Bargain hunting

Rupert Murdoch’s decision to launch a $13 billion takeover of British pay television company BSkyB is a good example of how difficult economic conditions can throw up opportunities.

News Corp, which already owns 39% of the company, is bidding at an opportune time.

BSkyB’s share price has recovered well since hitting a trough in October 2008 (when Lehman Brothers was going down) but remains below the price it traded at in October 2007.

In addition, the slide in the British pound against the US dollar has also given Murdoch more firepower in the bid, although the independent directors at BSkyB have already knocked back his first offer of 700 pence and are looking for at least 800 pence.

The deal is seen as a way for News Corporation to increase its geographic diversification, and use some of the excess cash on what Murdoch himself has described as a lazy balance sheet.

Another pair of billionaires apparently looking at opportunities in Australia is David and Simon Reuben, two of the richest men in Britain who were valued at $8.8 billion by Forbes magazine earlier this year.

According to a report in the Australian Financial Review, the brothers have teamed up with an Australian property business called Taemas Capital to scout for opportunities in the unlisted property fund sector and the property syndicate area.

Many of these property funds and syndicates are struggling under mountains of debts and badly in need of recapitalisation. The cashed-up Reuben brothers obviously see an opportunity to grab some high-quality assets at very good prices.

The lesson here is clear – cash is crucial if you want to go bargain hunting. With financial markets still fragile and funding still tight, those with equity have the opportunity to drive very good deals.

If you’ve got cash sitting on your balance sheet, this might be the time to put it to work.