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Re: [sharechat] Tranz Rail

From: "" <>
Date: Tue, 15 Apr 2003 13:22:39 +1200

Hi hello,

> We all know the implications for a share
> price if a company is "bought out".
> What are the implications for the share
> price should a company be "broken up"?

If a company is the broken up, then share price ultimately, should reflect what 
different pieces are worth to the different buyers of those pieces.   A 
starting point might 
be to assume that the share price will approach the net tangible asset backing 
of the 

However, you need to consider whether the asset values as shown on the company 
balance sheet are realistic.    Values carried at historical cost are often 
But if those same assets have in recent years been revalued upwards then they 
not be realistic.   Conversely assets valued at historic cost, like the rail 
network for 
example, will be depreciated in line with some accounting formula.   This may 
or may not 
have any connection with the amount of money that the company needs to spend on 
maintenance to keep the track to an acceptable standard.

The other thing that will not be reflected in the NTA is how much money is 
needed for 
new capital expenditure (new rolling stock for example)  to keep the company in 
business.    All this means I would caution you with just taking the NTA figure 
in the newspaper and saying 'that's it'.


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"Sometimes to see the wood from the trees, 
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