, however, Sony found itself unable to make a product that appealed to American audiences and lost considerable market share.

http://tradedeficitbytrade.blogspot.com/2010/01/what-is-trade-deficit.html

Understanding Value Traps

If you believe a stock has an a true ("intrinsic") value, you will try to buy it below that level (when it's "cheap"). So why sell if it gets even cheaper.

A stock that stays at a large discount to intrinsic value is a "value trap". It's an important issue for value investors and there are are few methods of avoid value traps.

One way to avoid a value trap with a cheap stock (like Benjamin Graham liked) is to buy them with catalysts, i.e. new management or new plans to unlock that value through buybacks, dividends, or sale/merger.

The best way to avoid a value trap is to buy a growing business that increases value over time.

LPI Capital Records RM84.72 Million In Pre-Tax Profit

July 08, 2010 20:59 PM

LPI Capital Records RM84.72 Million In Pre-Tax Profit

KUALA LUMPUR, July 8 (Bernama) -- General insurer, LPI Capital Bhd, chalked up a 17.3 per cent increase in pre-tax profit to RM84.727 million for the first half-year ended June 30, 2010, from RM72.231 million registered in the same period last year due to higher underwriting profit.

The group's revenue rose 12.2 per cent to RM423.510 million, during the period under review, from RM377.253 million recorded in the corresponding period on the back of increased premium income of 14.2 per cent, said Chairman Tan Sri Dr Teh Hong Piow in a statement Thursday.

He said LPI's earning per share for the six months period jumped to 47 sen from 42 sen previously.

Meanwhile, LPI's wholly-owned subsidiary, Lonpac Insurance Bhd, contributed RM63.7 million to the group's profit in the first-half of the year.

For the second-quarter ended June 30, 2010, the group's pre-tax profit fell 17.7 per cent to RM35.896 million, from RM29.994 million chalked up in the corresponding quarter, due to higher investment income received in the preceding quarter.

"Barring unforeseen circumstances, the group is confident of recording a satisfactory performance in the second-half of 2010," Teh said.

In consideration of the group's strong and commendable performance over the years, Teh said the board was proposing a one-for-ten rights issue of RM7.00 per share and a one-for-two bonus issue.

The proposals were, however, subject to the approval of relevant authorities.

The company also declared an interim single tier dividend of 10 sen per ordinary share.

LPI's total asset base rose 26 per cent to RM1.9 billion as at June 30, 2010.

"The group continued to create and enhance shareholder value through the efficient utilisation of its capital and increasing its return on equity while maintaining excellent corporate governance," Teh added.

-- BERNAMA

http://www.bernama.com/bernama/v5/newsbusiness.php?id=512025

Bursa Malaysia Reprimands Dealer Representative For False Trading

July 08, 2010 18:26 PM

Bursa Malaysia Reprimands Dealer Representative For False Trading

KUALA LUMPUR, July 8 (Bernama) -- Bursa Malaysia Securities Bhd publicly reprimanded, imposed a fine of RM100,000 and ordered to strike off Lee Beng Huat a commissioned dealer's representative (CDR) with Kenanga Investment Bank Bhd, from the Register for false trading and market manipulation.

In a statement, it said Lee had carried out false trading and market manipulation in his dealing activities in the shares of Axis Incorporation Bhd of approximately 41 million shares out of the market turnover of 104 million Axis shares for 87 trading days in 2006-2007.

During the said period, Lee had dealt in Axis shares predominantly through the accounts of 10 clients (10 Accounts).

The statement said he had entered buy and sell orders which were manipulative in nature and led to false or misleading appearance of active trading in, or market for, Axis shares and this tantamounted to stock market manipulation.

The breach by Lee, among others, involved entry of orders by Lee which were several bids lower than the last done price with no real intention to have the buy orders matched.

Lee also engaged in order splitting, entering a series of buy orders in succession through any one of the 10 Accounts with the same price which gave rise to, and created an impression, of continuous demand for Axis shares which led to false or misleading appearance of active demand/market for Axis shares.

Therefore, the buy and sell orders executed in the 10 Accounts had cross trades which were matched among each other for approximately 12 million units of Axis shares involving Lee as their common CDR in carrying out dealing activities in Axis shares in their accounts.

By engaging in False Trading and Market Manipulations, Lee managed to sell about 72 per cent (or 40.98 million out of 56.67 million units) of the sell orders entered for the 10 Accounts and bought 55 per cent (or 41.6 million out of 76.14 million units) of the buy orders.

