There can be no doubt that Bain will do a better job....Super Nova wrote: If this company can do a better job than the government... I'm all for it.
.... For Bain.
Lets look at the privatisation of CSL in Australia. A move which netted the government of the time a cool $300 million (which was quite a bit back in 1994) and we all know that CSL went on to double in size by 2000, and recently bought the German drug giant Aventis Behring.
So a massive success for privatisation, then? Sure. But not so much formthe Australian government. This is because the government effectively sold a monopoly (CSL is the exclusive blood product supplier for Australia) for which the government is the only client. The results is that the Australian government immediately began paying an additional $45 million per year for a service it previously received for free. So the capital from the sale itself was gone within 6 years (much earlier than the 10 year contract it guaranteed to private investors). The loss to taxpayers can be capitalised at around $600 million. That is, instead of selling CSL, the government could have taken out a $600 million loan and be in a better financial position after 6 years. So, not really a sensible sale if your are the government. But hey, it floated at $2.40 a share and is now fetching $65 a share, so a lot of private investors got very fucking rich.
Just remember, their only client - the one who's business is swelling that sweaty share price - is you.
Worse still is that with the sale, the government granted CSL immunity from liability for any HIV of CJD related injuries related to activities before CSL was privatised. So, the government takes a $600 million capital loss, and doesn't offload any of its exposure it the process.
So yeah, this is a no brainier for Bain. Huge profit potential. Just remember who the client is, SN.
