HotCopter, Not sure I agree with your first point. It is...

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yanlin

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21/03/17

10:03

Post #: 23501928
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Originally posted by HotCopter ↑

The primary reason it is accretive is because they are paying ~50% of the purchase price in low-cost debt. Nearly every NPAT generating business is an accretive acquisition under a funding structure like that (because the funding cost is <6% versus an NPAT yield well above this).

The structure of the offer makes it unlikely they will increase their offer, in my opinion. They haven't asked the SPO board for due diligence, they have simply gone straight to shareholders. Lodging a bidder's statement concurrent with the first approach, and doing a non-reversible capital raising to fund the deal, are two hallmarks of a takeover offer where engagement with the target is not seen as necessary.

On the flipside - the risk of the deal not going ahead is quite low, so if you do hold out for a bump (which is unlikely) you are taking some but not a lot of risk, I think.

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HotCopter,
Not sure I agree with your first point. It is attractive to the shareholders of DOW because they will be earning more net profit by acquiring SPO than if they didn't. They have little debt, so going to a net gearing of 28% is pretty conservative and shows they have employed sound financial principals.
But the real benefit is that they will be able to achieve another $20m of run rate savings. This makes it extremely attractive and is why I reckon there is more upside in the offer - if the shareholders of SPO push it.

SPO Price at posting: 72.5¢ Sentiment: None Disclosure: Held
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0 Great analysis

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HotCopter, Not sure I agree with your first point. It is...

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