There are potentially a lot of transactions that could be...

There are potentially a lot of transactions that could be implemented outside a "change of control". All pure speculation but it might be combining the US assets of both companies in one entity and the Aus assets in another. It is clear that there are tax "inefficiencies" in the structure - namely a combination of US withholding tax and franking credits. We should also be cognizant that CRN is actually a Delaware company so some interesting corporate law "gymnastics" could take place. Peabody is also incorporated in Delaware

I was wondering why the story leaked. Clearly someone is trying to put pressure on the other party (or may be a banker wanting a transaction success fee) to consummate a deal. Who wants the deal more - from the article the CRN private equity owners want a realization / liquidity event. Which is not necessarily great for retail investors as provided the price is ok (as opposed to great) the PE firm is likely to accept.

The other reality is that once these discussions are leaked there are a number of hedge / special situations funds who buy into the "rumor" on the basis that there is more often than not a transaction and it will be higher than the existing price (call it $2.10). These spec sits funds also want to see a deal done (for obvious reasons) and will put pressure on the CRN directors to consummate a transaction - and vote for a transaction should that be required.

The other factor is that CRN currently has a market cap of circa $4b in AUD. The USD price for CRN is circa $2.5b (at AUD= US63c) which equals a low EV/EBITDA multiple. Given first half EBITDA was USD850m and second will be (guess) USD500m it is a EV/EBITDA ratio of less than 2 and assuming USD500m is sustainable (for a couple of years at least) 2.5.

What would CRN realistically transact at? AUD2.25, AUD$2.50, AUD$2.75 (or more).

If nothing else it will give some interesting discussion points at the quarterly results on 21 Oct....

Best

BSP

NFA, DYOR, GLTAH, etc.