How they control cost: 21-May-08
Sourav Mitra -
Wednesday, May 21, 2008 8:47 PM
Tiger Brands Ltd., South Africa's biggest food producer:
It will sell a 10 percent stake to black investors after spinning off its Adcock Ingram health-care unit as South Africa's government is pushing companies to sell stakes to black investors to compensate for discrimination under apartheid, which ended in 1994.
[Click here for full story at Bloomberg.com]
Wider sources of funds = lower cost of finance.
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ArcelorMittal, the world's biggest steelmaker:
It bought a 14.9 percent stake in Australian coal producer Macarthur Coal Ltd., the world's biggest maker of pulverized coal used by steelmakers, and wants to take it over to secure raw material supplies after a tripling in coking coal prices this year.
Cost: above $4.2 billion
[Click here for full story at Bloomberg.com]
Captive sourcing = cost saving (+ income boosting if some of the commodity is sold outside at ever rising prices).
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Israel Corp., the holding company controlled by the billionaire Ofer family:
It is using dividends from its Israel Chemicals unit to finance acquisitions reducing its need to tap the capital markets.
[Click here for full story at Bloomberg.com]
Tapping internal accruals, and not tapping capital markets, for funding = lower cost of finance.
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Tricom SA, , the second-largest Dominican Internet supplier:
It is testing whether a foreign company can reorganize in a U.S. bankruptcy court, even when it doesn't have substantial business in the U.S. to seek protection from American creditors.
[It defaulted on its bonds in 2003.
Under its reorganization plan, about $500 million of debt and unpaid interest would be wiped out, leaving $130 million of long-term liabilities. Annual interest expense would fall to about $19 million from $68.4 million last year.]
[Click here for full story at Bloomberg.com]
Protection from creditors and wiping out of debt = saving cost of financing
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Isuzu Motors Ltd., Japan's largest maker of light-duty trucks:
1. It is open to tie-ups with vehicle and part makers beyond current partners Toyota Motor Corp. and Hino Motors Ltd.
2. It is opening its door to alliances in medium-sized trucks
3. It may expand cooperation with Hino in heavy-duty trucks.
4. It is seeking a Chinese parts maker to cooperate with to cut costs for its light-duty N-series trucks.
[Click here for full story at Businessweek.com]
Wider collaborations = more production = greater efficiencies of scale and capacity utilization = more cost savings
Cooperating with Chinese parts makers would cut input costs and add logistics costs which need to be recovered.