Malcolm Crenshaw felt better than he had for several days. The phone call he had received that morning could turn everything around. And things certainly needed to be turned around.

    The board meeting on Friday had been a disaster, with uncomfortable questions from both the chairman and some of the directors on why the costly new growth strategy wasn't working. The newspapers were also having a field day crowing about the profit downgrade of his company.

    As CEO of PrayforBetterTimes Limited he knew the board was having second thoughts about him and he silently cursed those part-timers for making his life difficult. The phone call from Reg Thornton however, could change everything.

    "What about having a chat to see if there is any common ground or synergies between our two companies," Thornton had said over the phone. "We have been slugging it out with each other in the market with no one winning. Maybe we could make a deal, Crenshaw? What do you think? Shall I get our secretaries to make an appointment?"

    Crenshaw, of course said yes, immediately. After all, if he could make a deal with Thornton who owned TrustMe Retailing, the fourth largest company in the industry, their combined strength would take them to number two. More importantly, the share price would at last start moving up, the analysts would get off his back and the board would smile at him again.

    One thing was certain. This had to be done quickly and quietly. If anyone found out about this, especially his main competitor and the market leader, they would try to scupper any deal. As well there were other players which would make a good fit with Thornton's company.

    Discretion was the key

    Crenshaw picked up the phone and called the chairman of the board of PrayforBetterTimes to seek advice regarding Thornton. The chairman was excited by the news and the prospect about a merger. He was quick to caution Crenshaw to keep this quiet until this deal, if there was going to be a deal, was much further down the track.

    "Let's just see what they want first and have a board meeting after your talk with Thornton," the chairman said. "I'll sound out individual members of the board to gauge their feelings about this."

    Crenshaw was elated. He called in Herbert Doright, the chief financial officer, to tell him the news and to sound out his views. Doright was a top notch accountant with a good feel for corporate strategy.

    His views were important, and besides, the CFO had been copping most of the flak from analysts and fund managers in recent months. It was only fair to put him in the picture early on. After the meeting with Crenshaw, a relieved Doright went back to his office. Action at last, he thought.

    When the phone rang and Herman Peskison, the analyst from BigbuckStockpickers was on the line with his usual carping comments on what was happening or not happening at PrayforBetterTimes, Doright couldn't resist.

    "Look, we are doing the best we can. The market is tough, consumer confidence is down but we are still in good shape. You know as well as I do that the share price and the perception of that price in the market has a life of its own," the CFO nearly shouted in the phone.

    "You guys always want immediate results so that you can make the share price jump. I've consistently told you to be patient. We may have an announcement for you soon."

    Peskison put the phone down, grinning. Doright had until now never veered from the business as usual spiel. What was PrayforBetterTimes up to? He decided to make a few phone calls.

    The next morning the chairman phoned Crenshaw and asked if he had read the papers. "Someone's been buying our stock," he says. "Have you any idea who it is? Does anyone know that you intend to begin talks with TrustMe Retailing?"

    Crenshaw said no on both counts but would investigate to see who the buyer was. He'd get back to the chairman. Peskison also wondered about the buyer for PrayforBetterTimes shares when he looked at his screen information. The buyer was not easily identified because it belonged to a trust he had not heard of. He would investigate further after he'd had lunch with his mate from the Financial TattleTale at Lucretia Borgia's.

    Peskison and Harry HearditallBefore had been mates for years and they had been a good source of market intel for each other. When the waiter opened the second bottle of red, Peskison looked around the room and asked conspiratorially if Harry had heard any drum noises about PrayforBetterTimes and a possible merger or acquisition.

    Harry said he knew nothing but was very intrigued by the comment. What had Peskison heard? Did this have anything to do with the share price rise? These questions raced through Harry's head but he said nothing.

    The topic of conversation then drifted off into sport and politics, both men judiciously avoiding mention of PrayforBetterTimes, other than to agree the company was not performing very well. After all there were unstated rules in this game of analyst/journalist interaction and neither wanted to overstep the mark. When Harry got back to his desk at the Financial TattleTale, the editor was in his usual agitated state. "Harry, we need a new lead. What have you got?" shouted the editor.

    "Not too much really. There may be something up with PrayforBetterTimes but I haven't had a chance to check it out. My source may have heard something about a merger or acquisition but he didn't have any details," Harry explained.

