re: Ann: Recommended cash offer for takeover ...
Ddzx,
I am certainly no cheer leader for EOC management however you have to put all these matters in context. When the first 60c conditional offer was made the price of thermal coal was over $120 whereas now it is at $80. Regardless of how good management are they will have difficulties in this environment. Therefore I give credit to management where it is due that instead of diluting the company and trying to maintain their jobs they recommended an exit strategy that would allow most shareholders to walk away with all their money. Considering where the coal market has gone over the past 6 months and that EOC is not generating income this is a great result. Therefore I completely disagree with your comment “EOC Board recommending the 38 cent offer does not put EOC in a favorable light.” For me what always appealed to me was the very low cost opex / capex of MDS. You yourself even said that the asset could generate $500M in profits over 10 years (when coal prices were higher). This was the asset that justified the 40c share price, with Rockwood and other scouting being potential for a big bonus. Furthermore for Xstrata they would have huge synergies for this direct shipping coal that starts 10 metres from the surface, has a mining cost of $29, which should be in production this time next year. Having the infrastructure there already they would have definitely run the numbers for this project regardless of the size of the other project. If they don’t bid on the asset I suspect it would be more to do with the Xstrata / Glencore merger taking all their attention and not because MDS isn’t worth their time. In any case I have certainly appreciated your contrarian view on this stock which has always appeared well researched. Good news that you were able to get out at 33c, I’ll wait for the 38c or another bid.
I am the Iceman!
EOC Price at posting:
31.5¢ Sentiment: Hold Disclosure: Held
