In general when buying minority stakes, listed companies prefer to have at least 20%, because once you own >=20%, accounting rules recognize it as an associate and will be able to equity account the minority stake's earnings on your own P/L (ie "share of results of associates"). If you own <20%, you can only recognize something on your own P/L when it declares dividends and we know dividends are generally always < accounting profit.
BRC Asia's purchase at 19.9%, just 0.1% short of 20% to allow recognition of P/L, looks to be intentional? Could we infer that the target purchase is probably loss-making?
BRC Asia to buy 19.9% of steel reinforcement company for S$16 million
BRC entered into a conditional sales and purchase agreement with Daehan Steel and LTC Corp on Tuesday. Under the agreement, BRC will acquire 4.6 million ordinary shares of Angkasa Daehan Steel from LTC, and Daehan Steel will acquire 6.9 million ordinary shares from LTC.
Daehan Steel will hold 80.1 per cent of Angkasa Daehan Steel after the transaction.
https://www.businesstimes.com.sg/compani...16-million
BRC Asia's purchase at 19.9%, just 0.1% short of 20% to allow recognition of P/L, looks to be intentional? Could we infer that the target purchase is probably loss-making?
BRC Asia to buy 19.9% of steel reinforcement company for S$16 million
BRC entered into a conditional sales and purchase agreement with Daehan Steel and LTC Corp on Tuesday. Under the agreement, BRC will acquire 4.6 million ordinary shares of Angkasa Daehan Steel from LTC, and Daehan Steel will acquire 6.9 million ordinary shares from LTC.
Daehan Steel will hold 80.1 per cent of Angkasa Daehan Steel after the transaction.
https://www.businesstimes.com.sg/compani...16-million