Monday, April 2, 2012

DBS-Danamon Dilution Estimate

I did a quick calculation on the impact of dilution on DBS share price for the other shareholders other than Temasek. Since Temasek own 29.5% of DBS and will receive its 67% stake in Danamon entirely in stock at $14.07 apiece, we can ignore Temasek in our calculation as it is a matter of transferring ownership from right hand to left hand. The stock dilution for the other shareholders is around 1.07B for the excess paid over market price in DBS stock to Temasek (2/3 of (4.8-3.2)).

For the other shareholders of Danamon, they will receive cash for the remaining stake for a sum of $2.2B. Since this value is calculated at a premium of 56% over the last trading price of Danamon before the announcement, the excess value paid over the market price is 0.77B. The market capitalisation of DBS (excluding Temasek) is around 20B (estimate at $14.18 before announcement).

If we will to assume that the excess value is shared by the remaining shareholder of DBS (excluding Temasek) is 0.77*2/3 = 0.52, then the total dilution is estimated to be around (0.52+1.07)/20 = 8%.

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