CNE value to an Indebted Bidder31 Mar 2022 20:48
Hi Easyp, sorry for the delay in replying, had to get the car serviced. CNE is probably THE MOST under valued Mid Cap UK oiler. I'm just thinking what benefits the acquisition of CNE cash, production and futures licences would convey on a peer company. IMO HBR sticks out a mile, my arguments are - UPSCALE - MASSIVE OPPORTUNITIES -HEDGING - CHEAP DISCOUNTED TARGET - CASH :-
1. It's a 'Unique' Opportunity to acquire a 'Discounted' Mid Cap Oiler at $110 POO, which has be a huge cash shell. Currently CNE have Net Assets $1.9bn or £2.90, add $1.26bn cash. This opportunity does NOT come around very often with POO being +$100 (where every oppo is overvalued and allows HBR (Mkt Cap £4.5bn) to use its Equity base - could swallow CNE in an all share deal, if CNE II's agreed. CNE size is just right £3/ bid for CNE £1.5bn = say 300m shares in HBR to be issued or 33% of Shares in issue - perfect accretive deal. IMO HBR Balance sheet Book Value goes from $1.7bn to $3.6bn Simples. It gives HBR greater Scale – forget Egypt per se – means to an end.
2. CNE is Ripe for a Takeover (Unique Oppo) Negative Goodwill can’t defend itself - , the CNE BOD would need to develop a 'Growth' model very quickly to defend a takeover. As stated, it is a cash Shell and HBR would put forward a stronger Growth argument to CNE-II's IMO.
3. Upscale M&A – the CNE cash would considerably strengthen HBR Balance sheet co, gearing would fall by 80% and the $1.3bn cash would allow gearing up of +2x2.5 for massive-scaled acquisitions. HBR could be 'Finally Free of Restrictive debt' and be able to pursue far wider opportunities - Which is a HUGE ATTRACTION. Take control back off the banks... Then - a $3bn acq’n would be on the table….
4. Banks - Greater determination of core operating capabilities & Hedging – Take Control of hedging at $100 POO- is costly and requires collateral – the CNE acq’n helps and accelerates that process.
5. Global Oil majors are throwing off small to medium sized assets like confetti, now (IF EVER) is the time to have cash and cherry pick opportunities - it is now.
6. Acquiring CNE would guarantee HBR into the FTSE 100, which should increase the SP if POO holds course and allow for further strengthening of the business and takes out a competitor.
7. The TO would accelerate HBR ability to pay dividends, share buybacks & define a more solid reliable distribution stream, which would entice CNE II's to support a bid, stronger more robust growth story.
IMO DYOR GLA - fingers crossed.
Sign In
Follow the stocks