    "Hey, you guys. My boyfriend over at TrustMe Retailing has been telling me all week that things may be on the improve over at his company. Maybe, PrayforBetterTimes and TrustMe Retailing are planning a merger," Kati Hopeful, the marketing writer chimed in.

    "That's our lead," thundered the business editor. "Harry, you do a piece on a possible merger and how the numbers and business synergies stack up and Kati, you do a sidebar on the combined marketing strength of each company and what a new structure will look like. Don't forget to say that the ACCC can always squash a deal like this. Let's get busy, people."

    When the Financial TattleTale hit the streets the next day, the possible merger between PrayforBetterTimes and TrustMe Retailing was the front page lead. The story didn't really quote anyone confirming the merger talks other than the ubiquitous reference to industry sources. Allan Fels was of course quoted as saying that the ACCC would look carefully at any proposal for a merger between the companies. A stockbroker was also quoted saying that he thought a merger would make sense. A merchant banker offered the opinion that both companies needed to ensure their finances were up to scratch.

    And Crenshaw?

    When the TattleTale phoned him the night before asking for confirmation that merger talks were underway, he was livid and told the reporter that no talks were underway and that PrayforBetterTimes never responded to these type of rumours. He was quoted as saying the company had no comment to make at this time.

    Over at TrustMe Retailing, Reg Thornton was also stunned when he was phoned and asked for confirmation. All that he could think of was that those bastards at PrayforBetterTimes had leaked the story to put pressure on him in terms of valuation. He knew he was in much worse shape than PrayforBetterTimes.

    Thornton's phone call to Crenshaw that morning was, on the surface, polite. Both men however, were extremely angry now that their individual ambitions had hit the rocks of the TattleTale's headline and story. They both agreed that there was little use of them meeting at this time. Each man silently blamed the other for leaking the story but agreed to meet at some time in the future.

    The phone call from the Australian Stock Exchange's compliance unit asking for an explanation regarding the TattleTale story and the share price hike the day before was the last straw as far Crenshaw was concerned.

    "There is no story. There is no merger. It's a media beat-up and I am not going to respond, " Crenshaw shouted in the phone at the hapless ASX manager. "I also do not know who bought the shares."

    But it was all too late.

    The hounds were off and running and the share price of both companies did the usual dipsy doodle the day of the story to the delight of stockbrokers who issued buy recommendations. It pleased the institutional fund managers who were active equity players and it pleased the beleaguered shareholders whose patience had been rapidly running out.

    Meanwhile, the ASX kept phoning and threatening to invoke Listing Rule 3.1b if the company didn't make a public statement about the merger. The ASX also indicated it was conducting its own investigation into the share buying.

    After several days of stonewalling, Crenshaw capitulated and issued a press release stating that no talks were being held with TrustMe Retailing about a merger. No one believed him of course but in the absence of hard evidence to the contrary, the barking hounds could only whimper.

    After one week, the PrayforBetterTimes merger story gradually morphed into a general mergers' story complete with graphs showing the size and value of recent mergers. At the end of the week, no journalist phoned Crenshaw or Thornton.

    The ASX however, wasn't satisfied and demanded a meeting with Crenshaw because they wanted more information about the spike in the share price. The TattleTale reported the concern of the ASX about the price hike.

    And the end result of all this?

    1. With no further news about a possible merger and speculation that the whole story was a beat-up by insiders to ramp up the share price, PrayforBetterTimes went into decline and its share price started to slide. The profit downgrade that the company had already forecasted only added to the woes.

    2. Malcolm Crenshaw was asked to leave the last meeting of the board of directors while discussions were being held as to who would replace him.

    3. Reg Thornton finally got the merger he wanted but not with PrayforBetterTimes. He is now the third largest in the market.

    4.The share price hike was finally revealed when an overseas conglomerate admitted to being the buyer. It intends to make a takeover offer at a greatly reduced price to what it originally thought thanks to the failed merger story.

    5. The chairman and the board of directors of PrayforBetterTimes are less than happy because their reputations have been damaged with all the speculation about insider trading. They are looking nervously at each other to see who will be a survivor in the event of the foreign acquisition.

    6. The ASX feels it was justified in seeking answers to the merger speculation and making public its intention to investigate the share price hikes. Continuous disclosure is very important to a fair market, it says.

    7. And, Peskison and Hearditall-Before still do lunch.


    The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.

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