The higher volume and percentage of the buy orders, which were subsequently cancelled and/or lapsed due to the orders being lower than the market/last done price resulting in lower percentage of buy orders matched, not only gave an impression of and created an inflated demand for Axis shares but also led to a false or misleading appearance of active demand/market for Axis shares.

-- BERNAMA

http://www.bernama.com/bernama/v5/newsbusiness.php?id=511931

Nazir: Retail investors moving offshore to expand investment options

Written by Bernama
Wednesday, 07 July 2010 16:37


KUALA LUMPUR: Retail investors are moving towards investing offshore as part of their strategies to grow investment options, CIMB Group Holdings Bhd group chief executive, Datuk Seri Nazir Razak, said.

He said for the past 18 months, retail investors had been investing offshore through many networks, including CIMB.

"That's a growth area. It may not make Bursa Malaysia terribly happy but at the end, retail investors are growing their investment options.

"The United States and Asean had been the top offshore destinations," he told reporters after delivering the keynote address at the CIMB Private Banking Second Annual Investment Conference here on Wednesday, July 7.

Nazir was commenting on the lack of participation by retail investors in the local bourse.

A recent Bursa Malaysia's report, "Rethink Retail", showed that 61% of the potential retail investors did not know how to invest in equity markets.

Furthermore, 48% of non-investors cited high risks as the main reason for their non-participation in the stock market.

Nazir said through the revival of CIMB Securities brand, the group was growing the number of remisiers to 1,000 across the region as part of its strategy to encourage more retail investor participation in the local bourse.

On the private banking potential, he said, the group, which currently has RM7 billion worth of asset under management (AUM), would grow it to RM10 billion within five years.

"The group is currently in the process of integrating its private banking capabilities across the region," he said.

At the same event, Nazir also announced that CIMB Group's automated teller machine (ATM) users could withdraw cash via its ATMs in Malaysia, Indonesia, Singapore and Thailand for free immediately.

On another note, Nazir said the bank was concerned with the recent development of SJ Asset Management (SJAM), which was currently being examined by the Securities Commission (SC) due to irregularities in its accounts.

"SJAM is one of the approved fund managers for our private bankers to recommend to our clients, so therefore, by extension, clients will have some money invested in," he said.

On CIMB's level of exposure in SJAM, Nazir said: "Even one sen will concern me because this is our clients' money in SJAM ... this is something that we are monitoring and engaging with SC closely."

According to newsreports, a number of banks' clients may have financial exposure to SJAM. - Bernama

http://www.theedgemalaysia.com/business-news/169431-nazir-retail-investors-moving-offshore-to-expand-investment-options.html

Bank Negara ups OPR by 25bps to 2.75%

Written by Joseph Chin
Thursday, 08 July 2010 18:11


KUALA LUMPUR: Bank Negara raised the Overnight Policy Rate (OPR) by 25 basis points to 2.75% at the Monetary Policy Committee (MPC) meeting on Thursday, July 8.

"The floor and ceiling rates of the corridor for the OPR are correspondingly raised to 2.50% and 3% respectively," it said.

The central bank said the MPC considered the new level of the OPR to be appropriate and consistent with the current assessment of the growth and inflation prospects.

It also said the stance of monetary policy continues to remain accommodative and supportive of economic growth.

On the domestic economy, it said recent trends in industrial production, financing activity, labour market conditions and external trade indicate that economic activity has remained robust in the second quarter.

"Going forward, while external developments may result in some moderation in the pace of growth, the domestic economy is expected to remain strong with continued improvements in private consumption and investment, and augmented by public investment spending," it said.

Domestic inflation recorded modest increases in April and May, mostly on account of supply factors.

Bank Negara said prices were expected to rise at a gradual pace in the coming months, in line with the continued improvement in domestic economic conditions, and taking into account possible adjustments in administered prices.

"Overall, inflation is, however, expected to remain moderate going into 2011," it said.


http://www.theedgemalaysia.com/business-news/169531-flash-bank-negara-ups-opr-by-25bps-to-275.html

Margin of safety

The margin of safety is the difference between the intrinsic value of a security and its current market price.

Expanded Definition
Benjamin Graham and David Dodd coined the term "margin of safety" in their 1936 book., Security Analysis. It was also featured in Graham's The Intelligent Investor.

