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Mergers in a new design

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  • Mike Hutton
    Dear all, 18EA is going to include mergers, a major factor in East Anglian railways. Ignorant as I am about other 18xx games which involve this sort of thing,
    Message 1 of 32 , Jul 1, 2005
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      Dear all,

      18EA is going to include mergers, a major factor in East Anglian
      railways. Ignorant as I am about other 18xx games which involve this
      sort of thing, I was wondering if someone could look over the
      following scheme and comment on problems/concerns/alternatives I need
      to consider. Before I start I have to comment that the base for this
      is 1860, so there's no limit on certificates held in a company, or of
      certificates in the bank pool.

      The overall reason for merging is to secure lucrative routes in the
      end-game, since unless there's heavy up-front investment a single un-
      merged company is unlikely to have enough tokens to secure the routes
      it needs to succeed.

      The general idea is this:

      Mergers happen at the start of a company's turn in an OR.
      The company can then merge with another company, provided:
      * the directors of both companies agree
      * the company instigating the merger has a train
      * the second company involved has not already operated this turn.
      * a valid route of any length can be traced from one base of one of
      the companies to a base from the other company (usual route rules
      apply).

      If a merger occurs, the following things happen:
      The new company formed is given a quote price equal to the sum of the
      two constituent companies, rounded down to the nearest valid share
      price.
      Shareholders in either company swap these 2:1 for shares in the new
      company - which in practice will be the certificates for the company
      instigating the merger. Any odd shares will be sold for half the new
      quote price.
      Any certificates in the new company, not in players' hands, are
      placed in the bank pool.
      The new company gains all the treasury for the two constituents, any
      tokens on the board or unused (up to a maximum of 8), and any trains.
      The tokens on the board are swapped for new company tokens as
      appropriate.

      After the merger the new "merged" company operates as normal.

      The above rules seem to operate quickly and are seemingly self-
      evident. Financially, players lose slightly on the deal, but should
      end up with a stronger/bigger company which is less prone to
      suffering train rush problems. It also means that there is additional
      benefit in owning shares in the lower-priced company in the merger,
      and a disadvantage in holding too many in the higher priced one. One
      concern is that a merger between two companies of great disparity in
      price could be too lucrative a gambit. This, of course, is an
      ecouragement for players to make a point of investing in their
      opponent's companies.

      Additional dynamics which affect this are:

      The stockmarket is the 1860 one; that is, stock depreciates 1/2 a
      place for each 10% held, and multiple jumps (up to 4x) are possible.
      In addition the share price only rises if the revenue paid as
      dividend equals or exceeds the current share price. The stock market
      is likely to have a top end of 500.

      There are 3 types of train, and each company may only have one of
      each type at most. Therefore, after a merger, the new company must
      discard any excess trains (for example if it has two freight trains
      it will discard the weaker of the two).

      Insolvency / train ownership rules work as per 1860, and the train
      rush is about as severe. An important point to note is that a
      trainless company's share price is deemed to be half that on the
      stockmarket, both when considering certificate sales (but not
      purchases), and also in gauging a new stock price as part of a merger.

      Any comments/suggestions would be more than welcome.

      Mike.
    • Marco Rocci
      On Tue, 05 Jul 2005 22:17:54 -0700, John David Galt ... We have OPAs in Italy... pubblic offers of acquisition. Anyone who intends to buy more than 5 or 10% of
      Message 32 of 32 , Jul 18, 2005
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        On Tue, 05 Jul 2005 22:17:54 -0700, John David Galt
        <jdg@...> wrote:

        >Because of America's laws against insider trading (which I don't think is
        >illegal anywhere else in the world), the bid offer must be announced a few
        >days before A starts buying any shares. Similarly, if a rich individual
        >wants to take over a company, he must make an advance announcement before
        >he obtains 10% or more of a company's shares.

        We have OPAs in Italy... pubblic offers of acquisition.
        Anyone who intends to buy more than 5 or 10% of a public
        company, must state so, how much they will pay for shares
        and how many shares they intend to buy. The offer lasts a
        month or so. During this period the price remains fixed and
        all shareholders may accept the offer. Successfull OPAs
        usually end up in takeovers.

        I think there must be something similar at least in France.
        Some years ago DeBenedetti's group made an unsuccessful
        offer on a french financial group.

        As for insider trading... it's illegal. We have stock
        exchange control authorities that should check these
        things... although they seem to be quite incompetent, to say
        the least.

        Regards,

        --
        Marco Rocci
        MicroEra srl
        Turin, Italy
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