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  • jpomper jpomper • Jun 19, 2011 4:28 AM Flag

    Value to Shareholders

    I have a different view on this.

    1) We have a loss of cca. 85B banking assets from a total of 927B. Since ING DIrect's ROA, ROE and cost ratio is similar the ING bank total, this is clearly a loss of 85B/927B=9.1% from the banking business.
    2) We lost a 269m underlying earnings power from a total of 1695m in banking, which is 15%. This numbers are from 2010Y annual report.

    3)So, we probably lost somewhere between 9% and 15% of the banking business, depending how you see it, for 9.0B selling price

    4)Now, if $9B is 9% or 15% of the value of ING, then the total ING is valued in this transaction to: $9/0.09=100B, or 9B/0.15=60B,
    which means total ING is valued at present $60-100B,
    or with 3.78B shares $15-$26/share.

    5)Currently we are at $12/share, se the stock market is undervaluing ING compared to this transaction 25-100%.

    If you sell something for 25%-100% more than it is valued at NYSE, it might be considered a good deal.
    or is it?

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    • jpomper jpomper • Jun 19, 2011 5:27 AM Flag

      Well, let' take a look at it from another wievpoint.

      1)Include into the calculations the ING Insurance business.
      Insurance total Assets are 325B, from ING total assets of 1250B, this is 26%.

      Its share from Equity total of 46B is 20B, this is 43%.

      Insurance underlying result is 461m from the total ING undarlying result of 2150m, this is 21%.

      2) Take an average of the above numbers, and you get to the conclusion that ING Insurance Business is cca. 30% of the total value of ING.

      3)If ING Direct is worth $9B today, and it is cca. (9%, 15% average) 13% of ING total value,
      then a 30% share of ING should be valued at cca. $21B. So, by the present market transaction ING Insurance should be valued at cca. 21B.

      4)Now, add to ING banking Busines value (see previous post) of cca. $80B (since it is valued between $60 and $100B) the Insurance Business value of cca. $20B, you get a total ING value of $100B today.

      5) And you get for ING Direct only $9B?
      Looks like a bad deal.
      Or is it?

      • 1 Reply to jpomper
      • jpomper jpomper • Jun 19, 2011 5:41 AM Flag

        Conclusion:

        1) If the current Stockmarket valuation of ING is right, then selling ING Direct for $9B was a reasonabley good deal, cca. 25% above the stockmarket value.

        2) If the price of $9B was right for ING Direct in this transaction (and the stockmarket valuation is wrong), and you calculate ING Total value from this,
        then you must conclude selling for $9B was a definitely bad deal.
        ING sold its crown jewel for cca. $4B less than it should have.

 
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