The four sins of cashed up Australian companies

by Jonathan Shapiro  22 September 2015

When a company finds itself swimming in cash, you would think that’s a good thing for shareholders.

But far too often when a management team finds itself with more cash than it knows what to do with, a rush of blood to the head means they end up frittering it away, costing shareholders billions.

That’s the view of Hugh Dive, of Aurora Funds Management, who’s less than impressed with Woodside’s pursuit of Oil Search.

Woodside is reaping the rewards of its completed $15 billion Pluto LNG project, which has been gushing with cash for three years, allowing it to cut its debt and boost its dividend payments.

But Dive is concerned that by looking to expend those reserves by acquiring Oil Search, it ends up wasting what is a precious resource in itself – cash.  Among the issues with the $11.6 billion deal is that it will dilute Woodside shareholders and give Oil Search shareholders access to franking credits, while the synergies of the deal are in question.

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