Yesterday, The Goldman Sachs Group Inc. (GS) received approval from sufficient number of shareholders of its Australian and New Zealand joint venture to acquire the remaining 55% of the business.
GS, which held minority stake in the business for eight years, bid to buy the remaining stake in the JV in April. GS’s primary intention was to strengthening its business control in Australian investment banking market.
In 2003, GS acquired 45% stake in the Australian brokerage company, JBWere Ltd. to form the joint venture for operating its business in Australia and New Zealand. The former and existing management and employee shareholders in the joint venture owned the remaining 55%.
However, to get the joint venture fully integrated with GS, minimum 75% shareholders’ approval was needed. The deal is expected to close in July 2011. However, the financial terms were not disclosed.
In August 2010, the name of the joint venture Goldman Sachs JBWere Group Holdings Pty Ltd. was changed to Goldman Sachs & Partners Australia Group Holdings Pty Ltd.
GS strategized to take full control in Goldman Sachs & Partners Australia Group Holdings Pty Ltd. In April, the local newspapers reported that value of the deal is expected to be A$800 million ($847 million) to A$1.2 billion ($1.27 billion).
Fundamentally, we expect GS to benefit from its well managed global franchise, strong capital base and industry leading position in trading and asset management. GS’s prudent business model and strong fundamentals are expected to deliver better earnings in the upcoming quarters.
Estimate Revision Trends
Over the last 7 days, 1 of the 18 analysts covering GS has lowered estimate for the second quarter of 2011, while no upward revision was witnessed. Currently, the Zacks Consensus Estimate for the second quarter is operating earnings of $3.88 per share, an increase of 40.93% from the year-ago quarter.
Further, over the last 7 days, operating earnings estimate for the second quarter of 2011 fell from $3.92 per share to $3.88. This indicates downward pressure on the stock in the near-term.
GS currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we maintain a long-term Neutral recommendation on the stock. GS’s closest competitor, Morgan Stanley (MS), retains a Zacks #4 Rank (a short-term Sell rating).
GOLDMAN SACHS (GS): Free Stock Analysis Report
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