WORLEY INVESTORS COP $500M WHACK

Worley Parsons’s once-in-a(corporate)lifetime US deal might or might not prove to be the making of the company, but on day one it’s proved a far more certain valuedestroyer for the company’s shareholders.

As of last night a total of more than $500 million had been destroyed.

Further and appallingly, directors quite deliberately twisted the knife by denying all shareholders and especially the retail ones the right to sell their entitlements to new shares.

True, if the share price falls much further – a mere 2 per cent or so after yesterday’s plunge – and yet more shareholder value was destroyed, that ‘right’ would be rendered entirely academic anyway.

I would add that directors have been aided and abetted in this – a combination of classic insider arrogance and quite frankly old-fashioned stupidity – by some of the (usually self-proclaimed) ‘smartest guys in the room’ at investment banks UBS and Macquarie Bank.

One can only hope that the WP share price DOES fall further and that their ’smartness’ ends up costing them real dollars on their underwriting commitments.

In simple terms, someone who owned 1000 WP shares went to the last weekend with an investment valued on the market at $17,840.

Yesterday that investment was worth $15,810. Thank you very much company directors and ‘smartest guys’.

Of course, that shareholder can recoup some of the loss if he or she is prepared to stump up $10,581 to subscribe for their full entitlement to new shares. On yesterday’s closing price they would recoup the princely sum of $170.

They would do better – and probably have less risk and certainly a more immediate result, one way or the other - to put the

It appears to have been ‘surprised’ by the WP move. It was only able to guarantee to subscribe upfront in Tuesday’s insto offer for $170 million of its $660 million total entitlement. It‘s considering what it will do in relation to the remaining $490 million entitlement under the retail offer.

It can watch to see what happens to WP’s share price specifically. It can watch to see what happens to the market overall, over the next two weeks.

Directors and especially those ‘smartest guys’ do not want to see Wall St take a dive. UBS and Macquarie will have to take up any shortfall. As of yesterday there was a $1.1 billion ‘shortfall’ – the amount of the retail (including Dar) entitlement.

They get a fee of 1.58 per cent on the $2.9 billion subscription total (less the $100 million coming from WP founding chairman John Grill). The $44 million would cover them for a fall in the share price to around $15 – any lower and they would start to lose money.

The directors and the ‘smartest guys’ were too clever by half on two levels.

First, in setting too low a ‘discount’ in a very, very big share raising, at a time when Wall St was teetering and teetering very nervously at record highs.

Supposedly marketsavvy investment bankers didn’t seem to understand that while they might be in love with the deal, having a near one-for-one issue at just a 13 per cent ‘discount’ to market – $15.56 to $17.84 – was asking for trouble.

Then, in trying to freeze out the company’s biggest shareholder in Dar, they were all but guaranteeing it would probably be Trouble with a capital-T.

There are going to be some very nervous investment bankers watching Wall St every night over the next two weeks; and watching to see how much of the

$490 million Dar now puts in next Wednesday week.