Actually, the articles I read last month referred to the 5-15% premium being on top of the net difference between the sale price and the related debt! Not on top of the sale price. If it were on top of the sale price and the AR's were valued as Jfur lists, then 5% seems more likely or 1.5b more. 30.8b + 1.5b equals 32.3b or 5.8b net above debt (27.5). Even 10% is only 7.3 (4.3b net + 3.08b premium) and after taxes and fees still comes out to my 8b scenario.
Much higher? Conservative estimate? Sears operating profits last year from the CC division were 1.5 billion or 1.3% higher than your conservative estimate. Sears gave a 2003 outlook of operating profits down low to mid single digits.
In Q1 operating profits from the CC division were down 48 million or 10.8%. If they are already in the hole 48 million or 10.8% versus last year it's going to be tough to be down only 20 million for the entire year. Especially given the guidance they have given for Q2.
Given Sears guidance and Q1 results 1.48B would be an optimistic number. Certainly not conservative.
What were Sears CC profits last year? I don't think they were 1.48 billion. Total net income for the company was only 1.56 billion. Sears has said they expect CC profits to be down this year. Charge-offs are also higher than 6.5%.
The company's preliminary outlook for 2003 is for comparable earnings per share to increase in the low- to mid- single digits. The Retail and Related Services business is expected to grow operating income in the mid-teens, while operating income for the Credit and Financial Products segment is expected to decline at a low- to mid-single-digit rate. Sears Canada is anticipated to post increased year- over-year profitability, and the Corporate and Other segment is expected to remain relatively flat with productivity savings being offset by higher benefit and insurance costs.
To even get $6.3b, then the sale price would need to provide a 50% premium ($4.5b net value x 1.5). And this is before due diligence has been performed on an 'aggressive accounting' portfolio (re: ONE). These credit card companies are lunatics so anything is possible. But if serious DD was performed on a 240 day aging portfolio with cardholders who qualify on S personal rating system and not commonly accepted credit bureau ratings, then guess what they will decide... It is possible they will price the cc AR's less than $31.5b which S has them at and then a 15% premium from there. GE and C may say the portfolio is really only worth $29b and only will pay $29.5b or $2b net related to the S financial statement AR number. After taxes, fees, etc then they would realize $1.2b or $4 a share cash.