Nestle and Alcon – The Value of a Listing.pptVIP

* Discussion Question Frequent and often substantial pricing differentials exists between a firm’s ADR and its locally traded shares exist for firms located around the world Why this persistent differences in pricing of local stocks and their associated ADRs? Does this create arbitrage opportunities in this market? * Stay in Switzerland and Directly Listing in US (4) Avoids potential problem of flow back since Alcon’s shares traded only in New York Alcon will be able to fully enjoy the benefits of being a US firm with a primary listing in New York without any of the drawbacks of reincorporating as a US firm * Discussion Question How to determine the value of Alcon and the implications for the value of Nestle? * Company Comparisons (Amounts in million USD) * Company Comparisons (Amounts in million USD) * Unbundling the Value of Nestle * Unbundling the Value of Nestle * Unbundling the Value of Nestle Nestle’s actual market value multiple = 12.7x * Discussion Question Is the market undervaluing Nestle’s food business, as suggested by the above analysis and by Nestle executives/ Is Alcon strength hiding the weakness of the food business? * American Depositary Receipts (ADR) Non-US firms raising equity in US Listed on.., NYSE AMEX NASDAQ Form of equity ownership Issued against shares represented through ADS Can be issued for more than one underlying share or for a fraction of share – ADR ratio Reversible process * American Depositary Receipts (ADR) Consideration in deciding ADR ratio ~ matching of value of shares of US companies in the same industry by bundling a specific no. of shares into one ADR Do not eliminate currency risk Program management done by – Citibank, JP Morgan Other similar structures.., GDR EDR IDR * ADR Mechanics * Types of ADRs * ADR Evolution 1927: first ADR created by JP Morgan for British retailer ‘Selfridge’ ADRs by.., European companies: 72% Asian Companies: 21% Latin America and Australia: 7% Top 50 ADR programs represented 90% of tr