age article

"The Age - 22/09/2008

Broker valuations put a stand-alone Cooper Energy well north of its current share price.

COOPER Energy's hostile takeover bid for Incremental Petroleum is very much alive thanks to Friday's 4.5 or 13.4% rebound in Cooper's share price to 38 a share.

A pre-condition of the bid is that the implied offer must be at least $1.18 an Incremental share (because of pre-bid acquisitions at that price), based on a two-day volume-weighted average price within a certain period.

At Friday's close for Cooper of 38 a share, the all-scrip offer of 3.1 Cooper shares valued Incremental at a shade under $1.18 a share and the scrip/cash native (1.9 Cooper shares and 50 cash) implied a $1.22 a share value.

All very interesting for sure. But Garimpeiro's wonder is that Cooper ever got to something less than 38 a share in the first place.

When it got to 35 a share last week, Cooper's enterprise value (market capitalisation less cash) got as low as $16million. That same enterprise had production revenue in the June year of $44 million and posted earnings before interest, tax and depreciation (EBITD) of $29 million.

Cooper got as low as it did because of the general market turmoil and the normal shorting of a bidder. The question now is where it goes from here in light of the Incremental bid.

In the worst-case scenario of a failed bid, it could be assumed that the stock edges back up to pre-bid prices of 40-42 a share ahead of the expected excitement to come from the big-time potential of the group's exploration plans in Tunisia and Indonesia. As it is, there are plenty of broker valuations of a stand-alone Cooper well north of the current share price.

Should the bid succeed, there would be the market re-rating that could be expected for Australia's newest mid-tier exploration and production company. Annual revenues of more than $90 million, EBITD of more than $50 million and a deep and diverse range of production and exploration interests would be hard for the market to ignore."

As an aside, it would be worth checking out IPM payments for Directors and office holders. My brief look at their annual report indicates that they are paid about the same or more than COE Directors & office holders; note that the IPM report is up to Dec 07 and their payments have probably increased. Also, COE 07/08 Annual report includes options issued..can someone who understands P & L and balance sheets do a proper analysis and post to the forum . The cost of IPM Directors will go direct to the bottom line if the COE takeover is successful.

In addition, the IPM Directors have a large bucket-full of $1-20 options and they could lose heaps if the takeover succeeds. No wonder they oppose the COE takeover bid; although they stand to win as the COE share price is re-rated as suggested by the AGE article.