Value investing, which was first described by Graham and Dodd, seeks to buy companies at a discount to their intrinsic value. But a company's intrinsic value, which judges not just the current value of the company but the future value of the company, depends on several variables that can at best be estimated. Therefore, the value investor builds in a margin of safety: the difference between the company's intrinsic value and the market value that would have to exist before the value investor would trust that he or she was truly buying at a discount.

For example, in order to buy a particular security, an investor might require that the market price be 30% below the intrinsic value. This margin of safety would ensure that, even if his calculated intrinsic value were wrong, he would likely not have overpaid.

The margin of safety, in other words, is a way of managing the risk inherent in valuing and buying securities. Investors will often require a smaller margin of safety from an established company with a competitive advantage, for example, than for one in a new and growing industry. As Warren Buffett once quipped, "It is better to be approximately right than precisely wrong."

Example
If shares of Danneskjöld Repossessions (Nasdaq: FAKE) currently trade for $75, but the intrinsic value of the shares is $100, then the margin of safety is 25%. On a related note, the potential upside on the shares is 33%.


http://wiki.fool.com/Margin_of_safety?source=iabsitlnk0000001

Thursday July 8, 2010

CIMB monitoring SJAM

KUALA LUMPUR: CIMB Group Holdings Bhd is monitoring the situation at SJ Asset Management Sdn Bhd (SJAM), which is currently being examined by the Securities Commision (SC) due to irregularities in its accounts.

Chief executive officer Datuk Seri Nazir Razak said: “We are concerned about this.

CIMB Bank Group Chief Executive Datuk Seri Nazir Razak delivering his keynote address at the CIMB Private Banking Conference 2010 on Wednesday.

“SJAM was one of two fund managers our private bankers had recommended to clients and by extension, some of them had invested in the asset management company.”

Asked if the investment by CIMB clients placed in SJAM was high, Nazir said high was a relative number. “The key thing is that even if it was one sen placed in SJAM, it’s our clients’ money.”

Beyond these facts, Nazir said he did not know more, except that the SC was examining SJAM’s records and that independent auditors had been called in to look closer at its accounts

http://biz.thestar.com.my/news/story.asp?file=/2010/7/8/business/6626594&sec=business

Performance at a Glance: Petronas Dagangan

Performance at a Glance:  Petronas Dagangan
https://spreadsheets.google.com/pub?key=0AuRRzs61sKqRdFpXVkdlVVlEWVc3dVg0aWJ6bExnNVE&authkey=CJmRvZsI&hl=en&output=html

Why stay invested during market declines

Click here for an enlarged version

Stay Invested
For long-term investors, staying invested makes more sense than moving in and out of the market at the first sign of bad news.

Over the past 60 years, bull markets have lasted longer (42 months on average) than bear markets (14 months on average) and have more than made up for the periodic market declines.
Bull markets have begun during economic recessions and expansions and at all level of rates.  And while it is impossible to predict when a bull market will begin, it is possible to miss one by waiting on the sidelines.

Federal fund rates
The interest rate at which private banks lend money for overnight loans.  The Fed generally raises the target federal funds rate to slow economic growth and lowers the rate to facilitate growth.

OSK Research maintains TP of RM13 for Public Bank

OSK Research maintains TP of RM13 for Public Bank
Written by OSK Research
Tuesday, 06 July 2010 08:52

KUALA LUMPUR: OSK Research is maintaining its target price of RM13 for PUBLIC BANK BHD [], which implies a return on equity of 26% and price-to-book value multiplier of 3.80 times.

It said on Tuesday, July 6 the current share price implies a relatively conservative 22% ROE vs management’s three-year targets of 30%.

“More intensive capital usage and greater focus on capital light high ROE, as well as high fee income are expected to help sustain the group’s robust profit generation trend,” it said.

OSK Research said the risk of potentially onerous regulatory core equity capital requirements has been overplayed as the possible dilution is less than 10% on a worst-case scenario.

“Investors should focus on the group’s agility in meeting such requirements from its excess reserves given its strong and stable asset quality and minimal exposure to derivatives, trading and off-balance sheet instruments,” it said.


http://www.theedgemalaysia.com/business-news/169259-osk-research-maintains-tp-of-rm13-for-public-bank.html

Kuok's Wilmar International - More money was natural sweetener

More money was natural sweetener
July 6, 2010

KUOK Khoon Hong is clearly far more loved by the Singaporean sharemarket than CSR is locally. How else to explain why CSR's surprise $1.75 billion sale of its namesake sugar business to Kuok's Wilmar International yesterday added almost $800 million to the market value of his company, yet added barely $80 million to the seller, which is pocketing a lot more cash than it had expected?

