Market's reaction (STX down and TPD down) is telling us:
- It is synergistic for STX and TPD to merge. Right now there are duplicated corporate costs that could be eliminated to benefit the merged entity.
- It is in both shareholders interest for a merger to occur (which is why both parties obviously took the time to consider).
This sentiment has been shared by everyone on this forum. The difference in opinion has been on the relative valuations, and this is where it gets difficult.
- If you hold STX, you want acquisition to be as low priced as possible
- If you hold TPD, you want acquisition to be as highly priced as possible
- Unless you hold a combination of STX and TPD (in the exact proportion to the terms of deal) would you be truly agnostic.
Which brings us to the stalemate.
What price is fair to proceed?
The longer the management of both STX and TPD play games with each other, the longer both shareholders miss out on the synergies (think net cash flow from Walyering, currently is reduced by two sets of corporate overhead costs).
The market wants to price both assets at a higher market value, but egos are now in the way.
I hope they get back in a room and work out the deal on fair and reasonable basis, so we can all enjoy the monetisation of the Perth Basin.