Wilmar wrong-footed China's Bright Food, which had been bidding since January, by offering more money. Kuok's team was apparently so confident that it had Minter Ellison partner Leigh Brown, who specialises in advising clients on Asian deals, register a corporate structure here last Thursday.

Kuok is these days ranked as Singapore's third-richest man, with about $US3.5 billion ($A4.2 billion), according to Forbes, although he still has some catching up to do on uncle Robert Kuok's $US13.5 billion.

Most of his wealth comes from Wilmar, which is worth $S38 billion ($A34 billion) and now claims the title of Asia's largest agribusiness group. Wilmar was put together by Kuok, with assets from Uncle Robert, business partner and grain trader Martua Sitorus, and the Chinese grain business of Illinois-based Archer Daniels Midland. It has been a profitable exercise for all (and for Kuok's broker mate Peter Lim, who is now a billionaire after putting $10 million into the compliance listing in 2006), and Kuok is well-liked in his home town.

There are critics of Wilmar on the environmental front because its palm oil operations in Indonesia are viewed as contributing to the endangerment of orangutan habitats. The company has strenuously defended its practices.

Wilmar already had a minor presence in sugar in Australia after buying the Brisbane Sugar Terminal in a joint venture last year, but it will now own not just a vertically integrated producing business but a big foothold in the pantries of Australian households - and a great launching pad for meeting increasing demand in China and other developing Asian nations.

The biggest hurdle the deal faces is clearing the Foreign Investment Review Board, which is really only a cypher for government policy. When Shanghai's Bright Food first made its initial $1.5 billion offer for the CSR business in mid-January, the deal was caught up in a whiff of xenophobia over state-owned entities buying more of the Australian ''farm''.

Wilmar's purchase does not carry any of that baggage, although Treasurer Wayne Swan and Prime Minister Julia Gillard will be keenly conscious of public opinion when they consider whether to approve the sale, given the deal's proximity to the federal election and the pivotal role Queensland electorates will play in the outcome.

CSR chairman Ian Blackburne and interim chief executive Jeremy Sutcliffe also get to pop along to the annual meeting in a couple of days armed with much better news than having to vote on the contentious plan to float the sugar unit as a separate company.

The trick now will be to harvest enough of the sale money to ensure that the courts and public are satisfied CSR is properly providing for potential victims of its now defunct asbestos operations.

They can now say that some time later this year, once the asbestos issue has been resolved, the company will be thinking about what the most tax-effective reward will be for investors - it may be more complicated than a capital return because it will depend on how the Tax Office views proceeds from the sale.

Already CSR is budgeting for about $150 million in costs. Much of that will be capital gains tax, followed by legal fees, although a substantial amount will be in the form of success fees to Lazard and UBS, which ran the sale (Goldman Sachs dropped out of the game earlier this year).

The sale had a few other interesting outcomes. Someone in the Bright Food camp clearly believed it was the right strategy to leak details of its offer to the media over the weekend, possibly hoping that publicising its decision to bid a lower price than the $1.75 billion mooted in April would clear the field of rivals.

In the end, they must have felt a little silly when CSR chief Sutcliffe made the courtesy phone call yesterday morning telling them they had been beaten by Wilmar (he had already rung Kuok's office). Asked about the Bright Food leak, Sutcliffe referred to the preparedness of some to breach confidentialities.

He also made repeated references to the ''uncertainty'' in Bright Food's offer, without ever spelling out whether that reflected the bid's conditions or CSR's reading of conditions in the FIRB and Canberra on what hoops a state-owned entity might have to jump through.

The second beneficial outcome is that we have, hopefully, been saved from the listing of a company called ''Sucrogen'' - which sounds more like an artificial sweetener than the real thing.

Sucrogen boss Ian Glasson, who was hoping to head up his own listed company if it had instead floated, probably disagrees.

Finally, ANZ chief Mike Smith will no doubt be congratulating Glenn Porritt and his mergers and acquisitions team, which was the successful advisory team for Wilmar. As long as there are no hitches, a relationship with the Kuoks will not hurt his Asian expansion ambitions for the bank.

Source: The Age